AGRI Committee Report

On 20 May 2003, Canada was struck with BSE. The discovery of one case of BSE in one cow, in one herd, in one province set off a series of events that devastated cattlemen and other livestock producers across Canada. The industrialized world immediately closed its borders to Canadian cattle and beef, and a fully integrated North American market for beef products and live animals became de-integrated. Cattle prices spiralled downward, cattle herds grew beyond affordable levels, flourishing cow-calf operations were made unprofitable, and packers and processors were burdened with costly new processing regulations.

The marketplace responded to the oversupply situation by reducing the prices of cattle to stimulate domestic demand. In the absence of the U.S. market for cattle, Canadian industry could not do anything else. At the same time, the depressed cattle price has inadvertently bestowed an economic advantage upon Canadian packers relative to their American competitors, as Canadian packers can now undercut American packers in their own beef markets. Canadian packers have thus quickly returned to profitability; Canadian cattlemen, on the other hand, have not.

The federal and provincial governments responded to the devastating situation with about $1.58 billion in financial assistance to industry stakeholders. The two federal programs had varying degrees of success. Although the Committee understands that the federal-provincial BSE Recovery Program accomplished its stated objectives, the Committee would have preferred that the program’s payments be tied and delivered directly to a cattle or livestock owner and that the payments were not subject to a specific cut-off date. In this way, the program would not have influenced the timing of the cattle being offered for slaughter, and the benefits of the program would have accrued largely to cattlemen and livestock owners.

Due to the temporary loss in foreign packers bidding for Canadian cattle and the high concentration of ownership in the Canadian packer and processing segment of the industry, the Committee believes that all aspects of the livestock marketplace must be carefully monitored in the crisis period. The Committee recommends that the Minister of Industry instruct the Commissioner of Competition to conduct an inquiry, under section 10 of the Competition Act, into the pricing of slaughter cattle and beef at wholesale level. The Committee also recommends that the Competition Bureau monitor the wholesale and retail pricing of beef, as well as the fed and feeder cattle prices, and that the Commissioner of Competition report periodically to the House of Commons Standing Committee on Agriculture and Agri-Food. Finally, the Committee recommends that the Government of Canada engage an independent body to conduct a comprehensive study of the competitive aspects of the cattle and beef products industry in Canada.

In the longer term, efforts must be focused on improving the operation of the North American marketplace for cattle and beef products. The use of sanitary measures for political purposes as a barrier to trade must be eliminated. More slaughter and value-added products processing capacity is needed in Canada to improve the competitive structure of the industry and to reduce the number of Canadian cattle and livestock exposed to trade embargoes. Accordingly, the Committee recommends that the Government of Canada pursue business opportunities with a particular emphasis on increasing livestock slaughter and value-added products processing capacity in Canada. The Committee also recommends that the governments of Canada and the United States immediately implement the OIE Code and repeal both countries’ import embargoes.