Thank you, Mr. Chairman. I would also like to thank the committee for giving us the opportunity to engage in dialogue.
Since May 2003, Canada's beef industry has been going through a great crisis, that of BSE. The crisis has brought to light two fundamental weaknesses in the beef industry: its double dependence on the slaughterhouses and on the American market. The crisis has also brought to the fore a serious imbalance in the market power of different links in the industry chain. In this context, and with the encouragement of the Government of Canada, Quebec's beef producers have been proactive, collectively acquiring the two largest slaughterhouses in Quebec: the Levinoff-Colbex slaughterhouse, for cull cattle, and the Zénon Billette slaughterhouse for slaughter steer, thereby improving their competitive position. Unfortunately, the adverse economic conditions were too much for the Zénon Billette slaughterhouse, which had to shut down in August 2007.
Though the United States reopened the border on Monday, November 19, to animals over 30 months of age, as well as to meat from animals over 30 months and breeding cattle, present conditions—in other words, non-harmonized regulations for SRMs, increased inspections at the U.S. border, the high Canadian dollar, soaring costs for feed and energy, etc.—suggest a dark future for the Canadian beef industry, and consequently for the beef producers of Canada and Quebec.
The complete lifting of the U.S. embargo following the principles set out by the World Organization for Animal Health, was both expected and necessary. However, after more than four years of absence, regaining access to the meat market among our neighbours to the south can only happen gradually. Meanwhile, cattle are already crossing the border more easily, penalizing our producers and slaughterhouses all the more. The Government of Canada should act quickly to stop the progressive erosion of the slaughter sector, the dramatic reduction in feed lot finishing, and the decline of cow-calf inventory. To that end, we suggest the following actions.
Let's begin with some remarks on the exchange rate. The overly rapid appreciation of the Canadian dollar over the U.S. dollar is a threat to the survival of Canada's manufacturing industry. It is also jeopardizing the production and processing of beef and veal in Canada. The Quebec beef producers' federation recommends a prompt lowering of the Bank of Canada's key interest rate, particularly inasmuch as inflationary pressures in western Canada are weakening.
We also have to deal with regulations on SRMs and the competitiveness of slaughterhouses. Since July 12, the use of animal meal containing specified risk materials is prohibited in the feeding of all livestock. SRMs are bovine tissues that could potentially contain the infectious agents responsible for bovine spongiform encephalitis, or BSE. In Quebec, some 50,000 tonnes of SRMs are generated annually in slaughterhouses and on the farm. The SRMs of U.S. cattle can therefore be processed into animal meal fed to poultry and hogs. The absence of regulatory harmonization between Canada and the U.S. seriously weakens the competitiveness of Canadian slaughterhouses, and indeed of the entire Canadian beef industry. This is because Canada's new regulations entail significant costs. Slaughterhouses and rendering plants must invest significant amounts and incur repeated operating costs to segregate SRMs from other slaughterhouse by-products. Animal meal from SRMs no longer has any commercial value. Worse still, in Quebec, we have to pay to bury them. Managing SRMs represents an additional cost of $30 to $35 per head for cull cow slaughterhouses. For example, at the Levinoff-Colbex slaughterhouse, the largest such operation in eastern Canada, these measures entail additional costs of $4 million to $5 million per year, compared to the operation's U.S. competitors. There is no way our slaughterhouses can absorb those additional costs. If nothing is done, the absence of regulatory harmonization across North America will lead to a drastic reduction of slaughter capacity in Canada, and, by extension, to an increase in the dependence of Canadian producers on U.S. slaughterhouses. Yet the BSE crisis clearly demonstrated that dependence on U.S. slaughterhouses represents a major risk for the Canadian beef industry. Let us remember that the crisis has already caused a loss of between $8 billion to $10 billion for Canada's beef producers.
The industry needs two-tier government financial support. To help the industry comply with the new requirements, Agriculture and Agri-Food Canada, in collaboration with the provinces, has put in place a financial assistance program of $80 million.
Some $10 million of this is slated for Quebec. This sum adds to the $10 million already budgeted by the province. Unfortunately, the amounts initially earmarked by the Government of Canada are not enough to support the necessary investment by the industry. For example, the investments required by Levinoff-Colbex come to over $5 million, whereas the program allows for maximum compensation of only $1 million per facility. Moreover, significant amounts are required to cover the loss in value of slaughterhouse by-products, the additional cost of SRM disposal, and the cost of additional manpower.
The Quebec Beef Producers' Federation asks the Government of Canada:
- to add to the $80 million already earmarked to help the beef industry comply with the new regulations on SRMs, to ensure that our competitiveness is not unduly affected. The new amounts must be enough to cover 75% of the costs incurred by the separation of SRMs in slaughterhouses and their processing by renderers;
- to create an assistance program of $50 million, to be paid to producers over two years, to cover the loss of income from our cattle due to the additional costs incurred by the industry in managing and disposing of SRMs.
North American regulatory harmonization.
We recognize that the government cannot indefinitely finance an industry whose competitiveness is diminished as result of regulatory factors, particularly in a context of liberalized markets. Solutions must therefore be put forward so as to continue the swift eradication of BSE in Canada, while minimizing the repercussions on Canadian industry.
Since November 19, 2007, the U.S. border has once again been open to cattle born after the “'effective” imposing of the feed ban, i.e., March 1, 1999. This is based primarily on a risk analysis by the USDA. The analysis clearly shows that the risk of BSE propagation is negligible for Canadian cattle born after March 1, 1999. It would be very much in Canada's interest to use an approach similar to that of the U.S. government in strengthening the ban on animal meal in cattle feed.
The Quebec Beef Producers' Federation proposes that only SRMs from Canadian cattle born before March 1, 1999 be prohibited in livestock feed. That approach would make it possible to maintain the rapid eradication of BSE in Canada by radically reducing the risk of cross-contamination; to reduce the volume of SRMs with no commercial value, thus mitigating the repercussions on industry and the environment; and to maintain Canada's status as a controlled-risk country with the World Organization for Animal Health, especially since our principal partner—also classified as a controlled-risk country—recognizes that the risk is clearly different, depending on whether Canadian cattle were born before or after March 1, 1999.
That approach seems to us to make very good sense. It would considerably reduce the impact of the regulations on the Canadian beef industry, while maintaining the goal of rapidly eradicating BSE in Canada. In fact, the mandatory identification and traceability system in Quebec makes this measure easy to manage.
Access to markets: The complete reopening of borders that are still closed to Canadian cattle and their meat, particularly for cattle of more than 30 months of age.
The situation is even worse for edible by-products. There again, cattle over 30 months of age are penalized even more. Yet this a major source of income for cull-cow slaughterhouses.
The Quebec Beef Producers' Federation asks the Government of Canada to take a greater leadership role and to coordinate the efforts of all departments and agencies involved to obtain speedy access to all markets, in compliance with WOAH rules, for Canadian cattle, their meat, and edible by-products.
Re-inspection at the border and the principle of reciprocity.
The Quebec Beef Producers' Federation asks the Government of Canada to intervene with the Government of the United States to express its disapproval of the new American measure of reinspection of meats at the border, and to demand its immediate withdrawal; and to apply systematically the principle of reciprocity for imported meats, in order to make that market more equitable.
With respect to Levinoff-Colbex, the Quebec Beef Producers' Federation, which has never received any assistance under the government programs in effect in September 2004 and October 2005, asks the Government of Canada to participate in the capital investment of the beef producers of Quebec in their acquisition of Levinoff-Colbex, in the amount of $5 million, which corresponds to the maximum government contribution under the Ruminant Slaughter Equity Assistance Program.
We are delighted that, on November 17, the federal and provincial ministers of Agriculture finally recognized that “the best approach consists of meeting the needs of agricultural producers and the entire sector”.
The financial situation of producers is critical. Many are seriously short of liquidity. Our creditors are knocking on our doors. The Quebec Beef Producers' Federation asks the Government of Canada to act quickly on the solutions proposed so often by producers to give Canada a competitive agricultural policy, one that is flexible at the provincial level, that is simple, transparent and effective, and that takes into account the fluctuations of input costs and market prices.
The government must act quickly. Thank you.