Canada’s livestock industry is in trouble.
It faces a long list of challenges. To name a few: market access, U.S. country-of-origin labelling, a strong loonie, packer consolidation, unsuitable government risk management programs and specified risk material disposal costs.
There is no single solution to the range of issues that bedevil the industry.
Industry leaders are trying to develop strategies to address the problems but there are few quick fixes. In some cases, solutions are in the hands of others, outside the livestock industry’s, or even Canada’s, realm of control.
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In the meantime, cattle and hog producers are culling herds and some are getting out. Some worry that the contraction is becoming so pronounced that valuable infrastructure is being lost.
It is this worry about infrastructure that caused the Canadian Cattlemen’s Association, along with the dairy, rendering and processing industries and the Canadian Federation of Agriculture, to ask the federal government to fix one well defined problem related to packer competitiveness with a well defined solution.
They asked that the federal government make up the difference in costs between what Canadian packers pay to remove specific risk material from over 30 month cattle and what American packers pay.
Agriculture minister Gerry Ritz has rejected the proposal even though his government appreciates how differing regulatory systems can disadvantage Canadian business.
In 2007, Canada introduced a new, strict enhanced feed ban to keep BSE-risk materials from being used in food or animal feed. Much material that once was rendered into animal feed or fertilizer now must be disposed of in landfills.
American rules covering these risk materials are less restrictive and less expensive to follow.
Canada’s enhanced feed ban is much more costly than first expected and is not delivering the desired result: helping Canadian beef get into more markets.
A Canadian Meat Council study shows that on average the enhanced feed ban increases Canadian packer costs by $31.70 per head relative to U.S. packers.
The difference hits processors handling older than 30 month cattle particularly hard, so the proposal asks for a compensation program paying $31.70 to abattoirs for every OTM animal slaughtered in Canada. On a slaughter of about 750,000 head, it would cost $24 million.
The money would go to packers to allow them to make bids that are competitive with American packers, keeping the cows in Canada to be processed.
The CCA admits the solution is unpalatable, given that packers did not use BSE crisis money to make their plants more efficient. But it warns the alternative of doing nothing will cause abattoir closures. The XL Beef plant in Moose Jaw is already closed and others are threatened because of the higher costs.
U.S. packers that have lower costs are able to outbid Canadian packers for older cows. Ironically, some of the meat from these cows it exported back to Canada.
Canada learned during the BSE crisis that inadequate packer capacity puts the cattle industry at the mercy of any border closures.
The federal government, through its stance on climate change policy, has made it clear it realizes Canadian businesses can be sorely disadvantaged if they must follow regulatory regimes more stringent than those in the U.S. It ignores that insight here.
Over time, research might find ways to allow specified risk materials to be used and have value. Also, regulations in Canada and the United States eventually might be harmonized.
But that will likely take years and meanwhile the packing sector is in immediate peril. In fairness, Ottawa must help to restore the competitive balance upset by the federal feed ban.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
