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Canada's Pork Sector Appeals for Government Involvement in Addressing Competitive Issues

by 5m Editor
21 April 2007, at 8:42am

CANADA - Canada’s pork industry is appealing to the federal government to assist in addressing long and short term competitiveness issues in light of challenges currently facing the pork production and processing sectors.

Last week (April 12) the Canadian Pork Council (CPC), Canada Pork International (CPI), and the Canadian Meat Council (CMC), forwarded a joint letter to federal agriculture minister Chuck Strahl and other key ministers outlining the dire situation facing both Canadian pork producers and processors and calling for action on several fronts.

Concerns Outlined in Two Recent Reports

The concerns are highlighted in depth in two separate reports. “Canadian Pork Industry Issues and Challenges,” prepared by the Guelph based George Morris Centre, an independent economic research organization, cites hog production costs, labour shortages and the appreciation of the Canadian dollar among the factors having the most damaging impacts on the sector. That report can be viewed at www.georgemorris.org.

“Canadian Pork Value Chain-Strengthening Our Competitiveness,” which was presented to the federal government by the three industry associations details the sector’s short and long term challenges and recommends several steps for future success and growth.

Rising Value of the Canadian Dollar Hurts Competitiveness

“The factor that really led to the challenges in the pork industry probably would be the evolution of the Canadian dollar,” observes Canadian Pork Council President Clare Schlegel.

“Our dollar has appreciated significantly from 63 cents back in 2001 to somewhere close to 90 cents currently. The reality is that both on the pork side and the pig side our prices have dropped directly proportional to that change,” Schlegel explains.

Disease Challenges Individual Operations

He adds a further complicating factor was the emergence of never before seen diseases.

“Circovirus challenged many individual operations as it swept across Quebec and Ontario and there was no apparent cure.”

He notes, “In mid-2006 vaccines were created and approved by CFIA [Canadian Food Inspection Agency] and it appears we now have the tools in the tool box to maintain a healthy pig herd again so many of us are recovering from that challenge as well.”

Canadian Meat Council executive director James (Jim) Laws agrees, “Especially in the last 18 months, because the value of the Canadian dollar compared with the American dollar, the value has changed so dramatically and so quickly we find the pork sector is not as competitive as the Americans are right now.”

“And put into that equation the value, the price of corn, the major feed supply for pork producers that is rising so quickly as well there are things that we think that we need to get done quickly.”

Processing Sector Struggles to Maintain Profitability

“Certainly we’ve seen major announcements from Maple leaf Foods and Olymel out of Quebec, Canada’s two largest pork slaughter and producers and have announced that they have got make some drastic changes in organizations to become a lot more competitive. And so, as you’ve seen, that involves closing some plant facilities, trying to double shift plants to make them more efficient and to try to cut costs wherever they can,” says Laws.

Past Success in Jeopardy

Schlegel notes, “I think the federal government has viewed the pork industry as a tremendous success over the last 15 years as well as many of our other export dependent commodities. They’re well aware that while the cattle industry faced BSE (Bovine Spongiform Encephalopathy) a few years ago, the poultry industry faced AI (Avian Influenza), this perhaps has become a major challenge for the pork sector. We appreciate their interest, we invite their participation and their help in both solving some of the short term but putting in a long term framework where we can be successful competing against the world.”

“There is no question that the pork and hog sector are in a very tenuous state right now,” adds CMC President Brian Nilsson. “By working closely with the federal government, we can make great gains in addressing the current competitiveness challenges affecting our sector.”

Schlegel stresses the industry is not looking for a hand-out but it does need to work with government to find real solutions, both now and in the future to improve its ability to compete globally with other pork-exporting countries.

Action Required in Five Key Areas

“There are five main areas that we are looking at,” explains CPI President Edouard Asnong. “They include costs, labor, innovation, risk management, and exports. Each of them is linked, and each must be addressed in order for us to succeed.”

Schlegel notes, “We’re asking for a firm commitment to having the West Hawk Lake zoning initiative brought to fruition. Hopefully in case of a disease we’d better be able to monitor the movement of animals and get back into international markets.”

“From a production base, as the ministers have already supported, we would like to actually see a production insurance program for livestock, specifically for hogs, come to be rather than simply being talked about.”

“Other regulatory areas would include accessing animal health products. If they’re approved for use in Canada we think we should be able to access them,” he points out. “Technologies have become available to our competitors around the world quicker than what they have to us in Canada and that of course is a concern.”

“In the whole export orientation we’re asking for a couple of different things,” Schlegel adds. “We think it's appropriate to support our sector by investing with a long term program in export promotion at a much higher level than what Canada currently does, building the image of Canada in external markets. Also in terms of free trade agreements, making sure that barriers come down, that the WTO is successful that we can gain better access to certain markets. We’re concerned if there’s preferential access given to our competitors to significant markets for us around the world. For example the Korean deal that the U.S. just signed would be a concern of ours.”

Canadian Pork Industry Dependent on Exports

CPI Executive Director Jacques Pomerleau maintains, “Canada will always be dependent on exports. Any growth we have in the Canadian pork industry will have to come from the foreign markets so the major concern of Canada Pork International in this regard is really along developing free trade agreements that make sure that we have at least the same conditions [as] our counterparts or our competitors.”

WTO and Bilateral Trade Negotiations Critical

Pomerleau believes Canada’s negotiators at the World Trade Organization need a clear mandate to pursue all avenues to achieve the best possible outcome under the Doha round but, given the uncertainty of those negotiations, establishing bilateral free trade agreements needs to be a priority.

“The markets that need to be targeted are Korea because the Americans just completed a free trade agreement and, as an industry, we can not afford to lag behind but also to consider completing the Andean community free trade agreement as well as Central America for the same reasons. In the future we should take a close look at free trade agreements with Japan especially, China and India.”

He notes, “The two competitors that are very active when it comes to free trade agreements are Chile and the United States. Chile, in particular, has negotiated free trade agreements with Japan and with Korea. It might be difficult for us to negotiate an agreement with Japan in the short while because it would be a massive free trade agreement but, in the short term, we need to complete the Korean one and hopefully in the next few weeks. And the U.S. has been very active in Central America as well as South America and, again, we are losing ground because of that.”

Labor Shortages Add to Difficulties

Schlegel notes labor is also a significant issue. According to the report prepared by the George Morris Centre, “Canadian livestock production and packing is facing a mounting labor shortage. This shortage has been brought on by many factors including an aging work force, a dramatic reduction in local youth enrolling in agriculture related programs/farm careers, and an inability to compete in the labor market with other sectors.”

Laws commends recent changes related to access to foreign labor. “In the last month, we've seen Canada's government announce changes for instance to the temporary foreign worker program which really helps the industry.”

“It’s one of the things we've been asking for,” he says. “We were able to get them to change the rule from allowing temporary foreign workers to stay for 12 months and they’ve double that up to 24 months so that's a really big help.”

Schlegel agrees, “We appreciate the changes that have already been made and we think there’s a few more that can be made.”

Fees for Government Services Burden Processing Sector

Schlegel also believes playing field needs to be leveled for Canada’s pork processors. “We would like to do a comprehensive study to understand what fees our competitors in the U.S. have what those processors have to pay [for food inspection services] and then ask for CFIA to consider meeting those rather than having our processors have to pay additional fees. We estimate, at this point in time, that our processors may be paying an additional $20 to 25 million compared to what our competitors in the U.S. are paying for those same services.”

Industry Players Confident in Industry’s Ability to Rebound

Despite the challenges industry representatives remain confident in the future of Canadian pork production.

“Canada has many of the fundamental building blocks to be successful internationally,” says Schlegel.

Laws agrees, “Really in Canada we’re very fortunate. We have a lot of arable land. We have a lot of potential feed supply for animals. We have a lot of competitive advantages and we need to take advantage of those but we need to get more competitive.”

5m Editor