Voluntary Report - public distribution

**Date:** 1/13/2005

**GAIN Report Number:** CA5002

CA5002

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 2**

**2005**

**Approved by:**

![](media/image1.wmf)Gary Groves

U.S. Embassy

**Prepared by:**

Christina Patterson and George Myles

**Report Highlights:**

\* Canada Announces Another BSE Case \* Feed Ban Did Not Include
Disposal of Stored Feed \* Industry Mulls Mass Cattle Cull \* U.S.
Groups Oppose and Re-Evaluate the Reopening Border to Live Canadian
Cattle \* PEI Potato Board Promoting Spud Diversion to Raise Prices \*
Growers Hopeful Prince Edward Island Potato Processor Will Expand \*
Ontario to Review the Distribution and Retailing of Liquor, Beer and
Wine \* Hearings to be Held Regarding WTO Wheat Panel Ruling \* Canada
Hits Back in Softwood Lumber Dispute \* Canada\'s Trade Surplus Soars

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Ottawa \[CA1\]

\[CA\]

This Week in Canadian Agriculture is a weekly review of Canadian
agricultural industry developments of interest to the U.S. agricultural
community. The issues summarized in this report cover a wide range of
subject matter obtained from Canadian press reports, government press
releases, and host country agricultural officials and representatives.

*Disclaimer*: Any press report summaries in this report are included to
bring U.S. readership closer to the pulse of Canadian developments in
agriculture. In no way do the views and opinions of these sources
reflect USDA's, the U.S. Embassy's, or any other U.S. Government
agency's point of view or official policy.

**CANADA ANNOUNCES ANOTHER BSE CASE:** On January 11, 2005, nine days
after its second case of bovine spongiform encephalopathy (BSE), the
Canadian Food Inspection Agency (CFIA) confirmed another case in an
Alberta cow (all three cases since May 2003 have occurred in Alberta and
the Washington State of December 2003 case was traced to an animal from
Alberta). The CFIA reports that traceouts have confirmed that three
birth cohort animals from the most recent case were exported to the
United States. So far, no birth cohort of the animal has tested positive
in Canada. The most recent positive-test animal was born in March 1998,
after the introduction of the 1997 feed ban in Canada (i.e., the banning
of rendered protein products derived from most mammals for use in
ruminant feed). USDA is sending a technical team to Canada to evaluate
the circumstances surrounding these recent finds. The Canadian
government has launched an extensive international outreach campaign to
reinforce awareness and understanding of the science-based measures
Canada has in place to protect human and animal health from BSE.
Canadian officials have been dispatched to China and will be traveling
to Hong Kong, Japan and Taiwan over the coming week. Canada's Chief
Veterinary Officer is currently in Washington for technical discussions
with USDA and FDA officials. Ag Minister Mitchell will travel to Mexico
next week and the United States soon after to meet with his
counterparts.

**FEED BAN DID NOT INCLUDE DISPOSAL OF STORED FEED:** Anecdotal
information from Canadian cattle ranchers suggests that because Canada's
feed ban did not require the disposal of previously manufactured feeds,
potentially BSE contaminated feed may have remained in storage on farms.
As a result, there remained the potential for farmers to feed prohibited
proteins in cattle feed for an extended period of time following the
actual ban. Indeed, prior to the May 2003 BSE incident, it was thought
that Canada's only possible source of BSE infective agent was the
importation of live UK cattle in the 1980s. Canada has not imported
cattle from the UK since 1990. Following the detection of BSE in one of
the imported UK animals in 1993, all others (remaining alive) were
slaughtered and incinerated (about 363 animals). From 1994 an import ban
was imposed on all countries where BSE had been detected in native
cattle. From 1996, live cattle could only be imported from countries
that Canada designated as free from BSE following a comprehensive risk
assessment. According to a CFIA factsheet, Canada has not imported
ruminant-derived meat and bone meal for the purpose of livestock feeding
from Europe for more than a decade. In December 2000, the CFIA suspended
the importation of rendered animal material of any species from any
country that Canada did not recognize as free of BSE.

**INDUSTRY MULLS MASS CATTLE CULL:** There is renewed interest in the
Canadian cattle industry for a mass cattle cull following the discovery
of another confirmed case of BSE in an animal born after Canada's 1997
feed ban (a ban to prohibit rendered protein products derived from
cattle and most other mammals in ruminant feed). Alberta Premier Ralph
Klein suggested this week that a cull of about 1.8 million older animals
should effectively remove the higher risk animals from the industry in
an expedient fashion. A spokesperson for the Canadian Cattlemen\'s
Association admitted that a cull is being discussed within the industry
and will likely be discussed with government officials. Canada's cattle
industry has been generally cautious about a grand scale cattle cull in
order to spare consumers scenes or thoughts of mass graves and piles of
incinerating bovine carcasses. In fact, beef consumption in Canada has
remained strong since the first incident of BSE in Alberta in May 2003.

**U.S. GROUPS OPPOSE AND RE-EVALUATE THE REOPENING BORDER TO LIVE
CANADIAN CATTLE:** While the U.S. administration continues to support
the opening of the border to live cattle imports from Canada, USDA is
sending a technical team to Canada to evaluate the circumstances
surrounding these recent finds of BSE in Alberta. A number of U.S.
politicians are against the reopening of the border to Canadian cattle.
Media reports say that North Dakota\'s Gov. John Hoeven, U.S. senators
Byron Dorgan and Kent Conrad, and California Congressman Henry Waxman,
all believe that the U.S. should re-evaluate the border opening. Earlier
in the week, R-CALF USA launched a lawsuit against USDA demanding that
the Canadian border remain closed. The 36-page document, filed in the
U.S. District Court for Montana, asks the court to overturn USDA\'s
final rule. The National Cattlemen's Beef Association (NCBA), the
largest organization representing America's cattle industry, intends to
send its own technical team to Canada and issued the following
statement. "In light of the recent findings of BSE in Canadian cattle,
and the fact that this last animal was born after Canada's feed ban, we
demand that USDA and the Food and Drug Administration (FDA) investigate
Canada's feed ban compliance. Based on this information, USDA and the
FDA should determine how to proceed with regard to implementation of the
Canadian rule.  Members of the NCBA are committed to normalizing global
trade based on science that protects the health of our industry. 
Science shows the feed ban breaks the cycle of this disease, and U.S.
cattlemen must be confident of Canada's full compliance with its feed
ban. Once the questions concerning Canada's compliance with its BSE
firewalls have been adequately answered, NCBA members will consider
their position on the Canadian rule and efforts to reopen the border.  

**PEI POTATO BOARD PROMOTING SPUD DIVERSION TO RAISE PRICES:** The PEI
Potato Board is encouraging growers to dump over one million pounds of
potatoes to help drive up the North American price. Prince Edward Island
is Canada's No. 1 potato producing province. One PEI board member told
local media that while the 2004 growing season proved to be a good
harvest, finding enough customers has been difficult. Many open market
potatoes (i.e., non-contracted) are reportedly still in warehouses
awaiting a buyer. Details of the Island's voluntary diversion program
were unveiled to growers, dealers, exporters, processors and other
industry people this week at the meeting of the Potato Marketing
Association of North America. Under the voluntary plan, potatoes would
be removed from normal marketing channels via spreading on fields, food
banks and livestock feed. PEI Potato Board manager Ivan Noonan said that
the board has spoken with other potato organizations in Canada and
challenged them to support strengthened returns for all growers by
looking at similar programs. He added that a similar program is underway
in Idaho where a new grower co-operative representing over 90 per cent
of the fresh potato acreage in that state has set a goal of diverting 4
million hundredweight of potatoes.

**GROWERS HOPEFUL PRINCE EDWARD ISLAND POTATO PROCESSOR WILL EXPAND:**
Local press reports indicate that Cavendish Farms, one of two major
processors of frozen french fries in Prince Edward Island (the other is
McCain), is looking to expand production capacity. Cavendish currently
operates two processing plants in the province. These are reportedly
running at full capacity. The company, said to be in discussions with
provincial agriculture and environmental officials, has made no public
announcement concerning expansion. Canada is a major exporter of frozen
potato products with worldwide sales estimated at \$700 million during
2004, of which about \$550 million was exported to the United States. In
fact, value-wise, frozen french fries is the third most important
Canadian agricultural export to the U.S. after beef and pork.

**ONTARIO TO REVIEW THE DISTRIBUTION AND RETAILING OF LIQUOR, BEER AND
WINE:** The Ontario government has announced that an independent review
panel will examine the roles of all the participants in Ontario\'s
beverage alcohol distribution and retail system, including the
government-owned Liquor Control Board of Ontario (LCBO), the privately
owned Brewers Retail Inc., and the retail stores owned by Ontario
wineries. The panel will receive input from the public and stakeholders
and make recommendations in spring 2005. Industry observers say that the
province is interested in extending certain wine and beer sales into
privately owned grocery and convenience stores, a practice not currently
permitted in the province, in order to boost realized revenues for
Ontario. Alongside its retail operations, the LCBO is also first
receiver of all liquor commercially imported into Ontario and enforces
minimum prices. In 2003/04, the LCBO\'s net sales (excluding retail
taxes) were C\$3.3 billion, generating a dividend to the provincial
government of C\$1.04 billion.

**HEARINGS TO BE HELD REGARDING WTO WHEAT PANEL RULING**: Mr. Wayne
Easter, Parliamentary Secretary to the Minister of Agriculture and
Agri-Food, will be holding hearings next week in Western Canada on the
implications of the implementation of the World Trade Organization\'s
(WTO) ruling on the Canadian Wheat Board (CWB). In 2004, a WTO Panel
released its final ruling against Canada on the rail revenue cap (which
limits what railways can charge for moving western Canadian grain), the
Canadian Grain Commissions authorization requirements for U.S. grain
moving into Canada, and prohibitions against mixing of Canadian and U.S.
grain by Canadian elevators. The U.S. and Canada later agreed on a time
frame in which the Canadian government has to implement the changes as
required by the WTO ruling. Mr. Easter is seeking the input of producers
from across the Prairies on how the Canadian government should go about
implementing the changes and the possible impact the changes may have.
The hearings are scheduled for January 17th in Abbotsford, B.C., January
19th in Calgary, AB, January 20th in Saskatoon, SK and January 21st in
Brandon, MB.

**CANADA HITS BACK IN SOFTWOOD LUMBER DISPUTE**: In the ongoing saga of
the softwood lumber dispute between Canada and the U.S., the Canadian
government has launched another trade challenge against the United
States. This most recent trade challenge comes in response to a U.S.
countervailing duty administrative review, which was issued on December
14, 2004. In the review, the U.S. Department of Commerce determined a
new duty rate of 17.18 percent, only a small fraction lower than the
original duty rate of 18.79 percent. Canada and the Canadian lumber
industry had been expecting a substantial reduction and were shocked by
the lack of significant reduction in the duty. This latest challenge
follows closely behind other actions recently taken by Canada in regards
to the dispute. The most recent actions taken by the Canadian government
are:

-   The Canadian government has filed a notice of intent to appeal the
    U.S. International Trade Commission (ITC) threat of injury
    determination, issued November 24, 2004, before the U.S. court of
    International Trade.

-   A notice of intent has been filed to challenge the countervailing
    and anti-dumping duty orders that were amended to reflect the new
    ITC determination.

-   Canada has also challenged the measure taken by the U.S. to comply
    with a World Trade Organization (WTO) ruling in the subsidy case.

-   Canada sought authority to retaliate on a maximum of C\$200 million
    of American imports.

**CANADA'S TRADE SURPLUS SOARS**: According to Statistics Canada,
Canada's trade surplus soared to near-record levels in November,
reaching C\$7.3 billion, the third-highest level since 1997. One of the
main contributors to the large increase was the fact that the high
Canadian dollar held down the cost of imports. Both imports and exports
were down for the month of November, with Canadian companies only
importing C\$27.4 billion worth of merchandise and Canadian companies
exporting C\$34.7 billion worth of merchandise. Both energy and auto
exports were down for the month of November. Economists did not greet
the increase in the trade surplus with enthusiasm, as the surplus was a
result of a drop in imports, not a boom in exports. Export Development
Canada's latest semi-annual report indicated that Canadian exporters are
more pessimistic about trade opportunities abroad because of the higher
value of the Canadian dollar, slower global economic growth and
geopolitical uncertainty.

# Find FAS on the World Wide Web: 

Visit our headquarters' home page at
[http://www.fas.usda.gov](http://www.fas.usda.gov/) for a complete
listing of FAS' worldwide agricultural reporting.

# 

# Recent Reports from FAS/Ottawa: 

+----------------+---------------------------------------+------------+
| Report Number  | Title of Report                       | Date       |
+----------------+---------------------------------------+------------+
| ## CA5001      | This Week in Canadian Agriculture,    | 1/7/2005   |
|                | Issue 1                               |            |
+----------------+---------------------------------------+------------+
| ## CA4092      | Strawberry Market Update              | 12/22/2004 |
+----------------+---------------------------------------+------------+
| ## CA4091      | Bill C-27, CFIA                       | 12/17/2004 |
+----------------+---------------------------------------+------------+
| ## CA4090      | Honey Production & Trade Update       | 12/16/2004 |
+----------------+---------------------------------------+------------+

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