Voluntary Report - public distribution

**Date:** 9/29/2003

**GAIN Report Number:** CA3062

CA3062

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 36**

**2003**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

George Myles, Matthew Cahoon

**Report Highlights:**

The BSE, Cull Cow Dilemma For Canada \* Dairy Farmers Ask For BSE Aid \*
Mexico To Accept Canadian Beef \* CWB Laments Strong Canadian Dollar \*
Saskatchewan 95% Harvested \* Ontario Crop Conditions

\* Swede Midge Found In Canola In Ontario \* New Strain Of Blackleg
Fungus Threatening Canada\'s Canola Industry \* Beetle Dooms Thousands
Of Trees; Kilometers-Long Swath Must Be Cut \* Gypsy Moths Discovered In
Northern Alberta \* Maple Leaf Foods, Inc., To Purchase Schneider
Corporation From Smithfield \* Live Hog Exports To U.S. Could Ease If
Major Manitoba Plant Re-Opens Soon \* Saputo To Buy Argentine Dairy
Processor \* Quebec Announces C\$1.9-Million Program To Aid Quebec
Beekeeping Industry Devastated By Parasite Mite \* Government Of Canada
Invests In B.C. Forest Communities

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.

THE BSE, CULL COW DILEMMA FOR CANADA: The BSE situation in Canada has
sharply disrupted the normal flow of cull cows through the supply chain.
With the industry heavily dependent on the normal flow of Canadian beef
to foreign markets and on the daily movement of live slaughter cattle to
the United States, the international border closures and restrictions
have presented a unique situation with regard to cull cows. Canada lacks
sufficient slaughter facilities for cull cows because normally, a
significant share of cows destined for slaughter are exported to
specialty plants in the United States. These animals are starting to
back up on farms and there have been some isolated cases of farmers
shooting and burying these animals. The national producer organization,
the Canadian Cattlemen's Association (CCA), continues to resist a
national cull, but is lobbying the federal government for a special
relief program unique to cull cows that would include alternate export
markets for older animal beef and expanded domestic ones. The CCA claims
that Canada\'s earlier decision to suspend supplementary imports of
non-NAFTA beef (see CA3055) has already helped increase the domestic
market for cow beef.

DAIRY FARMERS ASK FOR MAD COW AID: The October 1 *Edmonton Journal*
reported that mad cow disease is about to claim another victim \--
Canada\'s dairy farms \-- unless dozens of small slaughterhouses are
built and licensed in the coming months, a senior executive from the
country\'s largest dairy farmers association told Canadian government
Members of Parliament (MPs). With no access to slaughterhouses to
cost-effectively destroy aging dairy cattle \-- cows that previously
would have been slaughtered for meat -- dairy farmers are going to start
killing and composting the animals on their own farms, said Bruce
Saunders, Dairy Farmers of Canada (DFC) second vice-president. He termed
his prediction a worst-case scenario. Speaking to members of the federal
agriculture committee, Saunders farmers would lose C\$300 million a year
in trade in live dairy cattle, and would see their industry be tarnished
by farmers forced to shoot their own animals because they can no longer
afford to feed them. Saunders said that at the time of the May 20
closing of the Canada-U.S. border after a case of bovine spongiform
encephalopathy was discovered in Alberta, 70% of dairy cows were being
shipped live to the U.S. for slaughter. Saunders told the MPs that the
Canadian Food Inspection Agency (CFIA) should expedite the licensing and
opening of new abattoirs to ensure the viability of the dairy industry.
Farmers are surviving on milk sales but need to sell their older cows in
order to make a profit, he said.

MEXICO TO ACCEPT CANADIAN BEEF: Mexico has re-opened its border for
imports of Canadian boneless beef from cattle under 30 months of age,
liver, kidney, heart and tongue. It's expected that shipments to Mexico
should begin within days. The Canadian Cattlemen's Association (CCA)
hailed the news because Mexico is its second largest export market for
beef after the United States. In 2002, Canada exported about 50,000
metric tons of beef to Mexico, slightly more than 10% of total Canadian
beef exports that year (83% of Canadian beef exports was destined for
the U.S.). According to the CCA, a large percentage of the beef shipped
to Mexico is hips and chucks, which are in oversupply in Canada. In
August 2003, the Secretariat of Agriculture, Livestock, Rural
Development, Fisheries and Food, SAGARPA, began accepting requests to
import certain beef products from Canada, but no meat had actually
moved.

CWB LAMENTS STRONG CANADIAN DOLLAR: The October 2 edition of *Good
Morning Ontario* covered a Resource News story that the current strength
of the Canadian dollar, relative to the US dollar is negatively
impacting exporters of Canadian grains and oilseeds, said market
sources. \"For almost every sale we make, even in Canada, our
transactions are based on US dollar competition,\" said Louise Waldman,
media relations manager for the Canadian Wheat Board (CWB). \"As the
Canadian dollar strengthens, relative to the US dollar, the amount of
Canadian dollar revenue we receive per ton drops,\" Waldman added. The
past two years have been \"a double whammy,\" for the CWB, said Waldman.
Worldwide grain prices dropped at the same time as the increasing
dollar. \"So obviously this year, the dollar did have an impact on sales
returns,\" said Waldman. She noted a negative impact of up to C\$35 a
ton at different times in the year. Currency movements are \"a huge area
of concern\" for the CWB, said Waldman. \"In terms of hedging, we can do
that to a certain extent to protect ourselves." Waldman said that the
sharp drop in the U.S. dollar, to the extent it devalued was a
\"surprise to everybody.\"

SASKATCHEWAN 95% HARVESTED: Ninety-five percent of the 2003 harvest is
complete, according to Saskatchewan Agriculture, Food and Rural
Revitalization's September 28 weekly crop report. Harvest progress this
week remains ahead of the five-year (1998-2002) average of 83% complete
for this time of year. Crops with more than 10% remaining to be
harvested include flax, sunflowers, and canary seed. The northwest is
the only region with more than 10% of the crops still to be harvested.
During the past week, crop damage was mainly caused by wind, migratory
birds, and rain. Topsoil moisture conditions on cropland have improved
slightly since last week with one-third of reporters rating conditions
as adequate, compared to 28% last week. Twenty-four percent of reporters
rate topsoil moisture conditions on hay and pasture land as adequate,
compared to 22% last week. Rains in late August and early September have
revived some pastures, but more rain is needed to replenish ground water
supplies.

ONTARIO CROP CONDITIONS: According to the Ontario Ministry of
Agriculture and Food (OMAF) September 24 *Ontario Field Crop Report*,
early reported soybean yields vary widely from 25-50 bushels per acre
which is lower than what was anticipated based on crop appearance during
July and August. Seed quality has generally been excellent. Seed
moisture content has been dry. Rainfall during the past week has
improved seed moisture content with the majority of edible beans
delivered now being between 16-22%. Yields have been average to above
average with good quality reported. There have several reports of
anthracnose present in white bean fields. Initial infection appears on
individual plants. Recent weather has co-operated to bring much of the
Ontario corn crop closer to maturity. A lot of the late-planted corn has
caught up in maturity due to sufficient moisture through silking and
warm bright sunny days through August and September. Meanwhile, recent
rains have aided in creating an ideal seedbed for planting winter wheat.

SWEDE MIDGE FOUND IN CANOLA IN ONTARIO: According to the September 23
edition of the Ontario Ministry of Agriculture and Food (OMAF) *Crop
Pest Ontario* suspected Swede midge injury was been reported in a few
fields in Ontario. While surveying 32 fields for cabbage seedpod weevil,
six fields were found to have evidence of Swede midge injury. The six
fields were located in the Grand Valley area; currently an area listed
as quarantined for cole crops due to Swede midge by the Canadian Food
Inspection Agency (CFIA). Two of the fields were planted with winter
canola. The remaining four were spring canola fields. CFIA is currently
investigating the situation. To date, this pest has not been found
elsewhere in North America. The adult itself is a very weak flyer, so as
a result, CFIA has quarantined counties where swede midge was found in
attempts to limit its spread. Currently, swede midge has been found in
eight counties in Ontario. For more information on CFIA quarantine
directives and regulated counties, visit the websites listed below. CFIA
Directive:

http://www.inspection.gc.ca/english/plaveg/protect/dir/d-02-06e.shtml

CFIA Regulated Counties:
http://www.inspection.gc.ca/english/plaveg/protect/dir/smidgee.shtml

NEW STRAIN OF BLACKLEG FUNGUS THREATENING CANADA\'S \$2-BILLION CANOLA
INDUSTRY: The October 2 *CP Wire* reports that Canada\'s \$2-billion
canola industry could, according to this story, be facing its worst
disease threat in 20 years as a new strain of blackleg fungus appears to
be spreading across the Prairies. The story says that University of
Manitoba plant scientist Dilantha Fernando first found the strain, which
is common in Europe, in a crop last year near Morden, about 100
kilometers southwest of Winnipeg. This year, he\'s testing 75 samples
from Alberta, Saskatchewan and Manitoba farmers who have found canola
varieties normally resistant to blackleg covered in fungal lesions.
Samples are also coming into his lab from the northern U.S. JoAnne Buth,
vice-president of the Canola Council of Canada, which alerted farmers
through its website to send samples to Fernando, was quoted as saying,
\"I think this is serious.\" The canola industry and governments are
prepared to pour about \$200,000 into research this winter to assess how
far the disease has spread and whether any existing canola varieties are
resistant, Fernando said. Buth added that a huge outbreak of a different
blackleg strain in the 1980s caused tens of millions of dollars in
losses, according to, but crop varieties were bred during the 1990s to
resist it.

But many farmers have stopped taking precautions such as leaving four
years between canola rotations. The seed-borne fungus has been known to
infect winter-planted canola crops in Ontario and the southern U.S., but
this is the first time it has shown up in Prairie spring canola.

BEETLE DOOMS THOUSANDS OF TREES; KILOMETERS-LONG SWATH MUST BE CUT:

According to a story from the September 23 *Toronto Star*, Canadian
federal officials were cited as saying that the spread of the Asian
longhorned beetle (ALB) will force the removal of thousands of trees in
the Toronto, Ontario region because the ALB has no natural predators in
Canada and the only way to eradicate an infestation of the beetle is to
cut down host trees within a 300-meter radius of those where the winged
creature has been found. The story says that infested trees were found
in a 5-kilometer swath in a largely industrial and commercial zone
earlier this month.

GYPSY MOTHS DISCOVERED IN NORTHERN ALBERTA: According to a September 25
article from the *Edmonton Journal*, gypsy moths have, according to this
story, been found in Edmonton for the first time, raising concern over
the city's trees and Alberta\'s northern boreal forests. Peter Volney, a
Canadian Food Inspection Agency (CFIA) program officer, was cited as
saying that three moths were found in two local traps early last week
said Volney said he remembers opening the first trap and seeing the
three male gypsy moths. The specimens were sent to Ottawa to be more
specifically identified by DNA testing, since the male Asian gypsy moth
looks identical to the male North American \-- formerly European \--
gypsy moth. \"Either way, it\'s not good,\" Volney said.

MAPLE LEAF FOODS, INC., TO PURCHASE SCHNEIDER CORPORATION FROM
SMITHFIELD: Last week, Maple Leaf Foods, Inc. announced that it has
executed a definitive agreement with Smithfield Foods, Inc. of
Smithfield, Virginia to purchase Schneider Corporation of Kitchener,
Ontario for \$378 million (approximately C\$515 million). Schneider, a
value-added pork processor is a historically strong brand in Canada and
is one of Canada's largest producers of premium branded quality food
products, specializing in packaged processed meats, poultry and grocery
products, but is.  For the year ended April 27, 2003, Schneider's had
sales of \$C1.24 billion and earnings from operations of \$C54.1
million.   Schneider's employs approximately 5,000 people at its 20
facilities across Canada. Maple Leaf is Canada's largest food company
and one of the largest processors of slaughter hogs in Canada. In 1997,
Maple Leaf bid \$130-million to get Schneider, but the company moved to
thwart the bid and accepted a Smithfield offer. Some analysts were
speculating that Smithfield was anxious to unload Schneider due to the
potential lack of synergy of its operations in Canada under the U.S.
Country of Origin Labeling (COOL) initiative. Public Law 107-171
requires USDA to promulgate regulations for a mandatory country of
origin labeling program by September 30, 2004.

LIVE HOG EXPORTS TO U.S. COULD EASE IF MAJOR MANITOBA PLANT RE-OPENS
SOON: Hog industry observers in western Canada are speculating that the
Springhill Farms hog processing plant in Neepawa, Manitoba could re-open
this fall. The plant temporarily closed its doors earlier this summer
claiming low profitability which resulted in an increase in live
slaughter hog exports to the United States. The plant's capacity is
approximately 18,000 hogs per week. Normally, the plant slaughters hogs
for shipment to a cutting plant in Winnipeg owned by Maple Leaf Foods,
Inc. According to the local press, Manitoba's Minister for Industry,
Trade and Mines recently confirmed the province was working on the
details of a loan agreement with Springhill Farms.

SAPUTO TO BUY ARGENTINE DAIRY PROCESSOR: Saputo Inc. says it is buying
the third largest dairy processor in Argentina for US\$50.8 million. The
Montreal-based cheese maker says it has a preliminary deal with Molinos
Rio de la Plata SA to buy its Molfino Hermanos SA business. Molfino,
which has annual sales of about \$90-million, employs a work force of
850 and has two plants. About 40% of its sales are exported out of
Argentina ot more than 30 countries. It produces soft, semi-soft, hard
and grated cheese and also butter, cream and milk powder. Molfino\'s
main brands are La Paulina, Molfino, Ricrem and Taluhet. "By giving the
Company the opportunity to establish itself in a market where the raw
material is accessible at competitive international prices, this
proposed transaction is in line with Saputo\'s goal of becoming a
world-class cheese company," the company said.

QUEBEC ANNOUNCES C\$1.9-MILLION PROGRAM TO AID QUEBEC BEEKEEPING
INDUSTRY DEVASTATED BY PARASITE MITE: According to the September 26
*Montreal Gazette*, the Quebec agriculture department was cited as
announcing a C\$1.9 million program yesterday to help Quebec beekeepers
whose hives have been devastated this year by the parasite Varroa mite.
In announcing the program, Agriculture Minister Francoise Gauthier was
cited as saying that Quebec\'s 200 beekeepers have 37,000 hives, and
Varroa has wiped out \"no less than 50%\" of them this year. Denis
Pellerin, of the beekeepers association, was cited as saying the damage
is even worse in terms of honey production. For 2003, honey production
in Quebec is between one-third and one-quarter of the usual amount.

GOVERNMENT OF CANADA INVESTS IN B.C. FOREST COMMUNITIES: According to a
September 22 news release from Western Economic Diversification Canada,
the Government of Canada (GOC) is investing over C\$3.5 million in B.C.
communities severely impacted by softwood tariffs. This funding will go
towards eight job-creating community-based initiatives worth more than
C\$15 million. In the coming months, B.C.\'s forest-dependent
communities can expect to receive an additional C\$50 million from the
GOC for similar projects.

\"Supporting British Columbia\'s forestry sector and forest-dependent
communities is a top priority for the Government of Canada,\" said Herb
Dhaliwal, Minister of Natural Resources Canada. \"This initiative
demonstrates our commitment to the sustainability of B.C.\'s communities
while we continue to work for a long-term solution to the softwood
lumber dispute with the United States.\" Western Economic
Diversification Canada is the federal department mandated to support
economic diversification in communities across Western Canada through
activities that promote and assist Innovation, Entrepreneurship, and
Sustainable Communities. Federal funding for this initiative was
provided for in the February 2003 budget.

**Find FAS on the World Wide Web:**

Visit our headquarters' home page at 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

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                    35                                       

  CA3057            Grain and Feed September Update          9/6/2003

  CA3055            Livestock Annual                         9/4/2003

  CA3054            Canada's Dairy Industry and the          8/28/2003
                    Implications of the WTO Dairy Dispute    

  CA3052            Poultry Annual                           8/27/2003
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