Voluntary Report - public distribution

**Date:** 7/16/2003

**GAIN Report Number:** CA3042

CA3042

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 26**

**2003**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

Matthew Cahoon and Brad Kirbyson

**Report Highlights:**

Vanclief Rejects Talk Of Retaliatory Trade Action \* Alberta Premier
Klein - Beef Industry Dying \* "Plan B" For Cattle Industry \* Canada
Welcomes NAFTA Panel Anti-Dumping Ruling On Softwood Lumber

\* Expectations Of A Pool Account Deficit At CWB \* Monsanto Slams
Canadian Wheat Board Roundup Ready Wheat Report \* Rain Helps Maintain
Saskatchewan Crops \* Dairy Farmers Of Canada Presses For Overturn Of
Ontario Court Decision \* CFIA Modifies Directive Pertaining To
Commodities Regulated For Blueberry Maggot

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.

VANCLIEF REJECTS TALK OF RETALIATORY TRADE ACTION: A related article
from the July 14 *Globe and Mail* reports that Canada's opposition party
is calling for the federal agriculture minister to step down, following
a failed attempt to persuade Japanese officials to reopen their market
to Canadian beef. Despite his frustrations, Vanclief said that the next
step for Canadian officials is to continue meeting with their Japanese
counterparts and to push the science, which indicates that Canadian beef
is safe. Vanclief rejected the idea of retaliatory trade action. A few
provincial agriculture ministers have been calling for a halt to U.S.
beef imports in retaliation for the ban on Canadian products. \"You
don\'t open borders by closing borders,\" Mr. Vanclief said on Monday.
\"We\'ll keep pushing science.\"

ALBERTA PREMIER KLEIN - BEEF INDUSTRY DYING: The July 15 *Globe and
Mail* reported that Alberta Premier Ralph Klein said the country\'s
cattle industry will be \"down the tubes\" by the end of August if the
United States and other countries have not lifted their bans on imports
of Canadian beef by then. The single case of mad-cow disease, bovine
spongiform encephalopathy, discovered in late May has shut down Canadian
exports of meat and live cattle to several countries for eight weeks.
Industry groups put the cost at \$600-million so far. Klein said he is
frustrated that the bans continue despite an extensive investigation and
slaughter that found no other cases of BSE. However, the source of the
animal\'s infection has not been determined. Ranchers, breeders and
feedlots have only six weeks before the loss of exports causes major and
permanent disruptions, Klein said before a speech in Calgary. \"The beef
industry, relative to exports, will be down the tubes by the end of
August.\" After that, Canada will need to protect what is left of the
domestic beef industry, including an eat-beef campaign aimed at Canadian
consumers --- and perhaps retaliatory trade measures against countries
that haven\'t lifted their prohibitions, Klein said. Ted Haney,
president of the Canada Beef Export Federation, said in a worst-case
scenario, the cost to the domestic industry could more than triple to
\$2-billion by November

"PLAN B" FOR CATTLE INDUSTRY: The July 16 *Globe and Mail* reported that
Alberta premier Ralph Klein and the Alberta-centered beef industry have
begun to talk about the need for a Plan B: policies to have at the ready
in case the borders remain closed into the fall to assist the industry.
Klein has given only the broadest outline for his version of Plan B,
including the need to promote domestic consumption of beef, the
possibility of trade sanctions against countries banning Canadian
product and the unlikelihood that the province will spend more on
compensation to producers. Officials with Alberta\'s Agriculture
Ministry said yesterday that the government will consult with producers
about what should be included in Plan B. The beef industry, while
stressing that the best solution is to open borders quickly, is
beginning to think through a series of steps that would ease it through
a painful contraction from an export-oriented business to one about half
that size, geared to domestic consumption, as about half of Canada's
92,000 producers would be forced out of business should the export ban
remain in place past September. "The reality is, we have to take care of
our interests," said Alberta Beef Producers chairman Arno Doerksen. He
said that in the event of prolonged bans on Canadian beef, the first
step would be for Canada to stop issuing supplemental import permits for
overseas beef producers, chiefly from Australia and New Zealand, to sell
their product into the Canadian market beyond previously established
limits. The beef imported under supplemental permits is equivalent to
about 10% of the amount of lost exports. The Canadian government could
further restrict imports by reducing or eliminating shipments from all
producers other than the United States. A final step might be to limit
U.S. shipments, although Mr. Doerksen acknowledged that NAFTA would
impede any such move. However, restricted imports even combined with
marketing measures to boost the amount of beef that Canadians eat, would
not allow the industry to escape unscathed, he said.

CANADA WELCOMES NAFTA PANEL ANTI-DUMPING RULING ON SOFTWOOD LUMBER:

In a July 17 news release from the Canadian Department of Foreign
Affairs and International Trade (DFAIT), International Trade Minister
Pierre Pettigrew welcomed the NAFTA panel decision, which states that
the United States\' application of anti-dumping duties on Canadian
softwood lumber was inconsistent with U.S. domestic law. The NAFTA panel
has ordered the U.S. Department of Commerce to issue a new determination
within 60 days. \"The panel told the U.S. to correct its flawed
determination,\" said Minister

Pettigrew. \"Canada will continue to pursue all avenues to defend its
softwood lumber industry, including its other WTO and NAFTA
challenges.\" The NAFTA panel decision is available at
http://www.nafta-sec-alena.org

EXPECTATIONS OF A POOL ACCOUNT DEFICIT AT CANADIAN WHEAT BOARD: The July
14 edition of *Agriweek* reports that there now seems to be no chance
that the Canadian Wheat Board (CWB) main hard red spring wheat pool will
end the 2002/03 crop year in the black. The CWB will not realize as much
in revenues from sales as it will have paid growers in initial and
interim payments. The article hypothesizes that this explains why wheat
shipments and exports have been so down as of late. The CWB stopped
accepting delivery of CWRS wheat below No. 2 last month, allegedly due
to \"current market conditions.\" It accepted all the 1 and 2 CWRS wheat
offered to its C series delivery contracts, but zero of all other
classes, grades and types. The CWB has literally been unable to sell
export wheat since at least April at prices that would not worsen the
pool return gap. The CWB will now have to juggle its pool account
arithmetic, sales proceeds and payments, adjusting prices and grade
differentials. It will cross-subsidize some grades out of returns for
others to avoid if it can, or at least minimize, the deficit in the
total non-durum pool. The CWB can raise initial payments but it can\'t
lower them. No one in the industry knows how big the deficit will be,
but payments for No. 1 CWRS made to date are within \$1 a tonne of its
latest pool return outlook for 2002/03, a figure that is set by the CWB.
There have been three times before that CWB initial payments were set
higher than what the market was able to support: 1968/69, 1985/86 and
1991/92.

In a related article from the July 10 *Western Producer*, the CWB\'s
latest pool return outlook (PRO) forecasts a final 2002/03 price of
\$258 a tonne for No. 1 CW red spring 14.5% protein wheat. The initial
payment is \$256.75 a tonne, a margin of \$1.25 a tonne. If the pool
account ends up in a deficit ---the Canadian government would be
directly subsidizing wheat prices paid to farmers through the CWB. CWB
officials acknowledge that a deficit could cause problems on the trade
front. But they also are adamant there is no reason to believe that will
happen. \"The numbers are very close, but we are not in a deficit
position right now,\" said board chair Ken Ritter. \"Obviously we are
concerned about it, but there are still up to five months left in the
pool year and we\'re not going to speculate where those numbers will end
up.\" While the bulk of the 2002 crop has been marketed, Ritter said
some wheat remains to be sold. Analysts also said the board\'s recent
announcement that it would take only No. 1 and No. 2 CW wheat in the C
Series contract clearly reflects the board\'s concern about the
possibility of a deficit. \"They\'re only accepting the grain they felt
would contribute positively to the pool,\" said Charlie Pearson of
Alberta Agriculture.

MONSANTO SLAMS CANADIAN WHEAT BOARD ROUNDUP READY WHEAT REPORT: The July
17 edition of the *Manitoba Cooperator* reports that Monsanto continues
to slam a study commissioned by the Canadian Wheat Board purporting to
show that the unconfined release of Monsanto\'s genetically modified
Roundup Ready wheat would be environmentally unsafe and pose a natural
resource conservation risk. Monsanto spokesman Trish Jordan pointed out
the anti-GMO bias of the report\'s three University of Manitoba-based
writers, and suggested that the researchers ignored a large body of
scientific evidence in making their claims. Jordan added that references
in the report to Roundup Ready canola are misleading due to the lower
levels of pollen flow, and that the report fails to mention the economic
and environmental benefits of Roundup Ready canola. Rene Van Acker, the
lead writer of the report, responded \"the report is an environmental
risk assessment so it\'s not the purview of such a report to extol the
virtues of a product.\"

RAIN HELPS MAINTAIN SASKATCHEWAN CROPS: A cooler week, with some
rainfall, helped to maintain crops, according to Saskatchewan
Agriculture, Food and Rural Revitalization's

July 14 weekly crop report. Provincially, crop conditions are reported
as good to excellent for at least 50% of all crops, with the exception
of flax, mustard, and chickpeas. Crop development continues to
accelerate with three-quarters of the spring cereals and pulse crops and
two-thirds of oilseed crops either normal or ahead of normal
development. More than 90% of the fall cereals are either normal or
ahead of normal development. There is, however, concern about short
crops and heat stress. Topsoil moisture conditions on cropland improved,
mainly in central and northern areas of the grainbelt. Provincially, 50%

of crop reporters rate cropland topsoil moisture as adequate and 39%
rate hay and pasture

land topsoil moisture as adequate. The main sources of crop damage
during the past week were from insects and lack of moisture.
Grasshoppers, in damaging numbers, can be found in areas across much of
the province. Hail damage was reported in central and northern

areas.

DAIRY FARMERS OF CANADA PRESSES FOR OVERTURN OF ONTARIO COURT DECISION:
According to a July 16 news release, the president of Dairy Farmers of
Canada (DFC), Leo Bertoia, called on the Ontario Minister of Agriculture
to overturn a recent Ontario Tribunal decision allowing for dairy
producers in the province to not hold quota if production is for
export-only purposes. Bertoia said the tribunal ruling means Canada
would be contravening an agreement with the United States and New
Zealand on Canadian dairy exports. Bertoia said that the few non-quota
holders who wish to export milk jeopardizes the "collective rights" of
the majority of the producers who function under supply management. \"On
behalf of Canada\'s milk producers, I encourage the Ontario government
to overturn the decision of the Ontario Appeal Tribunal in the matter of
milk exports by non-quota holding producers,\" continued Bertoia. DFC,
provincial dairy organizations and other supporters of the dairy

industry and the supply management system have contacted Ontario
Agriculture Minister Helen Johns and various provincial government
representatives to put an end to the dispute and overturn the
tribunal\'s decision.

CFIA MODIFIES DIRECTIVE PERTAINING TO COMMODITIES REGULATED FOR
BLUEBERRY MAGGOT: On July 17, the Canadian Food Inspection Agency (CFIA)
noted that Appendix 1 of Directive D-02-04 \"Phytosanitary Requirements
For The Importation From The Continental United States and For Domestic
Movement Of Commodities Regulated For Blueberry Maggot \" has been
revised and is available on the web at:

<http://www.inspection.gc.ca/english/plaveg/protect/dir/d-02-04e.shtml>

**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

  CA3041            Promotion Opportunities Food and         7/14/2003
                    Beverage Shows-2003                      

  CA3040            This Week in Canadian Agriculture, Issue 7/10/2003
                    25                                       

  CA3039            Ban on Canadian Beef Exports Increases   7/08/2003
                    Short-Term Demand for Feed Grains        

  CA3032            Dairy Semi-Annual                        5/21/2003

  CA3030            Oilseeds and Products Annual Report      5/14/2003

  CA3021            Grain and Feed Annual Report             4/11/2003
  ----------------- ---------------------------------------- -------------

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