Voluntary Report - public distribution

**Date:** 9/2/2005

**GAIN Report Number:** CA5058

CA5058

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 30**

**2005**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

George Myles and Christina Patterson

**Report Highlights:**

CANADIAN CORN GROWERS TO FIGHT ALLEGED U.S. CORN SUBSIDIES \* KATRINA
NOT EXPECTED TO SHARPLY IMPACT U.S. CHICKEN EXPORTS TO CANADA \* TRANS
FAT TASK FORCE RECOGNIZES TRADE BARRIER POTENTIAL \* LUMBER: WTO RULES
AGAINST CANADA \* CANFOR TO PULL OUT OF LUMBER LOBBY \* CANADA SUES FOR
DUTIES \* CROP UPDATE

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.

**CANADIAN CORN PRODUCERS LAY OUT PLAN TO FIGHT ALLEGED U.S.
SUBSIDIES**: The Canadian Corn Producers, which is coalition of the
Ontario Corn Producers' Association, La federation des producteurs de
cultures commerciales du Quebec and the Manitoba Corn Growers'
Association Inc., recently released the groups' commitment to a
three-pronged approach to deal with U.S. grain corn imports. According
to the release, the plan will:

a)  *Enable Canadian corn farmers to earn a fair return on their crops
    and,*

b)  *Level the playing field for Canadian corn farmers who for years now
    have suffered injury from low corn prices caused by billions of
    dollars of illegal U.S. subsidies and dumping.*

The three prongs of the plan are:

1.  Byrd Amendment retaliation.

2.  World Trade Organization (WTO) case

3.  Anti-dumping and Countervailing Duties Complaint under *Special
    Import Measures Act* (SIMA)

Under the first prong of the Byrd Amendment retaliation, the Canadian
Corn Producers have asked the Canadian government to add U.S. grain corn
imports to the list of products targeted for retaliation by Canada
against the U.S. for its refusal to repeal the Byrd Amendment. Under the
second prong, a WTO case, the Canadian Corn Producers have requested
that the Government of Canada commence WTO dispute settlement
proceedings by requesting consultations with the U.S. regarding the U.S.
grain corn subsidies as a result of the expiry of the "peace clause",
and the recent WTO dispute settlement reports in the *Upland Cotton*
case initiated by Brazil. According to the release, the Canadian Corn
Producers justify initiating a WTO case because U.S. grain corn measures
are specific subsidies, which are contrary to the WTO *Subsidies and
Countervailing Measures Agreement* and the subsidies have conferred a
benefit to U.S. grain corn producers and have caused adverse
effects/serious prejudice to Canadian interests through displacement of
Canadian grain corn production and sales, significant grain corn price
undercutting, suppression or depression, and an unfair increase in the
U.S. share of world grain corn sales. Under the third prong, an
Anti-dumping and Countervailing Duties Complaint under SIMA, the
Canadian Corn Producers have filed a complaint with the Canada Border
Services Agency (CBSA), who will determine if there is justification to
launch a formal investigation. The goal of the third prong is the
application of duties to U.S. grain corn that is imported into Canada.
*Post Comments: Canada is corn deficient and is reliant on U.S. corn
imports to meet domestic demand. Ethanol production in the province of
Ontario is corn-based. The ethanol industry is continuing to expand to
meet demand and new regulations laid out by the provincial government.
There are new plants looking to come on-line in 2006. Currently the
industry utilizes roughly 25 million bushels of corn and the expectation
is that the industry's corn requirement will increase exponentially in
the next couple of years. The cattle, hog and poultry industries all
utilize corn in their production. In addition, there are several other
industry players who utilize corn in their production. The application
of tariffs on U.S. corn imported into Canada will have very negative and
far-reaching effect on Canadian agriculture and all those secondary
industries that rely on corn in the production of their products. In
addition, the benefit to the Canadian Corn Producers may only be short
lived, as those industries like ethanol that utilize corn may be forced
to either shut down or relocate into the U.S., where the corn is cheaper
and in ample supply.*

**HURRICANE KATRINA NOT EXPECTED TO SHARPLY IMPACT U.S. CHICKEN EXPORTS
TO CANADA:** According to the National Chicken Council, the state of
Mississippi, which received the brunt of the storm, produces about 10
percent of U.S. broiler chicken and almost 80% of chicken slaughter
plants in the state are not operating due to the effects of Katrina.
Canada is the No. 2 market for U.S. broiler exports after Russia. In the
January --June period of 2005, Mississippi accounted for only 2.5% of
U.S. broiler chicken exports to Canada (Louisiana accounted for about 5%
). Almost 60% of U.S. exports of chicken to Canada in the first six
months of 2005 originated from Alabama, Georgia, and Florida.

**INTERIM REPORT OF THE TRANS FAT TASK FORCE RECOGNIZES TRADE BARRIER
POTENTIAL OF ZERO DECLARATION ON LABELS:** In November 2004, a trans fat
related motion was passed in the House of Commons calling for the
establishment of a Task Force to provide the Minister of Health with
recommendations and strategies to effectively eliminate or reduce
processed trans fats in Canadian foods to the lowest level possible. In
its interim report, the Task Force recognizes that the food supply chain
in North America is highly integrated and said that any regulation must
be developed in accordance with Canada\'s international trade
obligations, i.e. science-based, transparent and predictable. The
difference in the definition of \"zero" trans fat is already seen as a
trade barrier. According to the Task Force report, the threshold for
declaring a serving of food as trans fat free is

0.2 g in Canada and 0.5 g in the United States. The Task Force is
recommending that Canada pursue discussions with the U.S. through the
NAFTA Technical Working Group on Food Labeling, Packaging and Standards
to reach a solution to the differences in each other's Nutrition Facts
tables (on food packages). Canada\'s new nutrition labeling regulations
require that trans fat declarations be listed on the labels of most
prepackaged foods by December 12, 2005 (December 12, 2007 for small
manufacturers). The Task Force will continue to gather information in
the coming months and a second public consultation is scheduled for fall
2005. The final report, which will contain recommendations for an
appropriate regulatory framework and for the introduction and widespread
use of alternatives to trans fats, is scheduled to be presented to the
Minister of Health in late fall 2005.

**WTO RULES AGAINST CANADA**: In an interim ruling earlier this week,
the World Trade Organization (WTO) supported a 2004 determination by the
U.S. International Trade Commission (ITC), that Canadian lumber poses a
threat of injury to the U.S. lumber industry and that the U.S. complied
with international law when it implemented duties on Canadian softwood
lumber exports. This ruling follows a recent NAFTA panel ruling that
dismisses the ITC's claims that Canada's softwood exports are
subsidized. Canadian officials announced their disappointment with the
WTO ruling, but indicated that the government is sticking to its
position that the NAFTA ruling supercedes the WTO and that they are
taking the case to the U.S. Court of International Trade. Canada's
International Trade Minister, Jim Peterson has stated that Canada's
position has not changed as a result of the WTO ruling. The Minister
indicated that there are no negotiations planned and that Canada intends
to continue to push for enforcement of the binding NAFTA ruling. The
Canadian government wants the U.S. to comply with the NAFTA ruling,
rescind the tariffs and return the already collected duties. Prior to
the WTO ruling, retaliation against the U.S. for failure to adhere to
the NAFTA was being called for by some Canadian politicians and industry
officials alike. The WTO ruling has silenced those calls. The final
details of the WTO ruling will be released later this year. In the mean
time, Canadian officials plan to appeal the WTO ruling.

**CANFOR TO PULL OUT OF LUMBER LOBBY**: Canada's largest lumber
manufacturer has announced that it will be pulling out of the B.C.
lumber lobby. According to The Vancouver Sun, Canfor has stated that it
is up to both Ottawa and Washington to reconfirm their commitment to a
rules-based trading system, live up to their legal commitments under
NAFTA and resolve the softwood dispute, which has become political. The
lumber giant will continue to remain active in the two lawsuits it has a
stake in winning: the appeal to enforce the NAFTA ruling and a second to
overturn the Byrd Amendment, but it will speak with its own voice on the
softwood lumber issue. The company has indicated that the B.C. Lumber
Trade Council has served its purpose for which it was created. Canfor
accounts from more than 30 percent of the B.C. lumber lobby group's
funding.

**CANADA SUES FOR DUTIES**: The Ontario Forest Industries Association,
the Ontario Lumber Manufacturers Association, and the Free Trade Lumber
Council, joined with the Canadian Lumber Trade Alliance, the Canadian
Wheat Board, Norsk Hydro Canada, Inc., and the Government of Canada in
launching a lawsuit demanding that the U.S. return duties collected and
possibly distributed to American companies under the Byrd Amendment. The
lawsuit was filed in the U.S. International Trade Court. The suit claims
that the Byrd Amendment does not legally apply to Canadian industries
because of NAFTA. According to the press release by the Free Trade
Lumber Council, a specific provision in NAFTA forbade the U.S. from
changing its trade laws to Canada's detriment unless Canada were named
in any amendment and Canada was warned in advance. Canada was not named
or warned when the Byrd Amendment was passed, therefore according to
U.S. law; the Byrd Amendment cannot apply to Canadian goods. The
Canadian government and the various affected industries are expecting a
decision from the court by the end of this year.

**CROP UPDATE**: According to Saskatchewan's provincial department of
Agriculture, harvest has been slowed due to additional rain over the
past week. In addition, the additional rain has impacted crop quality.
The north and west-central areas of the grainbelt received the most
rain, with amounts of over 6 inches reported. Eight percent of the 2005
crop has been combined and 21 percent has been swathed or is ready to be
straight combined. This is behind the five-year average of 25 percent
combined and 21 percent swathed or ready to straight combine. Winter
wheat is 62 percent combined, spring wheat is 2 percent combined, durum
is 3 percent combined and barley is 7 percent combined. Fourty-four
percent of canola is in swath or ready to be straight combined. Despite
causing flooding and impacting crop quality, the rain improved topsoil
moisture conditions in some areas. Insects, rain and wind were the main
sources of crop damage. There were also reports of staining, bleaching
and sprouting in some crops throughout the province. The heavy rainfall
also impacted crops and harvest in Alberta. Alberta is in need of some
heat to help finish crops, especially in the central and northern
regions. According to Manitoba's provincial department of Agriculture,
harvest continues, with quality and yields remaining mostly poor. Some
areas have begun seeding winter wheat. The latest reports indicate that
roughly 1.5 million acres of land, which is about 1/3 of all arable
land, was either unseeded or ended up with lost crops as a result of the
excessive rainfall Manitoba received in June and July. As a result,
spring wheat production is expected to fall 33.1% this year from last
year. According to Ontario's provincial department of Agriculture, the
corn crop is moving through the grain filling period under good
conditions in most areas and is 1 to 1.5 weeks ahead of normal in
development. The Ontario soybean crop is maturing quickly with many
fields beginning to senesce. Most regions received enough rainfall over
the past 3-4 weeks to allow for good pod set and seed fill. The crop is
7-14 days ahead of normal development. Soybean aphid populations have
increased rapidly over the past month, requiring treatment.

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       |
+----------------+---------------------------------------+------------+
| CA5056         | ## Livestock Annual                   | 8/26/2005  |
+----------------+---------------------------------------+------------+
| CA5055         | This Week in Canadian Agriculture,    | 8/19/2005  |
|                | Issue 28                              |            |
+----------------+---------------------------------------+------------+
| CA5054         | This Week in Canadian Agriculture,    | 8/12/2005  |
|                | Issue 27                              |            |
+----------------+---------------------------------------+------------+
| CA5053         | FAIRS Report (Import Regulations &    | 8/9/2005   |
|                | Standards)                            |            |
+----------------+---------------------------------------+------------+
| CA5052         | This Week in Canadian Agriculture,    | 7/29/2005  |
|                | Issue 26                              |            |
+----------------+---------------------------------------+------------+

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