Voluntary Report - public distribution

**Date:** 2/16/2005

**GAIN Report Number:** CA5010

CA5010

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 7**

**2005**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

Christina Patterson and George Myles

**Report Highlights:**

\* OIG Report Critical of Policies Relating to Imports of Beef From
Canada \* Latest BSE Investigation Concludes \* Canadian Cattle
Inventory a Record, But Some Surprises \* Canadian Hog Inventory
Unchanged \* B.C. Orchard Replant Program to Continue \* Canadian Wheat
Board Offers Up Choices \* A Majority of Wheat Growers Still Support CWB
\* Canadian Lumber Industry Still Going Strong \* Canadian And U.S.
Officials Meet on Lumber Dispute

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.

**OIG REPORT CRITICAL OF POLICIES RELATING TO IMPORTS OF BEEF FROM
CANADA:** The USDA's Office of the Inspector General (OIG) released its
audit report of the Animal and Plant Health Inspection Service (APHIS)
Oversight of the Importation of Beef Products from Canada following the
implementation of the U.S. import control measures related to the
discovery of (BSE) in Canada in May 2003. During testimony before a
House Appropriations Subcommittee, Phyllis K. Fong, OIG's Inspector
General said that in August 2003, the USDA announced that it would allow
the importation of low-risk beef and other ruminant products from
Canada. In response to Congressional concerns, the OIG evaluated APHIS'
oversight of Canadian beef imports and whether proper controls were
established to ensure that only low-risk product entered the U.S. Among
OIG's key objectives were to determine whether APHIS met existing
regulatory and policy requirements regarding permits that allowed the
importation of some Canadian beef products; and whether APHIS properly
considered and implemented risk-mitigation measures for animal and
public health. In the study released this week, OIG found that while
APHIS allowed the import of beef products they considered low risk in an
attempt to further trade, they did not publicly communicate or explain
their actions to all interested parties. It also found that APHIS
changed its policies relating to required risk mitigation measures to
allow the import of low-risk product produced at facilities that also
handled higher risk product, thereby increasing the potential risk for
cross-contamination. The OIG is currently completing an audit to
evaluate the adequacy of a recall of ineligible product from Canada. For
detail on the findings and recommendations of the OIG, see the full
audit report at: <http://www.usda.gov/oig/whatsnew.htm>

**LATEST BSE INVESTIGATION CONCLUDES:** The Canadian Food Inspection
Agency has concluded its investigation of the case of bovine spongiform
encephalopathy (BSE) that was confirmed on Jan. 11, 2005. It found there
were 349 animals that comprised the affected animal\'s birth cohort. Of
these, 41 were still alive and were slaughtered and tested. The
remainder had died or had been slaughtered. All animals tested negative
for BSE. Canadian officials are currently conducting a review of the
current feed ban. Concurrently, proposed regulations to tighten the feed
ban are moving through the regulatory process with the comment period
set to close on February 24, 2005 . These regulations propose changes
that will prohibit the use of specified risk material (SRM) in animal
feeds, pet foods and in fertilizers. For more information see CA4089.

**CANADIAN CATTLE INVENTORY A RECORD, BUT SOME SURPRISES:** Statistics
Canada released its cattle herd inventory numbers this week with the
national herd reaching a record 15.1 million head as of January 1, 2005.
Canadian farmers had 430,000 more cattle on their farms this year than
they did on January 1, 2004, representing a 2.9% year-to-year increase.
However, when compared with January 1, 2003 (before Canada's first BSE
incident and subsequent trade restrictions by trading partners) Canadian
cattle ranchers and farmers had 1.6 million more head of cattle on their
farms at the start of 2005. *Comment: Surprisingly, although Statistics
Canada stated that there are record numbers of cattle on cow-calf
operations and that the beef cow herd ended 2004 at a record level, the
Agency reported an actual decline in the number of calves born during
2004. In statistical terms, it reported a 6% increase on beef cows
numbers on farms during 2004 and a 4% decline in the number of calves
born. Many industry analysts had expected the 2004 calf crop to be the
highest ever recorded*.

**CANADIAN HOG INVENTORY UNCHANGED:** The steady annual expansion of the
Canadian hog herd since the hog market crash of 1998 has concluded, at
least temporarily. Statistics Canada reports that the total hog
inventory on January 1, 2005 was 14.7 million head, virtually unchanged
from a year ago. The uncertainty surrounding the investigative stage of
a U.S. trade action against Canadian hogs, the imposition of U.S.
anti-dumping duties in October 2004 (with margins ranging from *de
minimus* to 15.01 percent), and softer hog market prices in the latter
part of the year all combined to reduce breeding herd expansion and
farrowing intentions during the final quarter of 2004. For 2005, the
outlook for firmer North American hog prices related to booming U.S.
pork exports is expected to result in renewed herd expansion interest in
Canada. During 2004 Canadian live hog exports to the United States
increased to a record 8.5 million head, 14% above the 2003 level.
Two-thirds of those animals, or 5.6 million head, were feeder pigs
exported for finishing in the United States. The balance was live swine
for immediate slaughter in U.S. plants. In the hog trade case, Canada's
hog industry is awaiting the Department of Commerce's final
determinations in both the Anti-dumping and countervailing duty
investigations scheduled for March 7, 2005.

**B.C. ORCHARD REPLANT PROGRAM TO CONTINUE:** John van Dongen, Minister
of Agriculture, Food and Fisheries for British Columbia told the annual
convention of the B.C. Fruit Growers Association recently that his
government intended to provide C\$4.65 million to continue the
Provincial Orchard Replant Program. Originally introduced in 1990, the
replant program is designed to assist the B.C. tree fruit industry with
the removal of older plantings and replacement with new high-density
plantings of higher value varieties. The program, which was scheduled to
expire this year, has been highly successful for B.C.'s tree fruit
industry. It is estimated that government assistance will have resulted
in 10,625 acres replanted with new varieties by the end of 2005.
According to provincial authorities, new varieties now account for more
than 50 per cent of grower returns, especially for Gala apple and late
season cherries.

**CANADIAN WHEAT BOARD OFFERS UP CHOICES**: The Canadian Wheat Board
(CWB) has recently announced plans to allow producers the ability to
pick the market price at which they sell their grain. In a move aimed at
providing farmers with more flexibility and cash flow, the CWB will give
producers the chance to take advantage of the new daily price contract
option. This will be in addition to the three other payment options
farmers currently have with the CWB. According to the CWB, the daily
cash price will be derived from a number of U.S. elevator prices and
posted by the CWB. Farmers will indicate how many metric tons they want
to commit to the program by July 22. For the 2005-2006 crop year, there
will be a 500,000 metric ton limit for the program. It is expected that
farmers will receive full cash payment for the delivery within 10 days.
This is in contrast to the traditional pooling system, where farmers
receive initial payments and final payments are made later in the year.
The Western Canadian Wheat Growers called the new option a step in the
right direction, but added that it still did not give producers full
marketing choices.

**A MAJORITY OF WHEAT GROWERS STILL SUPPORT CWB**: According to a
recently released poll by Ipsos-Reid, a majority of wheat growers (64%)
on the Prairies would prefer the current single-desk marketing system
run by the Canadian Wheat Board (CWB) to an open market without the CWB
(27%). Support was evenly split among wheat growers when they were given
the option of the current system (48%) or a dual market system (46%). On
the other hand, a majority of barley growers (56%) support a dual market
system and in the absence of a dual market system, a majority (53%) of
barley growers would choose an open market system without the CWB, while
only a small number (37%) would opt for the current system.

**CANADIAN LUMBER INDUSTRY STILL GOING STRONG**: According to the
Canadian Lumbermen's Association, the Canadian lumber industry is
looking forward to another good year. This is a result of the hot North
American construction market and in spite of the duties placed on
Canadian softwood lumber exported to the United States. The strong
housing starts in both the U.S. and Canada are expected to help keep up
prices and demand for construction lumber. Canada Mortgage and Housing
Corp. is forecasting that residential construction will ease in 2005,
but housing starts will continue to remain strong.

**CANADIAN AND U.S. OFFICIALS MEET ON LUMBER DISPUTE**: Canadian and
provincial bureaucrats participated in an informal meeting with the U.S.
Commerce Undersecretary earlier this week in hopes re-igniting
negotiations to end the ongoing softwood lumber dispute. According to
news sources, the idea of an export tax on Canadian wood was floated
around as part of a negotiated settlement. The tax would be an interim
measure, replacing a quota system idea that was previously rejected by
the provinces and would be a means of restricting Canadian lumber
shipments until the provinces reform forestry timber practices towards a
more market-based system. Canadian International Trade Minister, Jim
Peterson has said he is optimistic the two countries may be able to
return to serious negotiations on settling the trade dispute.

# 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       |
+----------------+---------------------------------------+------------+
| ## CA5009      | This Week in Canadian Agriculture,    | 2/11/2005  |
|                | Issue 6                               |            |
+----------------+---------------------------------------+------------+
| ## CA5007      | GOC Proposes Expanded Access for U.S. | 2/2/2005   |
|                | Cattle and Beef                       |            |
+----------------+---------------------------------------+------------+
| ## CA5006      | This Week in Canadian Agriculture,    | 2/4/2005   |
|                | Issue 5                               |            |
+----------------+---------------------------------------+------------+
| ## CA5005      | This Week in Canadian Agriculture,    | 1/28/2005  |
|                | Issue 4                               |            |
+----------------+---------------------------------------+------------+
| **CA5004**     | Livestock Semi-Annual                 | 1/31/2005  |
+----------------+---------------------------------------+------------+

VISIT OUR WEBSITE: The FAS/Ottawa website is now accessible through the
U.S. Embassy homepage. To view the website, log onto
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on Embassy Ottawa offices, then Foreign Agricultural Service. The
FAS/Ottawa office can be reached via e-mail at: <agottawa@usda.gov>