Voluntary Report - public distribution

**Date:** 10/7/2005

**GAIN Report Number:** CA5069

CA5069

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 33**

**2005**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

Christina Patterson and George Myles

**Report Highlights:**

\* ITC Ruling Favors Canadian Wheat Board \* NAFTA Panel Requires US to
Recalculate Softwood Duty \* All Eyes on Possible Strike at Lakeside
Packers in Alberta \* Pork Processing Facility in Saskatchewan Gets go
Ahead \* Quebec Hog Processor Scouting Manitoba and Maybe the Dakotas to
Build a New Plant \* Stats Canada Releases Production Estimates

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.

**ITC RULING FAVORS CANADIAN WHEAT BOARD**: The U.S. International Trade
Commission (ITC) ruled earlier this week that the U.S. wheat industry is
not injured by Canadian hard red spring wheat imports into the U.S.
according to the manner in which injury is assessed under the dumping
and countervailing duty statutes. This is a reversal of the ITC's
October 2003 ruling that found that the Canadian wheat was subsidized
and sold in the U.S. at less than fair value. At the request of the CWB,
a NAFTA panel reviewed the ITC's 2003 final determination of injury had
found that the ITC had failed to demonstrate that imports of Canadian
hard red spring wheat into the U.S. were causing injury to the U.S.
industry. The NAFTA panel remanded the injury finding back to the ITC
for review. This week's ruling was the result of the review. A tariff
has been in place on Canadian hard red spring since 2003. The tariff
level has dropped from 14.15 percent in 2003 to its current amount of
11.4 percent. Despite the decline in the tariff level, exports of
Canadian hard red spring into the U.S. have fallen dramatically to
303,000 bu in 2004/2005 from a high of nearly 50 million bu, prior to
the duties. Both the Canadian Wheat Board (CWB) and the Minister of
International Trade, Jim Peterson were pleased with the ruling. The CWB
has stated that it is looking forward to resuming exports into the
United States. The Minister of International Trade urged the U.S. to
drop the duties on Canadian hard red spring exports, signaling the
ruling as a clear victory for Canada. The ITC has five days to file its
redetermination record with the NAFTA panel and the North Dakota Wheat
Commission then has 20 days to challenge the remand determination.
Despite the ruling in favor of Canadian hard red spring wheat exports,
the Western Canadian Wheat Growers Association (WCWGA) were quick to
point out the best way to end the threat of future trade disputes with
the U.S. regarding wheat is to give Western Canadian farmers the choice
in marketing the wheat. In a press release, the WCWGA contends that the
constant threat of trade action restrains the CWB in its export program
to the U.S. and the best way to end the threat and gain improved access
to the U.S. market is to give Western farmers the marketing choice. The
WCWGA also believes that the U.S. does not have a problem with Canadian
grain, but the issue is way it is marketed through a government body,
the CWB.

**NAFTA PANEL REQUIRES US TO RECALCULATE SOFTWOOD DUTY**: A NAFTA panel
has ordered the U.S. to recalculate its duties on Canadian softwood
lumber imports. The panel, which is comprised of three Americans and two
Canadians has ruled unanimously that the U.S. Department of Commerce
(DOC) erred in the way it calculated log seller profits in Quebec, as
well as profits in Ontario, Manitoba and Saskatchewan. This is the fifth
ruling by the NAFTA panel requiring the DOC to recalculate the
countervailing duty (CVD) level. The previous ruling resulted in the CVD
dropping from 18.79 percent to 1.21 percent in July. As a result of the
latest ruling, the Canadian lumber industry is expecting the CVD to fall
to less than 1 percent, which under trade rules would result in its
cancellation. The DOC has until October 28 to comply by this ruling.

**ALL EYES ON POSSIBLE STRIKE AT LAKESIDE PACKERS IN ALBERTA:** A labor
dispute at one of Canada' largest cattle slaughter facilities, Lakeside
Packers in Brooks, Alberta could effectively shut down operations in the
coming days. The union has rejected the company's contract offer and a
work stoppage could occur as early as October 12, 2005. Tyson Foods of
Arkansas, owner of the plant, is seeking permission from the Alberta
government to permit workers to vote on the company's latest offer.
Lakeside employs over 2,000 workers and slaughters about 3,800 head of
cattle a day representing more than 25% of Canada's total daily cattle
kill. *Comment: According to cattle industry sources, the Cargill plant
at High River, Alberta and other smaller western Canadian plants could
probably absorb about half of the overflow of cattle in the short term
if Lakeside ceases or sharply curtails operations. Post predicts that
the development could also result in increased exports of live Canadian
slaughter cattle to the United States, a somewhat ironic development in
that the Canadian industry has been expanding slaughter capacity in
Canada in an attempt to reduce its dependence on exporting live cattle
to the United States.*

**PORK PROCESSING FACILITY IN SASKATCHEWAN GETS GO AHEAD:** The
Saskatoon City Council gave its go ahead to the planned construction of
a modern pork processing plant in the city's Marquis Industrial park.
Maple Leaf Foods Ltd., Canada's largest pork processor, announced
earlier this year (see CA5051) that it will build a C\$110 million
primary pork processing facility and invest up to C\$50 million in its
value-added pork processing operations. Up to 350 new jobs will be
created. The company will reportedly receive provincial grants of up to
C\$35 million with C\$22.5 million for the new slaughter facility and
C\$12.5 million directed at the value-added manufacturing. Earlier, Sask
Pork General Manager Neil Ketilson said the announcement is an extremely
important development for the province's hog producers in that it will
increase provincial hog slaughter, which hasn't expanded in line with
recent hog production increases.

**QUEBEC HOG PROCESSOR SCOUTING MANITOBA AND MAYBE THE DAKOTAS TO BUILD
A NEW PLANT:** Olymel, Canada's second largest pork processor (and
Quebec largest) is reportedly looking to build a \$130 million hog
processing plant somewhere in central North America. There is
speculation that the preferred location is southern Manitoba, but the
company is also reportedly interested in looking at sites in North and
South Dakota. Late last year Olymel announced that it was expanding its
Red Deer, Alberta pork production facility (see CA4070). The Red Deer
plant is primarily for pork exports to the U.S., Japan, Mexico, and
Australia.

**STATS CANADA RELEASES PRODUCTION ESTIMATES**: According to Statistics
Canada's September estimate of production of principal field crops,
canola, flaxseed and durum wheat production estimates are expected to be
higher than 2004 levels. Spring wheat, barley, soybeans, corn and oat
production estimates are forecast to be lower than 2004 levels. Total
wheat production for 2005 is expected to be 25.5 million metric tons
(MMT), 1.2 percent lower than in 2004. Spring wheat production is
expected to be 18.1 MMT, slightly lower than the 2004 level of 18.5 MMT.
Both Saskatchewan and Alberta are expected to have small increases in
spring wheat production, while Manitoba's adverse weather conditions
decreased production 27.4 percent. Adverse weather conditions have
hampered harvest in both Saskatchewan and Alberta, resulting in the
downgrading of wheat quality. The Canadian Wheat Board (CWB) is
expecting 45-50 percent of spring wheat crop to grade no. 1 or 2. This
is better than last year's 30 percent, but well below the long-term
average of 65-70 percent. Durum wheat production is expected to increase
8.4 percent to 5.4 MMT in 2005 from 4.9 MMT 2004. Canola production in
Canada continues to climb to 8.4 MMT for the 2005 crop year. This is a
9.3 percent increase from 2004. Increased production in Saskatchewan and
Alberta as a result of greater area dedicated to canola production and
increased yields in Saskatchewan. Manitoba's canola production fell
victim to the poor weather conditions, dropping 34.7 percent from 2004.
Flaxseed production is expected to increase 100.3 percent to 1.0 MMT in
2005 from 517,000 metric tons (MT) in 2004. Gains in harvested area and
yield resulted in the increase. Barley production is forecast to decline
from 13.2 MMT in 2004 to 12.1 MMT in 2005 as a result of declines in
production in Alberta and Manitoba. Supplies of malting quality barley
in Western Canada are expected to be smaller than normal due to untimely
rains in September. Despite the smaller supplies, quality is expected to
be better than last year. Protein levels are significantly lower, which
is good for malt. Oat production is expected to drop 9.5 percent from
3.7 MMT in 2004 to 3.3 MMT in 2005 as a result of decline in yield.
Soybean production is forecast to decline slightly from the 2004 level
of 3.0 MMT to 2.9 MMT in 2005. Soybean production in Ontario and Quebec
is expected to drop as a result of a decline in yield and lower
estimated harvested area, respectively. Corn production in Canada is
expected to decline to 8.4 MMT in 2005 from 8.8 MMT in 2004 as a result
of smaller harvested areas and lower yields in both Ontario and Quebec,
the two largest corn growing areas in Canada.

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       |
+----------------+---------------------------------------+------------+
| CA5067         | This Week in Canadian Agriculture,    | 9/30/2005  |
|                | Issue 32                              |            |
+----------------+---------------------------------------+------------+
| CA5064         | This Week in Canadian Agriculture,    | 9/16/2005  |
|                | Issue 31                              |            |
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+----------------+---------------------------------------+------------+
| CA5056         | ## Livestock Annual                   | 8/26/2005  |
+----------------+---------------------------------------+------------+

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