Voluntary Report - public distribution

**Date:** 3/11/2005

**GAIN Report Number:** CA5018

CA5018

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 10**

**2005**

**Approved by:**

![](media/image1.wmf)Hugh J. Maginnis

U.S. Embassy

**Prepared by:**

Christina Patterson and George Myles

**Report Highlights:**

\* Mood in Pork Industry Generally Upbeat Following Department of
Commerce Determination in Live Swine Case \* R-CALF Injunction Adds
Impetus to Canada\'s Drive to Increase Slaughter Capacity and Beef
Processing in Canada \* Increasing Cattle Slaughter Capacity \* New
Provincial Programs to Promote New Product Development and Increase
Slaughter Capacity \* C\$50 Million to Aggressively Expand Markets for
Canadian Beef \* Cattlemen Muse that U.S. Border May be Closed to
Canadian Cattle for a Long Time Yet \* Government of Canada to Begin
Negotiations on Hopper Car Transfer \* NAFTA Panel Orders
Reconsideration of Wheat Duty \* Canada Looks Towards Free Trade with
Japan

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.

**MOOD IN PORK INDUSTRY GENERALLY UPBEAT FOLLOWING DEPARTMENT OF
COMMERCE DETERMINATION IN LIVE SWINE CASE:** Canadian hog producers are
generally upbeat following the U.S. Department of Commerce (DOC) final
determinations on countervail and anti-dumping cases against Canadian
live swine. In the March 7, 2005 ruling, the DOC reaffirmed its
preliminary determination that Canadian hog producers are not receiving
countervailable subsidies. In the anti-dumping phase, the DOC upheld its
earlier dumping decision but lowered the dumping margins for Canadian
hogs with the key \"all others\" rate falling from 14.06% to 10.63%.
Clare Schlegel, President of the Canadian Pork Council said in a
statement that the DOC ruling does not surprise the Canadian industry.
He said that Canadian and U.S. pork producers operate in the same
integrated North American pork market and his organization rejected the
claims from the National Pork Producers Council that countervailable
subsidies are being provided to Canadian exporters of live swine. Other
industry spokespersons, including the legal representative of the
Canadian industry in Washington D.C., said that they are optimistic that
the United States International Trade Commission (ITC) will rule against
the petitioners in April 2005 due to record profitability by U.S.
producers last year and continued prospects for U.S. hog industry
profits in 2005. If the ITC finds that live swine from Canada have not
injured or are unlikely to injure the U.S. hog industry, the case
against Canadian hogs would terminate and all duty deposits would be
refunded.

**R-CALF INJUNCTION ADDS IMPETUS TO CANADA'S DRIVE TO INCREASE SLAUGHTER
CAPACITY AND BEEF PROCESSING IN CANADA:** Last week's ruling by a U.S.
District Court Judge (Montana) to grant a preliminary injunction
preventing the implementation of the U.S. minimal-risk rule that would
have allowed a resumption of U.S. imports of live cattle from Canada is
fuelling the impetus to increase cattle slaughter capacity and expand
beef processing in Canada. With access to the U.S. market continuing to
remain shut for up to 1.5 million head of cattle annually, the Canadian
cattle industry and the Canadian and federal governments have turned
their focus from BSE producer-aid packages to investments in the cattle
processing industry that will certainly transfer some of the advantage
of the North American beef value-chain to Canada.

**INCREASING CATTLE SLAUGHTER CAPACITY:** In 2002, the year prior to the
Canadian discovery of BSE (in May 2003), total Canadian cattle and calf
slaughter was 3.8 million head. In 2003, the year disrupted by BSE and
border closures, total slaughter slipped to 3.5 million head. During
2004, total slaughter increased to 4.4 million head as players in the
Canadian packing industry, big and small, began making the structural
adjustments and investment necessary to expand cattle slaughter and beef
marketing strategies due to the uncertainty of market access to the
United States. The federal government formally announced its Livestock
Industry Strategy to reposition the livestock industry on Sept. 10, 2004
(see CA4064). Canadian cattle slaughter for 2005 is forecast at about
4.7 million head. Other announced projects across Canada are projected
to raise total Canadian slaughter to 5.0 million head by the end of 2006
(about 100,000 per week).

**NEW PROVINCIAL PROGRAMS TO PROMOTE NEW PRODUCT DEVELOPMENT AND
INCREASE SLAUGHTER CAPACITY:** While virtually all of Canada's major
cattle producing provinces have introduced initiatives in the past year
to encourage and assist increased slaughter capacity, the provincial
governments of Alberta and Manitoba announced additional funding to
their respective cattle industries this week:

**Alberta:** Alberta has introduced a new C\$30-million Beef Market
Development and Retention Fund to help the beef industry develop new
markets in regions such as Russia, the European Union, and Southeast
Asia, as well as Japan, South Korea, China and Mexico and increase sales
in existing ones. An additional C\$7 million will go towards creating
commercial uses for discarded specified risk material.

**Manitoba:** Agriculture Food and Rural Initiatives Minister Rosann
Wowchuk this week announced the Manitoba government would make C\$3
million available to investors looking to increase slaughter capacity
for beef and other ruminants. \"The decision by one judge in Montana to
hold up opening the border has underscored the merits of our
government's ongoing commitment to create slaughter capacity in
Manitoba,\" the minister said. \"We need to explore every option to
build facilities to ensure Manitoba cattle and other ruminants can be
slaughtered at home.\" The minister also announced her department will
cover up to 90 per cent of costs of feasibility studies for those
wishing to upgrade their existing provincially-licensed facilities to
become federally-inspected plants. Details of that program are expected
to be announced shortly. This week's C\$3 million announcement is in
addition to the C\$11.5 million the Manitoba government has committed to
help develop the Rancher's Choice slaughter plant proposal (see CA4076).
That project includes purchasing and disassembling a U.S. slaughter
plant and moving it to Manitoba.

**C\$50 MILLION TO AGGRESSIVELY EXPAND MARKETS FOR CANADIAN BEEF:**
Agriculture and Agri-Food Minister Andy Mitchell has announced a C\$50
million contribution to the Canadian Cattlemen Association\'s Legacy
Fund to help launch an aggressive marketing campaign to reclaim and
expand markets for Canadian beef. The fund will support the market
development activities of the Canada Beef Export Federation, the Beef
Information Center and the Canadian Beef Breeds Council. \"The
uncertainty created by the closure of many borders, including that of
the United States to Canadian live cattle, makes it imperative that we
accelerate our efforts to regain and expand our markets,\" said Minister
Mitchell. \"Through the Legacy Fund, the industry and governments will
work together to launch an aggressive marketing campaign to increase
exports and reduce our reliance on any one single market.\"

**CATTLEMEN MUSE THAT U.S. BORDER MAY BE CLOSED TO CANADIAN CATTLE FOR A
LONG TIME YET:** Given the setback to the re-opening of the U.S. border
to live Canadian cattle, Dennis Laycraft, exec. V.P. of the Canadian
Cattlemen\'s Association (CCA) told reporters that (due to the
litigation factor) it could be another 18 months before the U.S. border
reopens to live cattle. In a press release, the CCA said it was
appreciative of additional federal and Alberta government market
development funding and that by the end of March the CCA expected to
develop recommendations to enhance and adjust the repositioning strategy
announced in September 2004. Market expansion and development are key
components of the strategy as is expanding slaughter capacity. "The
Canadian beef industry is prepared to do whatever needs to be done to
regain and ensure our profitability long term," said Hugh
Lynch-Staunton, CCA Vice President. "While we prefer to work to move the
world toward more rational science-based trade rules, we're prepared to
take whatever steps are necessary. We're also positioning ourselves to
be one of the few countries in the world able to provide age-verified
beef."

**GOVERNMENT OF CANADA TO BEGIN NEGOTIATIONS ON HOPPER CAR TRANSFER**:
On March 9, 2005, the federal government of Canada announced its plans
to negotiate a transfer of the government-owned hopper car fleet to the
Farmer Rail Car Coalition (FRCC), a private farm group. There are
approximately 12,400 hopper cars in the government-owned fleet and they
form the core of the rolling stock used by Canadian National Railway and
Canadian Pacific Railway. According to the government announcement, the
decision to negotiate a transfer of the cars to the FRCC fulfilled a
commitment the government made to farmers in the federal election to
work with the FRCC to secure a viable future for the hopper car fleet.
The Canadian Wheat Board (CWB), an advocate for the FRCC proposal,
applauded the decision by the federal government. According to a CWB
news release, the decision is a milestone for western Canadian farmers
and FRCC's proposal will prevent increased transportation costs, which
would have occurred if other stakeholders took ownership of the cars.
The decision was met with less enthusiasm by the two major railways,
grain handlers and the various commodity groups who opposed the transfer
of the cars to the FRCC. The government is expected to make a final
decision on the transfer sometime this spring.

**NAFTA PANEL ORDERS RECONSIDERATION OF WHEAT DUTY**: A NAFTA panel has
ordered the U.S. Department of Commerce (DOC) to reconsider duties on
spring wheat imports from Canada. In the ruling, the panel reaffirmed
the DOC decision to assess a 0.35% duty resulting from government
ownership of railcars, but questioned the 4.94% assessed on Canadian
government guarantees of Canadian Wheat Board (CWB) debts, payments to
farmers and export sales made on credit. The NAFTA panel has yet to make
a finding on the 9% countervailing duty on charges of Canadian wheat
being dumped into the U.S. market. The panel has given the U.S. 90 days
to reexamine its logic behind some parts of the duty calculation. The
ruling has the CWB claiming another trade victory in the ongoing dispute
over wheat imports into the United States.

**CANADA LOOKS TOWARDS FREE TRADE WITH JAPAN**: According to the *Globe
and Mail*, Canada and Japanese officials have quietly begun negotiating
the terms of a study that could lead to a free-trade agreement within
the next several years. The trade study, which was agreed to in January
during Prime Minister Martin's visit, will have a one-year deadline and
should be completed by the summer of 2006. Agriculture will be a
contentious issue, as Japan may be unwilling to drop its traditional
policy of shielding its farmers from foreign competition. Japan is
considered a key market for Canadian goods, despite the fact that
Canada's share of the Japanese import market has slipped to 2 percent
from 3.2 percent in 1995. Business groups in Canada have lobbied hard
for a trade agreement with Japan and are pleased with the announcement
of the trade study. According to the business community, the trade study
and possible trade agreement could pave the way for improved trade
relations between the two countries. Some of Canada's major exports to
Japan, such as agricultural, forestry and fish products, are some of the
most sensitive industries in Japan, resulting in barriers to imports.
Some analysts are concerned that a free-trade agreement may not be the
best solution to the barriers Canadian exports are facing.

# 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       |
+----------------+---------------------------------------+------------+
| ## CA5015      | This Week in Canadian Agriculture,    | 3/4/2005   |
|                | Issue 9                               |            |
+----------------+---------------------------------------+------------+
| ## CA5013      | This Week in Canadian Agriculture,    | 2/25/2005  |
|                | Issue 8                               |            |
+----------------+---------------------------------------+------------+
| ## CA5011      | This Week in Canadian Agriculture,    | 2/18/2005  |
|                | Issue 7                               |            |
+----------------+---------------------------------------+------------+
| ## 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  |
+----------------+---------------------------------------+------------+

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