Voluntary Report - public distribution

**Date:** 6/18/2004

**GAIN Report Number:** CA4044

CA4044

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 20**

**2004**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

George Myles and Christina Patterson

**Report Highlights:**

\* McCain Plans to Process Potatoes in China \* Ontario to Assist
Packers of Cull Cattle \* Report Says Farm Families Hard Hit by BSE \*
Biodiesel Production Expands in Ontario \* Conservative Party Would
Abolish Canadian Wheat Board Monopoly \* Conservative Party Receives
Majority of Farmer Support \* Manitoba Crop Update \* Ontario Crop
Update \* Wheat and Barley Production Forecast to Increase

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.

McCAIN PLANS TO PROCESS POTATOES IN CHINA: According to its new CEO,
Dale Morrision, McCain Foods Limited, the frozen food manufacturer
headquartered in New Brunswick, with more than 55 production facilities
on six continents, will produce frozen french fries in China within two
years. In a recent food industry interview, Morrison said that McCain is
also looking at Russia and India for future plants. In the meantime,
McCain is establishing a presence in China with imports. Canadian
exports of frozen french fires to China reached 5,261 metric tons (\$3.6
mil) in 2003 enough to rank ninth in importance as an export destination
for Canadian frozen french fries. The level was more than 6 times the
quantity Canada shipped to China in 2002 and virtually all of the
exports were from New Brunswick and Alberta where McCain has processing
facilities. Morrison said that the company has been studying potato
growing in China for more than five years and that the Chinese french
fry market is being driven by the spread of fast food establishments
such as KFC and McDonald\'s. By far, the number one export destination
for Canadian frozen french fries is the United States. Sales to the U.S.
in 2003 reached a record 738,711 metric tons, valued at \$472 million
and have increased at an annual average growth rate of 9.5% over the
last five years. Canadian sales to Japan and Mexico also showed strong
growth last year.

ONTARIO TO ASSIST PACKERS OF CULL CATTLE: The Ontario government will
provide C\$7 million to packers to increase abattoir capacity for older
animals. Due to the market disruption caused by the BSE crisis, the
province has backlog of an estimated 60,000 head of cull cattle. Prior
to the U.S. border closure to live Canadian cattle, Ontario had been
shipping approximately 1,000 cull cows per week for processing in U.S.
plants, and up to 1,000 dairy heifers per week were destined for U.S.
dairy operations. The heifers now remain in Ontario\'s dairy herds,
resulting in an increase in Ontario\'s dairy cull rates. The lack of
slaughter capacity for cull animals has depressed Ontario cattle prices.
Under the Mature Animal Abattoir Fund, the Ontario government is making
up to C\$7 million available under a two-phase program, for agreements
with Gencor Foods Inc. of Kitchener (former MGI plant; see CA4043),
Ryding Regency Meat Packers Ltd. of Toronto, West Grey Premium Beef Inc.
of Durham, and Brian Quinn\'s Meats Ltd. in Yarker to increase cull
animal slaughter.

REPORT ASSESSES IMPACT OF BSE ON FARM FAMILIES: According to a
Statistics Canada report, Canada's discovery of a single case of bovine
spongiform encephalopathy (BSE), a year ago in Alberta, and the
subsequent international trade ban, have had a severe financial impact
on Canadian farm families raising cattle. In 2003, Canadian farm cash
receipts from cattle and calves were estimated at C\$5.2 billion, a 33%
plunge from 2002. The report attempts to assess the potential short-term
financial effect of the BSE situation on Canadian farm family income
using data from 2000. It assesses the potential financial impact of BSE
for families who have a single unincorporated beef cattle operation.
Such families are estimated to have lost an average of C\$20,000 due to
the BSE situation lowering their average total income 33%
from C\$60,000 to C\$40,000. The farm families hardest hit from the BSE
fallout would be those operating large intensive cattle operations.
Overall, 27% of families operating a single unincorporated beef cattle
operation would have earned a total family income below C\$20,000, up
from the original 14% that had a family income below C\$20,000 prior to
the BSE crisis. The study also showed estimates of the impact of cattle
exports on the Canadian economy, using Statistics Canada\'s national
input-output model. For each C\$100 million in exports by the cattle
sector, an estimated C\$80 million is added to gross domestic product at
market prices, C\$228 million is generated in total
output, C\$41 million is added to labor income, and 3,000 jobs are
created.

BIODIESEL PRODUCTION EXPANDS IN ONTARIO: Biox Corporation announced on
Friday, June 11^th^, that it would be building a biodiesel facility in
Hamilton within a year. The \$24 million plant will producer 60 million
liters (approximately 16 million US gallons) per year and will create
300 new jobs. The Ontario Soybean Growers were pleased with
announcement, as it will create new markets for Ontario soybean oil.
Biodiesel is derived from agriculture commodities like vegetable oils
and animal fats and can be used as an alternate fuel source or blended
with regular petroleum diesel.

CONSERVATIVE PARTY WOULD ABOLISH CANADIAN WHEAT BOARD MONOPOLY: In its
election platform, the Conservative Party of Canada has stated that it
would review and amend the Canadian Wheat Board (CWB) Act during the
first term of a Conservative government. The amendment would give the
producers the freedom to market their grain outside the CWB if they so
chose. The Conservative Party would not eliminate the CWB, just provide
producers with a choice. In recent polls, the Conservative Party has
moved ahead of the ruling Liberal Party, increasing the likelihood that
the Conservatives will win at a least a minority government in the
election, which will be held on June 28, 2004.

CONSERVATIVE PARTY RECEIVES MAJORITY OF FARMER SUPPORT: In a recent poll
done by reputable Canadian polling firm, the Conservative Party of
Canada enjoys 60% of farmer support nationally. The ruling Liberal Party
is a distant second with 23% support, the New Democrat Party has 7% and
the Bloc Quebecois has 6% nationally (with 44% support for the Bloc in
Quebec). The poll also asked farmers who they believed would be the most
helpful in meeting the needs of the agricultural community. More than
twice as many farmers believed the Conservative Party would be the most
helpful, garnering 44% vs. the 20% who favored the Liberal Party. During
the 2000 election, the farm support was split between the Progressive
Conservative Party of Canada and the Canadian Alliance (together support
was 55%), allowing many Liberals members to be elected in rural ridings
across the country. With the two parties united under the Conservative
banner, support is moving from the Liberals to the Conservatives,
changing the color of the rural landscape from red to blue. For
additional information on the upcoming federal election and the
implications for agriculture see CA4045.

MANITOBA CROP UPDATE: Rain, rain and more rain, accompanied by cool
temperatures continues to plague the province. The provincial department
of Agriculture reports as of June 14 that the ***Southwest*** saw
another 32-50 mm of rain in the past week. Cereal crop seeding remains
at the same level as last week of 80-90% completed. Oilseeds are 60-70%
done, but some canola and flax areas may need to be switched to cereals.
The wet fields are forcing producers to switch to seeding by aircraft
and custom floaters. The ***Northwest*** region saw another 10-15 mm of
rain, making it very difficult to seed the last 10-15% of crop area.
Crops are progressing, but at a slower rate than normal. In the
***Central*** region more rain and cool, cloudy, windy conditions
limited seeding and spraying. Many acres of canola have been seeded by
custom floaters and aircraft. Despite this, 10-15% of the crop area has
still not been seeded. The ***Eastern*** region has received a majority
of the rain this year, with another 23 mm falling in the past week.
Fields are saturated and many are in poor condition. Nearly 80% of the
crop area is seeded to cereals and canola. Sunflower and corn acres may
not be seeded, depending on the weather. Winter wheat is showing some
yellowing from excessive moisture, but fields generally look in good
shape. In the ***Interlake***, more rain delayed field operations and
seeding progress remains unchanged from last week. Soaking rains have
plagued soybean-growing areas in Manitoba this spring, making it
virtually impossible to get the areas seeded in time. Matt Garnder, an
oilseed trade with Parrish and Heimbecker, Ltd, is of the opinion that
Manitoba will be lucky to seed 80,000 hectares of soybeans this year.
This is a 20% decline from the previous year and a 50% reduction from
the projected area to be planted. This reduction in soybean production
is contributing to the overall decline in seeded areas across the
country, where the overall soybean production is expected to be down.
The poor weather conditions throughout the province may also result in
nearly 140,000 hectares of seeded land being written off. The estimated
loss is above average, but less than in 1999 when over 400,000 hectares
was written off.

ONTARIO CROP UPDATE: The provincial department of Agriculture and Food,
has reported that seeding of corn wrapped up last week with roughly 90%
of the intended area planted in most districts. Early planted corn is in
good condition, but later fields are variable and some may have to be
replanted to other crops. Soybean planting progress has gone from 5% to
75% complete in a week. Canola planting is now complete. Emergence on
the later planted stands is uneven due to moisture. Most of the spring
cereals are looking good. Some yellowing is occurring in the wet areas
of fields, but should green up as fields dry. Growth stages of winter
wheat vary across the province. Some of the early planted winter wheat
will be ready to harvest by the end of June. Despite the progress, the
provincial crop insurance agency is predicting that nearly 49,000
hectares of land will not be seeded due to the very wet spring
conditions.

WHEAT AND BARLEY PRODUCTION FORECAST TO INCREASE: The Canadian Wheat
Board has pegged the production of wheat and durum in Western Canada for
the 2004-2005 crop year at 22.1 metric tons, up 4.7% from last year.
Barley production was pegged at 11.9 metric tons, an increase of 4.4%
from last year. Rainfall has helped to improve crop production
expectations. Excess moisture in some areas of the west, especially in
Manitoba, are forcing producers to switch from oilseeds to cereals,
which may result in even larger productions levels for wheat and barley
by the end of the summer.

**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       |
+----------------+---------------------------------------+------------+
| ## CA4045      | Off to the Polls Canada Goes:         | 6/18/2004  |
|                | Implications for Agriculture          |            |
+----------------+---------------------------------------+------------+
| ## CA4043      | This Week in Canadian Agriculture,    | 6/10/2004  |
|                | Issue 19                              |            |
+----------------+---------------------------------------+------------+
| ## CA4042      | This Week in Canadian Agriculture,    | 6/04/2004  |
|                | Issue 18                              |            |
+----------------+---------------------------------------+------------+
| ## CA4041      | Dairy, Semi-Annual                    | 6/03/2004  |
+----------------+---------------------------------------+------------+
| ## CA4040      | This Week in Canadian Agriculture,    | 5/28/2004  |
|                | Issue 17                              |            |
+----------------+---------------------------------------+------------+
| ## CA4039      | This Week in Canadian Agriculture,    | 5/21/2004  |
|                | Issue 16                              |            |
+----------------+---------------------------------------+------------+
| ## CA4038      | Provisional Anti-Dumping Duties on    | 5/18/2004  |
|                | U.S. Frozen Pizza                     |            |
+----------------+---------------------------------------+------------+

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