Voluntary Report - public distribution

**Date:** 2/27/2009

**GAIN Report Number:** CA9011

CA9011

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 8**

**2009**

**Approved by:**

![](media/image1.wmf)Robin Tilsworth

U.S. Embassy

**Prepared by:**

George Myles & Darlene Dessureault

**Report Highlights:**

Livestock Inventories Continue Record Pace Decline \* Canadian Cattlemen
Voice Displeasure with Latest Action by USDA on Mandatory COOL \*
Canadian Wheat Board Releases First Pool Return Outlook for 2009-2010 \*
Saskatchewan Announces C\$71 Million Cattle and Hog Support Program \*
Recession Cuts Foodservice Sales

Includes PSD Changes: No

Includes Trade Matrix: No

Trade 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.

**LIVESTOCK INVENTORIES CONTINUE RECORD PACE DECLINE:** Canada's cattle
and hog industries remain in a steep contraction phase. On January 1,
2009 the Canadian cattle herd fell for the fourth consecutive year to
13.2 million head, down 5.1% from 13.9 million head a year earlier.
Meanwhile, Canadian hog producers reported a modern record decline in
hog numbers over a one year period when Statistics Canada reported total
Canadian hog numbers on January 1, 2009 at 12.4 million head, 10.2%
below the 13.8 million hogs recorded on that day one year earlier.
Despite reduced livestock inventories, current prospects point to modest
increases in both Canadian beef and pork output during 2009 reflecting
increased domestic marketings and declines in live slaughter and feeder
animal exports to the United States. A lower Canadian dollar is raising
optimism in Canada's livestock industries that red meat exports will
increases in 2009 although the optimism is somewhat tempered by
uncertainty surrounding world demand in a global economic downturn.
Total U.S. exports of fresh, frozen, prepared and preserved red meats to
Canada during 2008 reached a record \$1.3 billion. Canada was the third
most important export market for U.S. fresh or frozen red meats buying
\$1.0 billion worth. Also, Canada was the number one market for U.S.
exports of prepared and preserved meats during 2008 at \$329 million,
accounting for almost half the total. For more information on the
production and trade developments within Canada's livestock industry
watch for Posts' Semi-Annual Livestock Report, CA9010, available soon on
the FAS website under [Attaché Reports](http://www.fas.usda.gov/).

**CANADIAN CATTLEMEN VOICE DISPLEASURE WITH LATEST ACTION BY USDA ON
MANDATORY COOL:** After Secretary Vilsack suggested that the U.S. meat
industry adopt voluntary changes to the final U.S. Mandatory Country of
Origin Labeling (COOL) rule, the Canadian Cattlemen's Association (CCA)
issued a press release voicing its displeasure and urged the Government
of Canada to reopen its WTO case. CCA President, Brad Wildeman, said the
Secretary's new guidelines substantially change the intent of COOL's
final rule. "In our view, the guidelines, as written, will be worse than
the interim final rule that the Government of Canada was challenging
through the WTO. The implications for the industry on both sides of the
border are significant. If the Secretary's suggestions are adopted,
either 'voluntarily' or through subsequent rulemaking, the rule will
become even more onerous, costly and impractical than it is now, and
extremely trade disruptive. The threat of forcing 'voluntary' compliance
is tantamount to creating a de facto rule that's very damaging to
Canada's red meat industries, as the U.S. industry will likely ease
their compliance burden by avoiding purchase of imported animals and
beef."  Wildeman added, "This latest action by the USDA exacerbates the
already clear U.S. violation of the North American Free Trade Agreement
(NAFTA) and WTO trade rules. When the final rule was adopted by the Bush
administration in January, we felt a pause in Canada's trade challenge
was in order to evaluate the market response. But this latest
protectionist action makes it very clear that Canada must use every tool
to challenge actions and policies that will harm the Canadian industry.
It's obvious that the U.S. has no intention of creating a workable
solution for the industry. When the interim final rule was released in
September 2008, many U.S. packers decided that the easiest way to comply
was to no longer process cattle finished in Canada. We had hoped that
this would turn around with the final rule. Not only is this U.S. action
harming Canada's red meat industry, but it will ultimately impair the
global competitiveness of the majority of our U.S. counterparts, who
wanted to avoid the significantly increased costs of handling cattle
imported from foreign markets." *Comment: When queried by the press on
whether he would take action, Canadian Agriculture Minister Gerry Ritz
replied that his government was analyzing COOL's impact on Canadian
trade and said Canada's WTO challenge remains an option.*

**CANADIAN WHEAT BOARD RELEASES FIRST POOL RETURN OUTLOOK FOR
2009-2010:** The Canadian Wheat Board (CWB) released its first Pool
Return Outlook (PRO) for 2009-2010 on February 23, 2009. The 2009-2010
PRO is down by a quarter to a third compared to the first PRO of
2008-2009. The PRO is the CWB\'s estimate of crop year returns and is
used as key indicator by industry stakeholders when assessing future
values of hard red spring wheat, durum and malting barley. Key comments
made by the CWB analysts on the PRO include the expectation of a drop in
global wheat production accompanied by a drop in consumption due mainly
to a drop in demand from the livestock industry. This is expected to
help re-build stocks, as the stocks-to-use ratios remain relatively
tight. The CWB analyst also anticipates that Canada's wheat production
(wheat plus durum wheat) will fall to 23.9 million tones, a 16% decrease
from 28.6 million tons in 2008. The outlook for durum is heavily
influenced by high carry-in stocks of durum and the expectation of good
weather, and therefore higher yields, off-setting a reduction in world
area sown to durum wheat. More information on the CWB's PRO and
commentary are available at the following website: CWB
[PROs](http://www.cwb.ca/db/contracts/pool_return/pro.nsf/WebPRIndex?ReadForm&CropYr=2009-10).

**SASKATCHEWAN ANNOUNCES C\$71 MILLION CATTLE AND HOG SUPPORT PROGRAM:**
This week, the province of Saskatchewan announced a \$C71 million cattle
and hog support program in an effort to help producers cope with low
profitability. According to provincial Agriculture Minister Bob
Bjornerud, Saskatchewan cattle producers will be eligible for a C\$40
per head payment for all beef breeding cows and bred beef heifers owned
as of January 1, 2009. Hog Producers will be eligible for C\$20 per
market hog sold and C\$10 per head for all iso-weanlings, weanlings and
feeder hogs produced between July 1, 2008, and January 31, 2009. \"The
Government of Saskatchewan recognizes the challenges cattle and hog
producers continue to face,\" Bjornerud said. \"This program will help
producers retain their breeding herds and address immediate cash flow
needs.\" \"In the absence of a national solution, we had to take action
to help our producers, we will continue to work with our federal
counterparts toward a national solution. In the meantime, we urge the
federal government to come to the table and top-up this program with
their 60 per cent share, or provide some other form of meaningful
support.\" *Comment: Saskatchewan accounts for 29% of Canada's beef cow
herd (Alberta for 40%) and about 7% of total Canadian pig numbers.*

**RECESSION CUTS FOODSERVICE SALES:** Not surprisingly, the economic
recession in Canada has resulted in lower foodservice sales. According
to Statistics Canada, sales for the foodservice and drinking places
industry declined to just under C\$4.0 billion in December 2008, 2.2%
bellow a month earlier. While sales declined, the price of food
purchased in restaurants increased by 0.1% over the same period
according to the Consumer Price Index. All sectors of the industry
posted lower sales relative to November. The largest decline in sales in
December was in the special food services sector (-4.9%), comprising
food service contractors, caterers and mobile food services.
Full-service restaurants posted a sales decrease of 2.4% in December.
Sales declined by 1.5% at limited-service restaurants, where patrons
order and pay for their meals at the counter. Sales at drinking places
were also down by 1.5%. Comment: According to the Canadian Restaurant
and Foodservice Association, annual sales in food and beverage
commercial establishments totaled about C\$48 billion during 2008, but
could fall to about C\$46 billion for 2009 as a result of the economic
downturn.

**Exchange Rate:** Noon rate, February 26, 2009 (Bank of Canada): U.S.
Dollar = C\$1.2456

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