ATLANTIC CANADA AND BSE

UNCLAS SECTION 01 OF 02 HALIFAX 000264

SIPDIS

E.O. 12958: N/A
TAGS: EAGR ETRD CA
SUBJECT: ATLANTIC CANADA AND BSE

REF: Halifax 042



1. Atlantic Canadian beef farmers are feeling the pinch of low
beef prices brought about by the closing of the US borders to
the shipment of live animals and all but a few choice cuts of
beef. The subsequent glut of the Canadian market and the
insufficient slaughter capacity in Canada has caused a massive
drop in the price of Atlantic Canadian beef. The numbers are
significant; the Nova Scotia Federation of Agriculture estimates
that the provincial livestock industry lost over C$23 million in

2003. The provincial and federal governments are pitching in to
help offset the consequences of the border closures with a
recent announcement from the Federal government to infuse the
industry with C$488 million. The provincial governments have
been topping-up this aid, with programs designed to mitigate the
effects of the crisis on their specific industries. For
example, Nova Scotia has contributed C$13 million to address
income loss for Nova Scotian beef farmers.


2. The Atlantic Canadian livestock farmers contend that many of
the Federal measures dealing with the BSE crisis are designed to
address the concerns of Western beef farmers. Although they
laud Federal moves to strengthen Canada's tracking, tracing, and
surveillance system in order to demonstrate high Canadian
standards of animal and public health, producers are less
supportive of the Federal plans to increase Canadian
slaughtering capacity while temporarily decreasing supply
through a series of set-asides. Atlantic Canadian producers
argue that the Federal programs interfere with existing regional
solutions and offer little in the way of aid to Atlantic beef
farmers.


3. One of the biggest regional developments is the construction
of a new beef plant on Prince Edward Island, funded through the
purchase of stocks, or "hooks," by members of the Atlantic Beef
Producers Co-operative Ltd. Scheduled to open in late November
or early December, the plant will be federally inspected and
therefore permitted to distribute its beef to the entire
Atlantic region. The PEI plant will produce its own brand of
beef, the Atlantic Tender Beef Classic (ATBC),and will
discourage producers from slaughtering cattle larger than 1400
lbs to preserve the quality of the meat. Producers hope to open
a niche market in local supermarkets with an active marketing
campaign encouraging the consumption of local beef.


4. It is the restriction to cows of less than 1400 lbs for the
ATBC brand that makes the Federal set-aside program troublesome
for Atlantic beef producers. Any producer forced to set-aside
cows under the Federal program would not have the freedom to
sell those animals approaching the 1400 lbs cut-off. All those
cows that could not be sent to the PEI plant due to excess
weight would then have to be sent to slaughtering plants in
Ontario, potentially off-setting any Federal monetary incentives
for set-asides. Furthermore, the PEI Cattleman's Association
noted that the benefits of this program will be felt indirectly
through the use of set-asides in other provinces where there is
insufficient slaughter capacity, resulting in a more stable
price across Canada. The Atlantic Canadian beef producers could
take advantage of these prices without participating in the
program and consequently without jeopardizing the new PEI plant.
Essentially, they could take a free ride.


5. The Atlantic Provinces are skeptical other Federal programs,
arguing that the Canadian Agricultural Income Stabilization
Program is administratively top-heavy and inefficient. The
funding received by farmers under this program is not sufficient
given the complicated process necessary to secure it. They also
argue that the Federal government must develop measures to deal
with Atlantic environmental concerns associated with deadstock.
Burying carcasses is problematic due to high water tables, and
the close proximity of feedlots to residential development makes
visually unpleasant options like fence-line feeding unpopular.


6. With these developments, the Agriculture ministers from Nova
Scotia, New Brunswick, and PEI have agreed on a common approach
for the upcoming federal, provincial and territorial agriculture
ministers' meeting in Ottawa. Chris d'Entremont, Nova Scotia's
Minister of Agriculture notes that although the Federal measures
were welcome, further negotiations need to be held between the
provinces and the Federal government in order to develop
regional strategies for Atlantic Canada's livestock industry.
In the meantime, the Atlantic Provinces are attempting to aid
ailing Atlantic Canadian beef producers by offering cash
advances of C$100 per cow to be deducted later from CAIS claims.


7. COMMENT: All parties seem to agree on the necessity of
improving Canada's tracing, tracking, and testing for BSE in
order to reassure international trade partners as to the safety
of Canadian beef. However, although still anxious for the
reopening of the US-Canada border to live cattle and all beef
exports, Atlantic beef producers realize that in the meantime
they must develop alternative strategies to prevent the death of
the industry. Hence the push to increase Canada's national
slaughtering capacity and design marketing strategies
encouraging the consummation of local beef products. This will
allow Canada to serve its own market and hopefully to stabilize
the national price of beef. The construction of the PEI beef
plant is an example of this move towards increased regional
self-sufficiency.


8. At the same time, this plant will not be adequate to address
all of the region's beef concerns, nor are the Federal measures
sufficient to bridge the gap until the reopening of the border.
Therefore, it is likely that the Atlantic Provinces will
continue to exert pressure on the Federal government both to
continue strong negotiations with the U.S. on beef exports --
especially during the upcoming visit of President Bush to Canada
-- and to aid in developing federally funded solutions for the
Atlantic region's beef producers. END COMMENT

HILL