US embassy cable - 04HALIFAX264

UNCLAS SECTION 01 OF 02 HALIFAX 000264 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR, ETRD, CA, Beef, Agriculture, Trade 
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