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SRM Subsidy Critical To Survival, Packers Say

“There’s a very real possibility that there would not be a cow killer east of Brooks.”

– BRAD WILDEMAN, CCA

Canada risks losing its entire processing sector for older cattle unless the federal government subsidizes the cost of removing specified risk materials (SRMs) from beef carcasses, the industry warns.

New, less stringent regulations for SRM removal and disposal in the U. S. could force Canada’s older cattle, mainly cull cows, south for slaughter to avoid the extra cost of stricter standards here, according to industry officials.

“With margins as tight as they are on the beef-processing side, it’s too big a discrepancy between the cost of disposing the larger volume of specified risk materials and the lost revenue,” said Jim Laws, Canadian Meat Council executive director.

A coalition of industry producers, packers and processors recently called for a $24-million annual government subsidy to offset the higher costs of SRM removal in Canada. That works out to an average payment of $31.70 a head.

The group made its appeal in a Nov. 2 presentation to the House of Commons agriculture committee. The committee is writing a report on beef industry competitiveness and is expected to include recommendations on the subsidy request.

Without the subsidy, packers who normally handle cattle over 30 months of age (OTM) may refuse to accept them, leaving the option of shipping the animals to U. S. plants where costs are cheaper, Laws said.

That’s a distinct possibility for XL Foods Inc., of Brooks, Alta., which also owns plants in the U. S.

“They could effectively manage their operation that way,” said Laws.

“They could send the older cattle down to the U. S. and process them down there and not be subject to the same volume of specified risk material disposal that we have here in Canada.”

SRM regulations affect mainly older cattle, which are the ones at risk of BSE. Canada slaughters about 750,000 OTM cattle annually.

National SRM regulations were implemented as a BSE control measure in 2007. They require packers to remove the brain and other nervous system tissue that could contain the prion causing BSE.

The U. S. adopted its own SRM regulations last month which require less material removed than in Canada.

For example, U. S. packers must remove the brain but can use the skull. Canadian packers must discard the skull.

U. S. plants must take out the spinal cord but may leave the backbone in place. Canada requires removal of the entire backbone plus a minimum one-inch depth of meat on all sides.

SRMs in the U. S. may be used in fertilizer. In Canada, the material must either be incinerated or buried in landfills.

The only way for Canada to keep its packers competitive with U. S. plants, other than subsidizing them, is to harmonize standards, said Laws.

“The solut ion for the Canadian government, if they don’t want to hand out money, and we can understand that, is to change the regulations to harmonize with the Americans and allow the Canadian meat industry to only have to dispose of the brains and spinal cord. That’s quite a bit smaller pile than we’re currently doing.”

Ottawa and the provinces previously made $130 million available to help plants adapt to SRM regulations. But that covered equipment costs, not operating losses.

Brad Wildeman, Canadian Cattlemen’s Association president, said slaughter capacity for OTM cattle is already limited. Some smaller federally inspected plants in British Columbia, Alberta, Saskatchewan and Ontario have closed. Another plant in Quebec is in danger of doing so.

“There’s a very real possibility that there would not be a cow killer east of Brooks,” said Wildeman.

“EUTHANIZED AT HOME”

He said small provincially inspected plants are unlikely to accept OTM cattle because they are even less able to bear removal costs. Unless producers are willing to shoulder the extra expense of shipping animals up to 12 hours to a plant in the U. S., “they’re going to get euthanized at home.”

Lack of OTM capacity could even create a domino effect ending up in the trade courts, said Wildeman. Limited capacity in Canada could produce a stampede of OTM cattle to the U. S., possibly causing American producers to demand anti-dump action.

At the same time, less OTM slaughter at home might trigger increased imports of non-NAFTA industrial beef which could otherwise be produced at home, Wildeman said.

Federal Agriculture Minister Gerry Ritz responded cautiously when asked for his government’s position.

“Canadian cattle and hog producers need packers bidding on their animals so it’s important to have a strong processing industry,” Ritz said through a spokesperson.

“We know there are still challenges out there with the high dollar and SRM costs and we’re going to keep working with the processing industry to make sure they’re a strong link in the value chain.”[email protected]

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