2009 Year in Review

Many Canadians are glad its over and will be hoping for something better in 2010. Around the world, the economic downturn that began in 2008 became a full blown recession in 2009 and obviously Canada did not escape. Other major business stories in Canada included: Nortel goes bankrupt; the Loonie soars again (from a low of $0.76US in March to a high of $0.97US in October); Jim Balsille fights, but fails, to bring a 7th NHL team to Canada; Canadian property prices reach near record highs, bucking the North American trend (the average home selling price reported for all major Canadian cities increased 19%, year over year, by November 2009); and Canadian Banks are declared “the most secure in the world” by the World Economic Forum. As the year ends, it appears the Canadian economy suffered less than many, certainly when compared to our Southern neighbour, but tell that to the thousands who lost jobs in the manufacturing sector among others.

For 2010, one of the questions will be whether Canada’s economy is growing again and if so, at what rate. The Canadian economy stopped shrinking in the third quarter of 2009 (meeting the definition of recession being over), but signs of growth are fragile at best and not felt across all sectors. It will be interesting to see the 4th quarter numbers, and to understand what consumer spending for the holidays was like. I’ve heard it explained that consumer confidence is not an indicator of whether or not the recession is over, but rather a result which trails other positive signals.

It appears that cash strapped Canadians ate less turkey, slightly less chicken and more eggs in 2009. At a macro level Canadians ate less at food service and purchased more groceries at retail. Feed costs seem to have found an equilibrium, at a level lower than the record levels of 2008 but still historically high. Almost all pundits expect that this level is the new normal given the continued demand for biofuels and particularly ethanol. The livestock feeding sector benefited by a good feed crop; we could expect higher feed costs and therefore higher farm gate prices for supply managed commodities in future years. Canadian pork producers bled again in 2009…some went bankrupt and some are on life support. Competing meats are pressuring chicken and turkey in both retail and food service channels.

The severe recession resulted in many countries focusing internally and there was no progress at WTO. A quick response to the avian influenza outbreak in BC (January – 2009), particularly by the producers involved, resulted in no consumer concerns. During an industry / CFIA post mortem of the event (held late in the year) we discussed the few issues around segregation, labelling, movement control and international trade, but agreed that both industry and government are dealing with these outbreaks better.

CanNAISS 2009 - The AI event in BC early in 2009 may have delayed the launch of the 2009 Canadian Notifiable Avian Influenza Surveillance System (CanNAISS), but with committed effort from CFIA officials and the National Poultry Group representatives, a revised sampling plan was drafted and ready for implementation by late summer. Sampling for the pre-slaughter component began in late August through cooperation of the CPEPC slaughter facilities and their providing advance slaughter schedules to CFIA.

A new sampling component introduced in the 2009 CanNAISS was the Hatchery Supply Flock. CFIA will source the supply flock locations through CPEPC hatchery members and sampling was to begin in mid-December. Due to holiday scheduling with the CFIA test lab in Winnipeg, there was a break in sample collection since mid-December. Waterfowl and specialty birds will be another CanNAISS sampling component introduced early in 2010. The EU audited CanNAISS in 2009, and although preliminary reactions seemed positive, CFIA awaits their final audit report.

Beginning in 2010, CanNAISS will morph into an ongoing surveillance program and CFIA will continue to request advance slaughter schedules and supply flock information from CPEPC member slaughter and hatchery facilities. CPEPC wishes to thank its members who are involved with providing producer contact information to CFIA. Testing and possible detection of AI occurring while the flock is still on the farm (as opposed to having entered the food chain) is better for consumer perception and the Canadian poultry industry as a whole.

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Turkey

2009 marked the second very poor year in a row for turkey processors. The result of the processor driven FP allocation process late in 2008 was a reduction in FP allocation for the 2009/10 control period of about 7.5 million kgs. This was implemented by Turkey Farmers of Canada (TFC) but was not enough to correct markets for breast meat and processed products. TFC reacted to the request from processors and the recommendation from TMAC to reduce the whole bagged bird allocation but not quickly enough so that the effect of the 4.5 Million kilogram reduction was delayed. In addition, one processor, citing continuing losses, ceased operations, at least on a temporary basis, while another reduced production by about 1 million kilograms. The former triggered an ad hoc interprovincial lease of production quota and eventually a new TFC policy to deal with interprovincial lease going forward. Live costs due to continuing high feed prices, could not be passed on by processors who are competing with oversupplied protein markets and per capita consumption of turkey appears to have declined slightly in 2009.

Heading into 2010, supply levels are set about equal to 2009 with virtually no change to the FP allocation from the Processor driven process and a timely decision by TFC, supporting TMAC’s recommendation to reduce whole bird allocation by an additional ½ million kilograms. Festive season deep discounting of turkey by retailers was the most dramatic it has ever been and it remains to be seen if consumers will believe in future that turkey is worth more than $1.00/lb. At least we can hope that these loss leaders cleared inventory so that 2010 has an opportunity to start on the right foot. Meanwhile, TFC Directors have begun discussions at a high level about analyzing the turkey value chain, given the new reality around feed prices and competing meats.

CPEPC has increased efforts to share market information from members on a confidential basis with TFC committees in order to improve decision making for the entire industry and continues to work closely with TFC’s Supply Policy Committee on various issues such as how to deal with new processor requirements for bagged production – especially in a market that is currently contracting. The allocation system has been operating on the basis of what amounts to “a gentlemen’s agreement” for a few years, but TFC has worked with legal counsel and the provinces to address impediments and is targeting having new draft regulations for review early in 2010. The goal is to have these regulations, complete with audit and penalty provisions, in place for the 2010/11 control period.

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Eggs

Similar to 2008, graders participated in an on-carton promotion in 2009 in the early part of the year and for a second year, it was once again deemed successful in increasing sales in a traditionally slow period.

The overall demand for table eggs and egg products in 2009 substantially outpaced the moderate growth of 2008. Members from both sectors were required to rely on imports more so than in previous years to meet demand.

Egg Farmers of Canada (EFC) and Further Processors continued to honour the terms and conditions of the contract that expired on October 31, 2007. After a break from negotiations of almost 11 months, EFC called a meeting on September 1st and presented a proposal to the Processors Advisory Committee (PAC) which included a move from the current contract to a policy along with a substantial surcharge for eggs used in the production of Value Added Products. Neither of these is acceptable to processors. The Further Processors negotiating committee, in consultation with full membership, is preparing a response for an upcoming meeting in early 2010. Processors remain hopeful that an agreement can be reached with EFC in the not so distant future.

Industrial Product Pricing has eased in 2009 compared to 2008 due to lower US prices and a stronger Canadian dollar. The lower price has reduced EFC’s Pooled Income Fund to a year-end balance of approximately $33M from the opening balance of $66M.

In response to the Federal Government’s commitment in addressing the H1N1 pandemic, some grading sector members have had their table egg supply diverted to vaccine production. The impacted graders have had to source supply from other graders and in some cases; eggs were imported from the US under special circumstances to ensure domestic supply was uninterrupted in the traditionally busy pre-Christmas period. Throughout this unusual period, CPEPC and the individual graders impacted, cooperated with International Trade Canada and EFC to ensure that the vaccine manufacturer received the required supplies.

The Egg Tariff Quota Advisory Committee (TQAC) met on a couple of occasions to review the Notice to Importers regarding supplemental import rules. TQAC allows industry stakeholders to provide input to the Federal Department of Foreign Affairs and International Trade on egg industry issues. CPEPC and EFC cooperatively prepared a common position and response outlining changes both organizations believe will help protect the intent of supply management. Department officials will forward a recommendation to the Minister of International Trade, who has the responsibility and authority to make the final decision on any changes to the Notice. Members should expect to see the changes in 2010.

The consistent strong demand for eggs and egg products throughout the year, made 2009 a good year for the egg industry.

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Chicken

During the second half of 2009 processors finally began to achieve reasonable margins after a year and a half of below acceptable levels. The improvement resulted from a number of factors. Live prices were relatively stable in 2009 and although they were on average slightly higher than in 2008, prices declined by about 8 cents from the peak levels experienced in the last quarter of 2008 to average about $1.45 for the year (Ontario base price). Wholesale prices showed steady improvement over the year and averaged $3.25; an increase of about 22 cents over the 2008 average. Allocations, while sometimes not set as conservatively as processors would have preferred, were stable; being established within a range of plus or minus 1 percent relative to Base in every period of 2009. Looking forward to 2010; there appears to be an opportunity for modest growth although the challenge will be to not overreact to the strength seen in the markets late in 2009 and set growth levels that are unsustainable.

CPEPC increased the staff resources devoted to the chicken sector in 2009 through an arrangement with AOCP whereby Kevin Thompson assumed the role of Manager, Chicken Sector effective June 1, 2009. Kevin now spends 50 percent of his time on CPEPC activities while continuing in his role as Executive Director of AOCP during the other half of his time. In order to create the time for Kevin to devote to CPEPC and in an effort to bolster capabilities in data management and analysis, Susan Collier was added as a full time staff member in 2009. While officially an employee of AOCP, Susan supports Kevin in his roles both at CPEPC and AOCP. The additional staff resources CPEPC added in 2009 has allowed more emphasis to be placed on the chicken sector. It has also freed up more time for Robin to devote to government relation activities and other strategic priorities of CPEPC.

Allocation continued to be CPEPC’s greatest single focus for the chicken sector in 2009.

While better periodic allocation decisions were achieved in 2009 these decisions could not be attributed to any meaningful change in the CFC allocation process. The only real area of improvement was the reaching of agreement on healthy ranges for Storage Stocks and TRQ for use on the Report Card. While this is a good step, it is a relatively small achievement. There was no progress made on the most important market indicator, that being a healthy range for Processor Margin. Work in conjunction with CFC will continue on this in 2010. Finally and most importantly, the biggest single issue pertaining to the Report Card remained unresolved – that is the issue of how to use it. For some time CPEPC has been advocating that the Report Card should be used as a tool;

• To get all stakeholders to a common understanding and analysis of the most important market factors.
• To take a longer term view of allocation, with the goal of stability and predictability. Allocation should be treated like a business plan with the level of growth tweaked up or down based on a common analysis of the identified market factors.

• Measure the results of previous allocation decisions in order to learn and improve going forward

While space does not permit a summary of them, a number of other issues required significant attention in 2009. These included; participation in the Oversight Committee established by FPCC, interprovincial movement, TRQ policy and administration, and the differential growth policy initiative of CFC.

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Canadian Hatchery Federation

The Canadian Hatchery Federation (CHF) welcomed Dr. Teresa Cereno to her new role as Chief of Hatchery Programs at CFIA near the end of 2009. There had been virtually no progress on issues around HACCP implementation and hatchery regulations during the year and with Dr. Cereno on board we anticipate that 2010 will become busier and more productive on these fronts. CHF looks forward to finally getting the scientific subcommittee off the ground, while we understand that CFIA’s highest priorities will be hatchery regulations, CVS and the scientific sub-committee. Members are looking forward to working with Dr. Cereno regarding hatchery HACCP. Our frustrations in the past on this file have been due to program changes without industry input. Toward year end the newest component of AI surveillance, the Hatchery Supply Flock portion of CanNAISS was kicked off. CHF members have committed to cooperating with CFIA to provide data (including end of flock life dates) in order to have this component run smoothly, always keeping our eye on the goal of discovering any positives before birds are slaughtered and meat is in the food chain.

As reported for the past two years, our leghorn hatcheries continue to support the Leghorn Breeder and Pullet Flock Se insurance initiative spearheaded by Egg Farmers of Canada. Lately we have been disappointed as EFC’s new “transition team” seems to not want input from hatcheries.

CHF wished Giuseppe Caminiti well in his move to become Canadian Hatching Egg Producers’ (CHEP) new General Manger in October. We look forward to having 2 Directors at the CHEP Board table once the new FPA is signed by all parties – expected to be sometime in 2010. CHEP’s 2009 allocation worked well in that it utilized the domestic production as well as a utilization of approximately 95%+ of the hatching egg TRQ and 90%+ of the chick TRQ. We anticipate no redistribution of TRQ for 2010. CHF looks forward to working with Giuseppe in his new role and anticipates that the current good relationship with CHEP will continue.

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POTC

In December, CFIA announced some staffing changes in the Ottawa office. Dr. Yves Labbé, CFIA’s former Chief of Poultry assumed the role of National Manager, International Programs. CPEPC staff and POTC wish to extend their gratitude for Dr. Labbé’s openness, professionalism and dedication to advancing many aspects of poultry inspection over recent years. This progress would not have been possible without unbiased industry consultation amongst CPEPC, Dr. Labbé and his colleagues at CFIA. We wish Dr. Labbé great success in his new position.

Dr. Martin Appelt has assumed the position of National Manager, Policy Development. Dr. Appelt, a graduate of the University of Veterinary Medicine in Austria, joined CFIA in 2003 in animal welfare and transportation before moving to the meat programs division. The technical committee looks forward to meeting and working with Dr. Appelt in the not too distant future.

In 2009, CPEPC hosted two technical symposia; one in February on Salmonella and another in October related to processing equipment, Salmonella biomapping, biofilm control and current Canadian poultry research. Feedback from these events was very positive and POTC made a decision in October to host these types of events annually, in conjunction with the June meetings, with the next one planned for June 2010 in Saskatoon.

CPEPC was discouraged by the February announcement from CFIA Executives to temporarily halt new work with the Poultry Rejection Project following a legal injunction launched by the CFIA veterinary union. Over the following several months CFIA legal council and policy developers gathered supporting evidence citing the benefits of PRP. The legal injunction was eventually dropped in early October. A third party review took place throughout October which generated a report and some recommendations, none of which reportedly affect the policy itself. CPEPC will be provided a copy of this report and PRP pilots are expected to resume as soon as possible. CFIA remains committed and PRP will be implemented in eligible plants beginning in late 2010 and into 2011.

After a great deal of industry collaboration with CFIA, including a national baseline study, data analysis, data assessment, and policy adjustment the Eviscerations Standards policy was delivered to all CFIA Regional Coordinators by mid-November. The policy is now ready for implementation in eligible facilities pending training of industry operators by their local CFIA. Implementation of the ES allows facilities to change evisceration from a Critical Control Point to a Process Control in HACCP programs, thus reducing the number of CCPs. Evisceration Standard data will be collected for CFIA for 6-12 months and then reassessed for the need to adjust Accept / Reject criteria.

In 2008 and 2009, some CPEPC member companies struggled to maintain their US eligibility with failing Salmonella test results as per the US requirement. To protect trade, CFIA proposed a revision to the Salmonella policy to make it a requirement for all facilities, not only US-eligible facilities and for the testing regime to more closely reflect what the US requires of their own facilities. Through 2009, CFIA consulted with industry on the details of the policy, while in the meantime, the US announced that they would be adjusting their Salmonella performance standards. The final Canadian policy will reflect a harmonization with US and further consultation with industry.

CPEPC was pleased to learn of the May decision from Health Canada that poultry kidney does not present a health risk due to extremely low cadmium levels after reviewing CPEPC’s extensive study submitted in 2008. A small triumph however, because the industry still remains bound by definitions in the Meat Inspection Regulations with respect to the removal or the retention of kidneys in poultry carcasses. Working closely with CFIA, CPEPC continues to consult on some details but the necessary regulatory changes are already underway.

Looking back, 2009 was a busy year for the technical committee and we continue to move quickly on some files, less quickly on others. The collaboration amongst the membership continues to be the single greatest asset for POTC, while the close collaboration with CFIA officials is also invaluable.

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HPAI Virus Found In Texan Poultry

Domestic ducks have been found to be positive for the highly pathogenic avian influenza (HPAI) virus during routine surveillance at a live market.

According to Bloomberg, US federal and state officials say that Japan has banned imports of poultry and eggs from Texas after tests showed possible avian influenza in a flock of ducks in the state. Meat from birds slaughtered in Texas as of 1 December are ineligible for export to Japan, the US Department of Agriculture's Food Safety and Inspection Service said. Texas is the sixth-largest US producer of chicken meat.

The Texas Animal Health Commission restricted movement of about 1,000 domesticated ducks in the north-central part of the state after routine tests at an associated live bird market found a 'weak positive' result for avian flu, the state agency said in an e-mailed statement to Bloomberg. The live bird market slaughters and processes animals on site as they are purchased, and the ducks were not part of a commercial flock, the commission said.

"No clinical illness at the market or in the flock" has been discovered, the state agency said. Additional samples from the duck flock are being tested, according to state officials. Flocks near the market are also under surveillance, they added.

www.thepoultrysite.com

UK Unveils 20 Year Food Security Plan

The British government unveiled a national 20-year food-security manifesto Tuesday aimed at safeguarding the future of the country's food supply, which is in danger of shrinking if certain consumer trends – the favouring of local foods over imported, the rejection of genetically modified food and reliance on “food miles” to measure the environmental cost of food – continue. The strategy, an 84-page document entitled Food 2030, is Britain's first comprehensive food policy in more than 50 years.

The plan argues that the way food is bought and sold in Britain must be revolutionized, and is one of the first of its kind among developed nations. But that may not be for long. International food-policy experts predict similar strategies will be cropping up in developed countries all over the world as the availability of food is increasingly linked to national security.

“Food security is as important to this country's future well-being … as energy security…” said Hilary Benn, Britain's secretary of state for environment, food and rural affairs, in announcing the strategy at a farming conference in Oxford. “We can't just carry on as we are,” warns Prime Minister Gordon Brown in the report's introduction. “We need to produce more food without damaging the natural resources – air, soil, water and marine resources, biodiversity and climate – that we all depend on. We need to feed more people globally, many of whom want or need to eat a better diet.”

It warns consumers that an overzealous dedication to buying local – and avoiding imported foods – will have a negative economic impact on often poorer exporting countries if the trend continues. The report also takes aim at an over-reliance on “food miles.” For years, laws have mandated that British-sold products be labelled with indicators of their carbon footprint. However, continuing to use food miles as a main means of calculating the environmental impact of certain foods is not sustainable in the food regime of the future, according to the report, because transport accounts for so little (9 per cent) of the food chain's greenhouse-gas emissions.

“We are far more mutually dependent than we've ever been in the past,” said Phil Bloomer, a policy director for Oxfam in Great Britain who attended the announcement. “We need to make sure that we're not creating Fortress Canada or Fortress Europe and leaving everybody else out. That is definitely unsustainable … Not trading with developing countries would lead to far greater levels of international tension and conflict.”

- from Globe and Mail article of Jan. 5

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Russia, US to Solve Dispute Over Poultry Imports

Russia and the United States will hold talks on January 17 in Moscow to solve a dispute over U.S. poultry imports, a top Russian official said on Sunday, according to Reuters.

Russia blocked U.S. poultry imports beginning January 1 with a law prohibiting chlorine as an anti-microbial treatment in poultry production.

Russia's chief sanitary official Gennady Onishchenko reportedly said that he hoped a compromise would be found at talks in Moscow, which he agreed to hold after telephone talks with James Miller, the USDA's undersecretary for Farm and Foreign Agricultural Services.

The United States supplies more than one-sixth of Russian poultry consumption, or 600,000 metric tons, Onishchenko said, adding that Washington knew about Russian plans to proceed with new regulations since 1994.

The January 17 talks will involve shipments of U.S. poultry, which are already en route to Russian ports on the Baltic Sea. U.S. officials have said there might be some 30,000 metric tons of poultry already en route to Russia.

Watt Poultry

Prime Equipment Group New H₂ Low Skinner

Prime Equipment now offers the new H₂ Low Skinner, which can reduce water usage by up to 75%, eliminate the high pressure pump system and decrease the overall power consumption per unit.  Simple and durable counter-roller ejection design includes upgraded 2 HP stainless steel gearbox and motor.  Larger guard door opening for easier maintenance access.  New easy-access pinch block adjustment feature and upper assembly upgrade for ease of serviceability.  Prime can rebuild and upgrade your existing skinners for a fraction of the new machine price.  Contact Kurt "Buzz" Samuelson at (614) 592-0629 or (614) 253-8590 or Ken Van Dyk at (519) 472-2846 for a quote.

CPEPC members are invited to visit Prime Equipment's booth location at # 5066 Hall B of the 2010 International Poultry Exposition in Atlanta January 27-29, 2010.

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Conferences, Courses and Workshops

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