The Canadian cattle industry went through a severe crisis during the years following the discovery, on May 20, 2003, of the first case of a cow born in Canada affected by bovine spongiform encephalopathy (BSE). This crisis shed light on two structural weaknesses of the cattle commodity chain - dependence on U.S. packers and markets. This extreme situation also exposed a serious imbalance in the bargaining power of the various links in the commodity chain. It caused Canadian producers to lose $8 billion to $10 billion.

Context of the BSE crisis

On May 20, 2003, an Alberta cow was discovered suffering from BSE (bovine spongiform encephalopathy). When the diagnosis was announced, the United States, followed by about 30 other countries, closed their borders to all Canadian cattle and beef products.

The embargo quickly led to the collapse of markets, because Canada exported 70% of its production. The price of all categories of cattle crumbled. In the cull cattle sector (cattle over 30 months) for example, the price dropped 70%!

In August 2003, the United States announced a partial lifting of the embargo for boneless meat from cattle under 30 months and, in June 2005, for live cattle under 30 months for feeding or slaughter.

Since November 19, 2007, the border has been open to cull cattle (meat and livestock over 30 months) and breeding cattle born after 1999.

Steps taken by cull cattle producers

At the beginning of the BSE crisis, cull cattle producers operated in a virtual monopoly context and sold their cows at very low prices to the major cull cattle buyer in eastern Canada (the Levinoff-Colbex slaughter and processing plant).

To deal with this situation and obtain a price that really reflected the value of their product, Quebec cattle producers mobilized and blockaded the Levinoff-Colbex plant. Negotiations between the parties led to a partnership agreement with the plant's owners. Through the Fédération des producteurs de bovins du Québec, cull cattle produces acquired 80% of the plant's shares. To accomplish this and to build up a development fund, in May 2004 Quebec cull cattle producers approved the deduction of an amount of $20 per head of cull cattle marketed.

To carry out their acquisition project, producers opted for a collective approach (fairness for all producers) and innovated by deciding to use the full powers of the Act respecting the marketing of agricultural, food and fish products. In July 2008, the levy was raised to $53.86 per head of cull cattle.

Did you know?
On January 1, 2006, following an agreement in principle reached on December 2, 2004, Quebec cull cattle producers became 80% owners of the Levinoff-Colbex plant. In 2007, producers acquired the remaining 20% of shares.

Slaughter plant competitiveness

On July 12, 2007, the ban on the use of specified risk materials (SRM) in cattle feed was extended to all livestock feed. In Quebec, about 50,000 tonnes of SRM are generated annually at the slaughter plants and on the farm. Animal meals made from SRM no longer have any market value. Even worse, in Quebec, farmers and slaughter plants must pay to bury them!

Regulations in the United States are different. The list of SRM is shorter (in the feed ban) in the United States than in Canada, and thus less restrictive. The absence of regulatory harmonization between Canada and the United States considerably weakens the competitiveness of Canadian slaughter plants and the entire Canadian beef and cattle commodity chain.

Indeed, the management of specified risk materials represents an additional cost of $31.70/head for cull cattle slaughter plants. Thus, for Levinoff-Colbex, the largest cull cattle slaughter and processing plant in eastern Canada, these measures result in additional costs of $4 million to $5 million per year, compared to its U.S. competitors.

The federal government has acknowledged the issue. A program was established in 2010 to support the slaughter plants.  

For more information, consult the following documents:

CFIA Fact Sheet: Enhanced Health Protection from BSE

Poster on SRM