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Report of the Auditor General on the Alberta government’s BSE–related assistance programs

Fred J. Dunn, FCA, Auditor General of Alberta, released his report today on the Alberta government’s BSE–related assistance programs. On March 8, 2004, the Minister of Agriculture, Food and Rural Development (AFRD) asked the Auditor General to fast-track the work on the BSE–related programs he was already planning and answer whether the public dollars used to support the people in Alberta’s beef industry helped to achieve the intended goals of the assistance programs.

Alberta’s preparedness for BSE—Alberta was reasonably well-prepared for this animal health incident and, at the time of the discovery of BSE, was working to resolve the deficiencies in its disease identification systems. However, Alberta was not well prepared for the impact on its agricultural economy and international trade. The Auditor General recommends that AFRD prepare a risk assessment for Alberta’s agriculture industry including risk mitigation and response strategies (see page 21).

Impact of the BSE discovery in May 2003—Cattle prices paid to producers in Canada decreased while the supply of cattle in Canada increased due to the closure of the borders to any export of live cattle or beef. Wholesale and retail beef prices decreased much less than cattle prices paid to producers decreased because cattle prices form only a small part of the retail price. Also, beef prices at the retail level declined less because there is no surplus of beef at the retail level for the cuts that are popular in North America . Cattle prices are low because there is a surplus of cattle compared to packer capacity and demand (see page 31).

Alberta’s BSE non-financial aid program activities—The Auditor General recommends that AFRD work with other governments in Canada and industry to immediately develop and implement a contingency planning process. Alberta must be prepared to make difficult decisions this fall and winter. He also recommends that AFRD ensure that Alberta meets its share of the BSE testing quotas for 2004 and 2005 (see page 43).

Analysis of the impact of BSE financial aid programs—The BSE recovery programs (other than certain aspects of CABSERP) were generally well-designed and had clearly stated goals and appropriate controls. However, the flaws in the design of CABSERP resulted in increased cost for the program. Also, AFRD had not defined measurable targets for its emergency financial assistance programs (see page 75).

Profitability of Alberta-based meat packers—Substantially reduced cattle prices resulted in allegations that the packers received program funds destined for the producers. These allegations are not true. Program funding went to the owners of cattle eligible for compensation. The public and the media have asked for specific information on the profitability of the meat packers. The Auditor General concluded that the three major Alberta-based meat packers benefited significantly from the impact of BSE on the price and slaughter volumes of cattle. The packers’ earnings before corporate interest and taxes rose $130/head, an increase of 281% (see page 89).

Further challenges—The Auditor General identified issues critical to the success of the integrated beef industry. The Government of Alberta will need to work with other governments and industry to resolve the issues (see page 95).

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