Beef Prices Set to Soar in 2012

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The Vancouver Sun Jan 31, 2012

The price you pay for meat at the grocery store is likely to rise again in 2012.

Soaring feed prices across North America and drought conditions in the United States are pushing the cost of meat — beef in particular — through the roof.

“We’ve just been hit with a five-per-cent increase [on organic beef] across the board this month and there were two increases last year of a couple per cent,” said Mark Hills, owner of Port Coquitlam-based specialty meat supplier Hills Foods. “I’d say over the past two years prices are up 15 per cent.”

Wholesale prices of conventional beef are up between 10 and 37 per cent this January compared to prices at the end of 2010, according to Agriculture and Agri-Food Canada. The price jump varies by cut with beef tenderloin leading the way. “There seems to be no end to the demand for beef, even with the price increases,” said Hills, who sells mainly organic and specialty meats. “There never seems to be enough tenderloin no matter what the price is.”

All the indicators point to continued upward price pressure.

In 2011, Canadian consumers paid 6.8 per cent more overall for fresh and frozen meat, excluding poultry, compared with the previous year, according to Statistics Canada. Beef prices rose 11 per cent in the United States and the U.S. Department of Agriculture projects another rise of five per cent in 2012.

The B.C. Hog Marketing Commission reports the consumer price of pork rose eight per cent in 2011.

Tight supply and recovering export markets will keep beef prices high, said Brenna Grant, a research analyst at Canfax research services and the Canadian Cattlemen’s Association. Korea has just reopened its markets to Canadian beef after an eight-year ban dating back to the 2003 Bovine Spongiform Encephalopathy outbreak.

The commodity price of corn is another factor driving the price of popular meats skyward, say meat producers. The price of corn grown for animal feed has doubled since the summer of 2010, driven in part by rising demand for corn as a source of ethanol fuel.

Western Canadian cattle producers are managing their feed costs by feeding cattle more barley during the fattening process, according to Grant.

But even barley prices are up 67 per cent since 2006, she said.

Drought conditions in southwestern United States and feed shortages are forcing American beef producers to contract their herds.

That shrinking supply has pushed the price of feeder cattle — young animals that are ready to go to feed lots for fattening before slaughter — steadily upward since 2006.

The U.S. beef cattle herd is at a 50-year low and by late last year Alberta’s herd had contracted by 20 per cent since 2003, according to Canfax. Many B.C. ranchers have also contracted their herds over the past five years.

This province’s ranchers are already feeling the benefit of the price pressure created by a shrinking supply of cattle, said Kevin Boon, general manager of the B.C. Cattlemen’s Association, though they aren’t breaking out the party hats just yet.

“This fall the prices got back to the highs that were just coming into play in 2003 when Canada discovered [Bovine Spongiform Encephalopathy],” he said.

But there is finally reason for optimism in B.C.’s beef industry.

“Ranchers are making money for the first time in nearly 10 years,” said Port Coquitlam’s Hills.

The pork industry is also seeing prices rebound.

The wholesale price of hogs ready for slaughter has increased by almost 30 per cent over the past three years, bringing welcome relief to producers.

Between 2005 and 2010 the industry was buffeted by rising grain costs and an increasing Canadian dollar that drove down the prices pork producers received. That, combined with a global oversupply of pork, led hog producers to leave the industry in droves, many in response to a $75-million federal buyout program that cut Canada’s producers by 450 and sliced B.C.’s pork sector by one third.

“We’ve seen about a 20-per-cent contraction in the size of the Canadian hog industry,” said Martin Rice, executive director of the Canadian Pork Council.

Pork faces particular challenges not seen in the beef industry, he added. Shoppers will seek out certain grades of beef or opt for the well-branded Alberta product, but when it comes to pork, both personal and commercial consumers tend to seek the lowest price regardless of its country of origin. Only in Japan is Canadian pork regarded as a premium product, said Rice.

Increases in the price of corn in response to the U.S. push to use the grain for ethanol production has also affected the price of pork.

“[U.S. energy policy] did motivate producers to grow more corn, but it wasn’t nearly enough to meet the increase in demand,” said Rice. “That increased competition drove up the price of corn and that was a huge hit [to pork producers].”

Last year for the first time more corn was grown in the U.S. for fuel than for feed, 5.05 billion bushels, according to the USDA.

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