'Tipping point' for depleted cattle herds driving beef prices higher
June 15, 2015, 2:21 p.m.
TORONTO, CANADA - Shocked by what the local grocer is charging for your favourite steak or ground beef for the grill? You're not alone. Industry experts have warned a cattle shortage would send prices through the roof this year. "Thinking of barbecue, it's very top of mind right now," says Sylvain Charlebois, a professor with the University of Guelph's Food Institute. He says retail beef prices have risen about 40 per cent over the past three years and the trend has continued to build each month from January through April, according to the most recent food prices compiled by Statistics Canada. "So there's still momentum upward. I don't think we've actually reached our peak yet."
That view is shared by Kevin Grier. The independent food industry analyst in Guelph, Ont., says the North American cattle herd has been on the decline for about 15 years but 2014 and 2015 has been "kind of a tipping point." Grier says he's been recently swamped by calls about beef prices, which he monitors as well as pork and chicken prices.
Grocery flyers were advertising popular cuts of steak at $4.99 a pound (about $11 a kilogram) as recently as two years ago, Grier says, but that was before prices went up. "Now you're seeing $7.99, $8.99, $9.99. And that's the specials."
Charlebois says as shocking as it has been for Canadian beef lovers to see prices rise, it's a phenomenon being experienced around the Western world. "Let's look at the United States, for example. Since 2009, beef prices have almost doubled. So the increase in the United States has actually been higher than it has been in Canada," Charlebois says. "Herds in the United States are much more depressed than in Canada, so that's why prices have gone up significantly. In Europe, it's even worse."
The European Union ended dairy quotas in April, causing increased uncertainty for farmers, he says. "So a lot of farmers are exiting the industry — both in dairy and in cattle. So there's less and less inventory in Europe. Supplies are much lower, so prices have gone up."
Charlebois says Canadian ranchers and farmers are benefitting from the higher prices for their cattle but they're cautious about expanding their herds because of the costs, time and potential risks — noting that cattle prices dropped 70 per cent overnight on May 20, 2003, after an outbreak of mad cow disease that scared away consumers and closed export markets. "That killed a lot of operations across the country," Charlebois says. "These risks still exist today. You never know." Grier expects cattle shortages until at least 2018 because it can take up to three years to produce a new generation of cattle. "In Canada, we haven't started to increase the herd yet," Grier said.
Brenna Grant of Calgary-based Canfax Research Services, which collects market information for Canada's cattle industry, says "it's the very start" of an expansion phase after a "really tough" decade for cattle producers. "Many don't have the labour available or the inclination to take on more work," Grant says. She adds some producers are thinking that prices have been high enough for a long enough time to consider expansion, but they're watching what weather will follow a dry spring and wondering, "Are they going to have grass this summer?" The grass will be required to feed the cattle herds through next winter, either in pasture or as hay, Grant says.
Source: Farm Credit Canada