Record Canada Beef Prices Ready to Drop as Herd Sizes Climb

  • Sirloin, prime rib, ground beef dearest since at least '95
  • Analyst sees herd, retention dynamics signaling more supply

Canadians may soon pay less at the supermarket for steak.

Prices for cattle and calves fell 7.6 percent in October, the biggest monthly decline since June 2007, Statistics Canada said Friday in its report on raw material product prices. That will probably have a knock-on effect at the grocery store, where the retail cost of beef is at the highest in records dating to 1995, forcing many consumers to move further down the aisle to the pork chop section.

Canada, the world’s seventh-largest beef exporter, saw prices surge earlier in 2015 amid tighter supplies, with the cattle herd dwindling to the smallest in 22 years after a decade marked by mad cow disease, floods, droughts, and labor shortages. The industry may be at an inflection point, according to Brian Perillat, a senior analyst at Calgary-based Canfax. U.S. ranchers have started to expand their herds, and heifer retention in Canada may rise about 5 percent in 2016, signaling a rebound in supplies, he said.

“We had low supplies in 2014 and really, really strong demand," Perillat said Friday in a telephone interview. "We’ve now shifted. Expansion is occurring and looking forward to 2016, 2017, we’re looking at a fairly big increase in beef supplies.”

Ranchers held 13 million cattle on their farms as of July 1, down 2 percent from a year earlier. Slaughter dropped 13.5 percent and exports plunged 21 percent in the first half of 2015 as there were fewer animals available to market, Statistics Canada said in an Aug. 20 report.

Prices for fresh and frozen beef are up 12.8 percent in October from a year earlier, Statistics Canada said this month in its consumer price index report. One kilogram of sirloin steak cost C$24.74 ($18.54), prime rib roast was C$30.76 and retail ground beef reached C$13.23 a kilogram, all at or close to the highest prices in records dating from 1995.

U.S. feedlots started losing money in early 2015 as ranchers started to expand their herds, Perillat said. Fewer Canadian feeder-cattle are being exported south of the border as a result and ranchers did not liquidate their herds this summer after drought conditions eased in the prairies, he said.

U.S. cattle futures have declined 19 percent this year as supplies are poised to rebound. Retail prices have been slow to come down which has weakened demand for beef, Perillat said.

“The consumer is still looking at high-priced beef,” Perillat said. “They see cheaper pork. They can switch quite easily.”

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