Meat Price Surge Not Expected In Canada

“There’s definitely a stall on here.”

– PERRY MOHR

Canada is unlikely to see a surge in meat prices this summer, unlike the United States, where pork and beef prices soared earlier this spring.

The wholesale price of pork in the U. S. increased as much as 25 per cent in April, while beef rose 22 per cent, according to the U. S. Department of Agriculture.

But American prices have softened since then and similar increases aren’t in the cards for Canada, analysts say.

“They took a good run but I think it was a run based on things that are now starting to correct themselves a bit,” said Kevin Grier, livestock analyst with the George Morris Centre in Guelph, Ontario.

Here in Canada, prices are likely to remain fairly stable, both at the wholesale and retail level, said Ron Glaser, executive director of communications for the Beef Information Centre in Calgary.

“We’re not anticipating that the market’s going to be flooded or shorted through the summer, so there’s likely no reason for the current trends to change,” Glaser said.

U. S. PRICES RISE

U. S. meat prices were expected to rise to record levels this summer, especially since demand usually peaks during the summer barbecue season. USDA cited herd reductions and rising feed costs linked to ethanol production as main reasons for the price increase.

Wholesale pork prices reached US90.68 cents a pound in mid-April, the highest since August 2008, USDA reported. Beef reached US$1.6996 a pound on April 23. Chicken in March showed its biggest price gain in 20 months.

But prices have since moderated and Grier said that’s not surprising, since pork especially went “far higher than expected.”

Grier said retail margins for meats are tighter in Canada than they are in the U. S. Pork margins in particular are below average because pork was hammered by the H1N1 scare last year and is only now returning to previous levels.

Margins could remain tight for most of 2009, although retailers may gradually try to raise prices, said Grier.

Glaser said the store price of beef in Canada has remained fairly stable in recent years, despite frequently heard complaints that they’re too high.

According to BIC, average beef retail prices over the last seven years were: $11.46/kg in 2004; $11.59/kg in 2005; $11.58/ kg in 2006; $12/kg in 2007; $12.17/kg in 2008; $12.87/kg in 2009; $12.58/kg in 2010 (first quarter).

Canada shows no sign of a revival in food inflation, at least not for meat, Glaser said.

CONSUMPTION TRENDS

He said the recession significantly affected beef consumption in the U. S. as consumers ate out less and switched to cooking hamburger and cheaper cuts at home. But that trend occurred less in Canada, as reflected in the fact that retail prices have remained steady all through the recession, said Glaser.

Scott McKinnon, an analyst with Canfax, the market research arm of the Canadian Cattlemen’s Association, said the industry saw some “extremely attractive cutout prices” in the last quarter. Packers raised wholesale prices to keep up their margins and retail prices increased a little to reflect that.

But carcass cutout values have since dropped and retail prices are down again, McKinnon said.

He said beef retail prices this spring looked as if they would follow the U. S. trend. But cool, wet weather in the West dampened demand and restrained prices.

That could continue because Canadian packers have ample supplies of fed cattle and no reason to bid up prices, McKinnon said.

“If the supply is large, the packers are going to take advantage of it, buy them cheaper and all the way through the chain – should be able to put a cap on our Canadian retail prices as opposed to the U. S.”

LIQUIDATION

Meanwhile, producer prices show little sign of improvement, despite recent herd liquidation.

Statistics Canada reported the number of cattle of Canadian farms as of January 1, 2010 stood at 13 million head, down 1.3 per cent from 2009 and 6.3 per cent from 2008.

But McKinnon said lower numbers aren’t reflected in higher prices because Canada currently exports fewer feeders and processes more finished cattle at home.

“We’re not really seeing a reflection of the tightening supply and the smaller calf crop yet because we didn’t export those feeders. We actually fed more. So our fed cattle numbers haven’t responded and haven’t gotten lower yet. So we’re not seeing much of a price improvement on those fed cattle.”

The price outlook for hog producers has turned pessimistic again after a significant market recovery earlier this year.

Hog prices, which peaked at $162/100 kg, were back down last week to $147/100 kg, said Perry Mohr, Manitoba Pork Marketing Co-op’s CEO.

Much of the drop is due to conditions in the U. S., where export sales have slowed, consumer are rebelling at the high price of pork and packers are cautious with slaughter volumes, Mohr said.

“There’s definitely a stall on here.” [email protected]

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