$100 for a rib roast? Yep. Some customers are forking out the cash and driving demand

Strong demand lifts beef prices as ranchers cope with soaring costs

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Consumers who have reached out to CBC Calgary have expressed concern about the cost of buying beef at the grocery store, like the steaks seen in this file photo. (J. Scott Applewhite/The Associated Press)

A visit to the meat counter can sting these days, whether you’re a shopper or rancher.

Consumers have watched prices soar, with the cost of a rib roast jumping to over $100. Meanwhile, ranchers struggled with sub-par cattle prices and rocketing costs.

That has many people wondering, what gives?

Dozens of people who texted CBC Calgary for our project on the cost of food said they struggle to buy meat.

“Are the increases in price due to a shortage, due to shipping, taxes and tariffs or are we just being gouged as Canadians?” said Calgary mom Shauna Ogston, voicing a shared frustration, especially from those dealing with four per cent inflation and no increase in wages or pension.

But in a world still swimming through the chop of a pandemic, the answer to why there’s a disconnect between cattle and beef prices is complex.

There have been bottlenecks at processing plants, parched pasture lands, labour shortages and pandemic disruptions.

Still, when you boil it down, analysts say a big reason beef prices have been climbing is strong demand, and that customers — from stores to restaurants to overseas markets — have been willing to keep buying even as the price tag grows.

“The primary reason why beef prices are as high as they are is because of fantastic North American demand for beef,” said Kevin Grier, a long-time livestock, meat and grocery market analyst.

“Prices are high, yes, but we are eating beef at these levels,” he added.

But let’s unpack this, beginning on the farm.

Rancher costs up ‘astronomically’

Rancher Melanie Wowk paused briefly during an interview last month to find the right word to express how much farm expenses have shot up this year.

“Astronomically,” she said, “is the best word I can use to describe what’s going on.”

A woman carries groceries home from a Vancouver store in this file photo. Some shoppers are having to carefully budget for groceries, including meat, as prices climb. (Ben Nelms/CBC)

When shoppers see increased beef prices at the grocery store, some might think ranchers are rolling in dough, but that hasn’t been the case.

Wowk said a brutal drought has made cattle feed more expensive — if you can find any. Farmers say the cost of fuel is also up, as is the cost of machinery, parts and power.

Meanwhile, Farm Credit Canada data shows Alberta cattle prices have rebounded somewhat from last year but continue to lag the five-year average.

“Those increases in costs have just not been reflected at all in the price that we get for our calves,” said Wowk, chair of the Alberta Beef Producers.

The impact of the drought and a lack of feed also led more Prairie ranchers to sell their cattle early.

The prices of fed cattle sold by feedlots have improved, but they’ve also been hit by feed costs, said analyst Brian Perillat of Canfax, a division of the Canadian Cattlemen’s Association that tracks cattle market data.

“Just cause the prices are better doesn’t mean they’re making any more money,” he said.

The cost of bottlenecks

Market watchers say a big factor why cattle prices haven’t matched the growth at the meat counter is bottlenecks between the ranch and the store.

Ranchers and feedlots in Canada and the United States felt the shock of temporary closures at meat-packing plants early in the pandemic, when there were outbreaks of COVID-19 among workers. It led to huge backlogs of cattle, though meat sales rose during the pandemic.

It took months for the backlog to fade, but challenges remain even as analysts say North American processors have cranked up beef production to record levels.

Drought affected many beef producers across the Prairies this summer, forcing some to sell their cattle due to a shortage of feed caused by dry weather. (Patrick Foucault/Radio-Canada)

Privately-owned Cargill, a major beef processor with plants in Canada and U.S., recently told CBC News that, in part due to a shortage of labour, the industry is not able to process as many cattle as ranchers are able to produce.

“This, when combined with other backups of cattle due to COVID/weather events plus an increase in demand for beef, accounts for the disconnect between live cattle prices and wholesale beef prices,” a spokesperson said in a statement.

It’s a situation that has ranchers in both countries talking about building more processing capacity, lessening the dependency on a handful of massive meat companies and giving them more options for their cattle.

Meanwhile, demand for beef is pushing beef prices higher, helping boost processor margins.

One analyst, Grier, said a gross margin of $500 a head, historically, would have been considered “really great,” but this year and last year, it’s not unusual to see $900.

Tyson Foods Inc., the largest U.S. meat producer, made headlines in November when it reported that it booked record-large profits. Such profits have become a charged political issue in the U.S. and at the White House.

Meatpackers have countered that they’re also facing higher costs for such key expenses as labour, power, shipping, equipment and packaging.

“It’s also important to look at the costs all along that [supply] chain that have gone up as well” when considering beef prices, said food economist Mike von Massow at the University of Guelph.

Back at the meat counter

Back at the grocery store, customers such as Molly Lerbekmo have been shocked by the prices they’ve been seeing at the meat counter.

Lerbekmo said she now serves less meat to her family and budgets carefully for groceries. She has also found new ways of getting protein but adds she’s getting pretty tired of chickpeas.

“That’s not something that I typically … really budget for,” Lerbekmo said. “But with the price of meat now, I absolutely do.”

Statistics Canada reported the price of round steak, sirloin, blade roast, stewing and ground beef in October were all up from last year. The price of prime rib roast took the biggest leap, up 27 per cent over the past dozen months.

On Wednesday, the federal agency reported that prices for fresh or frozen beef increased 15 per cent year over year in November. It pointed a finger at poor crop yields that have made it more expensive for farmers to feed their livestock, “in turn raising prices for consumers.”

But the thing is, just as Lerbekmo and others deal with a tight budget by cutting back, others are still buying beef even at today’s prices.

Analysts say that’s a big reason prices moved higher: strong demand.

Grier measures demand by looking at how much beef is being consumed and the price people are willing to pay for it. By his math, Canadian and U.S. beef demand is the best he’s recorded in a quarter century.

“We’re eating less beef than we did 25 years ago, but the price at which we’re willing to eat it is much higher,” he said, crediting the industry for a “darn good job” in increasing beef production.

Cargill’s meat-processing facility near High River, Alta., is seen on Jan. 8, 2021. A spokesperson for the company, with plants in Canada and the U.S., said current prices in the beef market are a result of supply and demand. (Justin Pennell/CBC)

Strong international demand is also helping to lift prices, as domestic buyers have to compete to meet their customers’ appetites.

As of October, Canadian beef exports were up roughly 25 per cent in volume and 40 per cent in value, according to Canfax. The reopening of restaurants has also been a factor in improving demand.

Canadian grocer Sobeys said in an email to CBC News last month that the entire food-retailing industry is dealing with significant price fluctuations in beef.

“We are doing everything we can to work with our supplier partners to keep our prices as low as we can for our customers,” a spokesperson said.

Regardless of the reasons for the increases, the price of beef and other groceries has become a concern for shoppers like Lerbekmo.

She is not pointing blame, but while she can manage her budget, she worries about the impact of rising costs of everything — from groceries to post-secondary tuition — on communities broadly.

“Society is kind of trending in a direction where … that gap between the rich and the poor is growing so exponentially, and those of us in the middle class are kind of starting to feel the effects of that,” Lerbekmo said.

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