The new normal in the price of beef

But even with the price hikes, the future of the cattle industry couldn’t be brighter


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Contact Sylvain
Contact Sylvain

INNSBRUCK, Austria, Jun 8, 2015/ Troy Media/ – The price of beef has gone up on average by more than 40 per cent across the country in the last three years. Depressed inventories across North America and higher feed costs have led to spectacular retail price hikes for products like round steaks, prime ribs and ground beef.

Canadians’ love affair with our favourite red protein is definitely being challenged these days by what’s happening at the meat counter. Whether we like it or not, this new normal in beef means that consumers waiting for discount prices will have to wait for a very, very long time.

Rest assured, this phenomenon is not exclusive to Canada. Beef prices worldwide are reaching record levels. In the U.S., beef prices have almost doubled since 2009. In Europe, the situation is even worse. Beef production is dropping due to the uncertainty generated by the implementation of the new common agricultural policy and the end of dairy quotas this year, hence putting upward pressure on retail prices. In short, no one in the western world is immune to what’s happening with beef prices.

The price of beef reflects it becoming a luxury food

Nonetheless, despite higher prices and widespread claims that cattle production is an environmentally-unfriendly way to feed the world, the future of the cattle industry couldn’t be brighter. Skeptical?

Here’s the argument. First of all, producers who have remained in the industry are making a decent living. The cattle industry has been too often affected by economic cycles, food safety crises and trade wars, but things are much calmer now. Quite the contrast from what has happened over the last few decades or so.

price of beef
The price of beef doesn’t reflect what is going on on the farm

Secondly, and most importantly, over the past two decades beef has been slowly becoming a luxury food product, as should be the case. Paying a premium for beef is something the market was primed for already. Although demand per capita for beef in Canada has steadily dropped over the last 20 years, price hikes haven’t really accelerated the trend in the last three years. This may suggest that many of us still remain loyal to our burgers and steaks.

It seems consumers sticking to beef will either trade down, buying lean beef in lieu of extra lean for example, or will buy beef less frequently. Because of our aging population, this only makes sense. Many will look for other more affordable protein sources like chicken or pork. Pork prices, interestingly, have gone up as well despite lower prices at farmgate. Continuous, symmetric benchmarking by retailers between pork and beef prices allows both categories to rise, even if wholesale pork prices have actually gone down.

That’s just the way things work in food retailing. Retail prices are sometimes decoupled from what goes on the farm. The most significant case was in 2003 when mad cow lowered prices at farmgate by 70 per cent overnight, and prices for beef products at retail barely moved. Essentially, this means meat prices across the board will likely continue to rise although not necessarily at current rates.

The resilience of beef demand is making a case for protein’s currency in the market place. The market is showing consumers’ willingness to pay for the actual cost of meat production. If the industry wants to address market-based concerns such as traceability, animal welfare and environmental stewardship, this influx of capital can only spell good news.

Price of beef good news for organic industry

This is also good news for natural and organic cattle farmers out there. In recent years, price point differentials between conventional and specialty beef products are slowly decreasing, giving a legitimate choice to those who want to support different production protocols. For those concerned about affordability, more affordable substitutes are plentiful, including vegetable proteins, and fish.

The cattle industry is doing much better now, and its brand equity as a commodity seems strong. Peculiar marketing campaigns to sell a breed as a superior product, as we saw with Certified Angus Beef, may not be as necessary in the future. Consumers are not only smarter, but they seem keen to embrace beef as a premium, high-quality food item on their menu.

Troy Media columnist Dr. Sylvain Charlebois is a Professor at the Food Institute at the University of Guelph. He is currently on leave at the University of Innsbruck in Austria.

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