Producers seeing profits | Consumers are finding even ground meat is more expensive
The beef industry is finally feeling the effects of short supplies as price records are broken on a weekly basis in the competition for all classes of cattle.
“We are setting a record this week for fat cattle prices,” said market analyst Brian Perillat of Canfax.
“Cull cow prices and our feeder cattle are hitting record prices. Our market is incredibly strong across North America.”
For the week ending May 9, Canfax reported central Alberta 850 pound feeders averaged $180 per hundredweight, up $56 per cwt. from last year. Light weight cattle at 550 lb. destined for the grass market were fetching $225 per cwt., or $1,240 per animal.
The cow-calf sector is probably the biggest beneficiary of this market, in which prices are going up faster than expenses.
There has also been an incredible turnaround for the feeding sector, and owners will have to work closely with their bankers and pay close attention to risk management.
Historical information from Canfax showed that a yearling steer lost $21 per head in March 2012. By November 2012, losses were at their highest levels at $241 per head. The losses continued until November 2013, when profits returned and they earned $75 per head.
There have been four months of successive profits with the latest figures showing a profit of $202.44 per head in March 2014.
There is renewed optimism within the business, said Bryan Walton, chief executive officer of the Alberta Cattle Feeders Association. However, the organization is also talking about the need to train the next generation about volatility, hedging and other risk management practices needed to survive the boom and bust periods.
“Risk management isn’t really taught,” he said.
High priced cattle are now going on feed, and careful management is needed even during periods of profitability because the Canadian dollar may continue to decline and feed prices are not firm.
Perillat said the break-evens for slaughter animals will also continue to climb, based on the price of cattle, feed and other costs.
“There are guys who contracted 1,000 lb. feeders in September for $1.70. They are paying $1,700 for a feeder that they are putting into their feedlot. That is unbelievable when they used to put them in for $700 to $800,” he said.
The fed cattle market is strong, and records were set last week with average steer prices at $145 to $150 per cwt.
Consumer resistance was anticipated when packers started paying $1.20 per lb. for fed cattle.
“It is not necessarily the total price, but the relative price,” Perillat said.
“Everybody is going to eat, but what are they going to eat? If they want meat products they have to pay for it.”
Meat prices are up all around the world.
“People will have to get used to the fact that meat prices are going to stay high,” he said.
People are starting to change what they buy. If they cannot afford the high end cuts, they select ground meat instead. This has encouraged cull cow prices to trend higher with the increased demand for hamburger meat.
“It’s high prices everywhere, and it is affecting how much people will actually consume,” said Wendy Neuman with the National Cattlemen’s Beef Association.
Meat, poultry and produce prices are on the rise, and consumers feel the pinch. Red meat sales have been flat since 2008, mostly because of price, she said at the Canadian Meat Council annual meeting in Toronto May 7-9.
Ground beef has gone up 70 percent in the last five years while steaks are up 20 percent. The result is more cuts are being ground.
Statistics Canada maintains a monthly price reporting index that shows one kilogram of sirloin steak cost $15.33 in March 2010, compared to $19.54 this past March. A kilogram of ground beef was $7.32 in 2010 and rose to $10.44 in 2014.
A kilogram of pork chops was $9.02 in March 2010 and now retails at $11.24 per kg.
Comparatively, a loaf of bread was $2.55 in 2010 and $2.81 in 2014. A 500 gram package of macaroni was $1.40 in that year and the most recent price was $1.37.