Chicken could rule the roost | Some butchers are reducing their profit margins or promoting cheaper cuts to keep customers
Good times may have returned for beef producers, but they come with a proviso, says the George Morris Centre’s senior market analyst.
The industry is likely to lose market share.
Kevin Grier expects the loss to present a challenge when production begins to increase.
“The bottom line for the cattle and beef industry is that there is going to be serious challenges to beef market share during 2014. Part of the challenge is that grocers and consumers will turn their attention toward competing meats, particularly chicken,” Grier said.
“Fewer features will mean that beef sales tonnage will decline in Canada. In addition, even ignoring features, the overall price of beef is going to increase.… That means Canadians will simply eat less beef.”
He said retail margins on beef sales have shrunk to 20 to 25 percent in the last half of 2013 compared to the previous five years.
Canfax market analyst Dallas Rodger said retail prices are now at historical highs.
He said grocery chains in Canada and the United States have decreased their flyer promotion of beef, but that doesn’t mean they have abandoned the category. It remains an important part of their business and is linked to other grocery categories, such as barbecue sauce.
“There are some people who come into stores solely to buy beef. You can’t just cut off the market,” he said.
“Some retailers are willing to take a loss or take less of a profit or break even.”
Rodger agreed that cattle numbers won’t increase soon. The earliest that could occur would be 2016, he added.
Some cow-calf producers are starting to hold back more heifers as replacements.
Jim Clark, executive director of the Ontario Cattle Feeders’ Association, said it will take more than a couple years for cattle numbers to increase substantially.
There have been too few months of profitability for producers to forget the years of low prices that preceded them, he added.
Clark is the driving force behind the Ontario Corn Fed Beef brand, through which 289,000 finished cattle were marketed last year.
He said promoting less expensive cuts is one of the strategies that the program uses to sell beef in grocery stores.
A good example is the brand’s recipe suggestion for slow-cooked boneless blade or chuck to make pulled beef.
Clark said beef exports are also strong. Japan is back in the market, there are well-heeled buyers in the Middle East and demand in Southeast Asian has increased.
“There are many people in the world craving the North American lifestyle who have the wealth to pursue it,” he said.
Clark said the Ontario beef industry’s long-term success depends on maintaining the cow-calf sector.
“My fear is that we’re going to lose an entire generation of producers and their knowledge,” he said.
“We need to stop the erosion of the eastern cow herd and we need to rebuild. This is not a short-term gig. It’s a long-term job.”
He said a good first step would be to encourage the remaining cow-calf producers to expand their operations, even it’s only another 10 cows. From there, consideration should be given to drawing a new generation to the business.
The transfer of cow-calf operations could be supported through a government guarantee program for older farmers looking to transfer their assets and their cattle know-how, Clark said. The buyer could be a family member or just an ambitious young person with an interest in farming.
Clark said the challenge is considerable because pasture, fences and other cow-calf infrastructure are disappearing.