Costco asks producers: where’s the beef?

Retailer forced to import | Meat buyer says producers need to develop the right kind of cattle to produce AAA quality

TORONTO — The shrinking of the Canadian cattle herd is being felt among major retailers.

Costco Canada was the first company to exclusively sell AAA beef. The high quality product flew off shelves, but fewer cattle and a shrinking herd have made it increasingly difficult.

Consequently, products from the United States and Australia are displacing Canadian beef in Costco’s 88 Canadian stores.

That was sobering news for those attending the annual Canada Beef Inc. forum in Toronto Sept. 18-19.

However, Costco representatives said they had no choice but to substitute AAA with USDA Choice and Canada Prime with Australian Wagyu.

“We sell Choice but not by choice. Are you forcing us to switch our current program to USDA Choice?” said Claude Gravel, head of fresh food purchases.

Costco started offering U.S. tenderloin and strip loin primals, rib steak and sirloin tip roasts June 20. Rather than carrying the red maple leaf, this beef carries a USDA sticker.

“We need more AAA, high quality beef. We don’t do it by choice,” said fresh meat buyer Chris Tindall.

“No matter what, when a member comes in the building and they want to buy beef, we give it to them.”

He said there are not enough cattle and not enough qualifying for the AAA quality stamp.

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Forty-five to 50 percent of Canadian cattle grade AAA, up from 15-20 percent when the grading program started more than 20 years ago.

Costco struggles to get enough when supply drops to 45 percent. This was a particular problem last summer. Supplies are adequate when 55 percent of cattle grade AAA.

As well, more retailers will want to stock AAA beef as they understand its value, and there is increasing competition for a small volume of meat.

The company launched a Canada Prime program at 11 stores in Canada in 2009. Only one percent grade Prime at any given time, so supply was extremely limited.

However, customers were willing to pay more. Sales increased as Canadians developed a taste for higher quality beef.

Costco will sell 45 million kilograms of beef this year and in five years plans to market 72 million kg as well as Prime. However, meat buyers don’t know where to find quality beef.

Tindall said producers need to expand and develop the right kind of cattle and feed regimens to get them to the AAA level.

Saskatchewan beef producer 
Garret Hill said economic pressures forced many producers out of business and they are unlikely to return.

“I appreciate the fact that you want us to produce more beef, but the last 10 years have been pure hell. We have lost a lot of people in this industry,” said Hill.

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“The message we heard is we have to produce it cheaper. That is why you don’t have anybody left producing.… If you are going to pay for it, fine. We have to get paid before you get any beef on the shelves.”

Costco officials said the entire beef industry needs to work together because everybody has to make money.

However, one sector often profited at the expense of another over the years, and a new approach is needed to ensure the industry has a future.

“We don’t have any problem paying the market value for beef. What we choose to sell it for is our business,” Tindall said. “We would love to get it back if it is available and the consumers will pay the premium.”

Costco met with the Canada Beef Inc. board two years ago over concerns about the shortage of high grading cattle that would fit its AAA program.

“They really do not want to understand the production side,” said Chuck McLean, past chair of Canada Beef.

Marbling levels can be affected by weather or feed changes. At other times cattle are sold to meet packer contracts for certain delivery dates even though they need more time in the feedlot to add fat. If they were kept on feed longer, the grade would change.

“We can get the specs but every once in a while you get a hiccup in the system,” McLean said.

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  • Ron Lewkowicz

    The producers are gone and they are not coming back. The markets have lost all touch with reality and actual production costs. The cattle industry was first, grain will happen soon.

  • ed

    Back when the BSE first came up in 2003 as a trade barrier punishment in response to our nation unwillingness to agree with our good neighbors to the south on certain foreign policy action plans, a series of bad strategies was employed to counter the ill that would come of it. A large capacity packing plant that would be located as far east in Western Canada to provide domestic beef to Eastern Canada was proposed. Public loans to be paid back with a nationally imposed ear tag regulated check off would pay for the plant, be it at full capacity or at half capacity or moth balled if the “big guy’s” pulled all the cattle away from the plant with super high farm gate prices. It was predicted that an additional $3-4 ear tag fee would not only pay for the plant over time but also immediately raise the cattle price over $200 per head. The Canadian Cattlemen Association was squarely against it. A $750 million BSE recovery payment was in the works at the same time to assist cattle farmers. It was suggested that it be sent directly to the producer based on a producers past sales numbers. CCA was against it. They convinced the authorities in control to pay it out based on future sales. Not a good idea! The announcement as such was made by the Federal Agricultural Minister in Lethbridge, Alberta and within hours of the announcement being made the national cattle price mysteriously dropped another 10 cents a pound. The cattle industry was assimilating the tax payer help into their own pockets as the cattemen sold their beef, and long before the cattlemen had applied for the programing monies. The packers upgraded their own plants with the money and bought the only remaining big beef shelf space retailer remaining in the Eastern Canada with the rest on the tax payers money putting to bed the possibility of a big publicly helped packing plant that would have raised the price at the farm gate and kept many producers from going permanently out of the business and protected the consumer price over the long haul. When boxed young triple AAA beef would be allowed to flow south to stop the log jam of very cheap high quality beef in the packers freezers, the suggestion that an all or nothing approach and BSE testing would be the better way to go. NO, the CCA said we have to give them something. Can’t be setting new standards in North America. So the Americans got our triple AAA fine Canadian beef in a box at a big discount for their top end customers in fancy restaurants with a bottle of wine while we got the old cull cows and the carcasses for our Western Canadian consumers and imported dairy cull cows for our Eastern Canadian customers and it was years before live beef would cross the border. When an inquiry into all this ill conceived lobbying of governments on policy and possible wrong doing by big business was put to a vote in our Federal Parliament that had to be unanimous to pass, one opposition member of the House of Commons stood up and blocked the motion to have the packing plants open their books for inspection. The Agricultural Critic at the time and our present Federal Agricultural Minister by himself blocked this Federal inquiry process. He more recently relaxed regulation at packing plants which lead to the terrible listeria break out and the fall out of that. Many cattlemen have gone broke under the circumstances of the last 10 years of totally misguided policy. Many are struggling with high BSE policy blunder debt loads. The present high prices are providing the first real exit point in many years. Many are taking it. The higher the price the more producers that are contemplating that exit. The young producers are mostly missing from the picture now, and others young producers are culling hard to take some profit. The risk at these prices seems too big to assume. Nobody knows where the bottom is on this one. The Canadian consumer is paying dearly for this tragic chain of events as well. This has been to our Canadian beef industry in many ways, to use a direct quote from our present. Federal Ag. Minister, “Death by a million cold cuts”.

  • James

    You are right on Ed. I remember when Ritz blocked the Federal inquiry ! I also wonder if the Western Producer have any investigative reporters? This was truly legalize thievery in the first degree ! And Ron you are right grain is next.

  • Kevin

    The retailers mentality of we will charge whatever we please is the pitfall of the system. Ranchers are at the bottom of the capitalist food chain in this industry. During BSE we were told the consumer would not pay more so losses were (as always) passed back to the rancher instead of raising end price in the store. Now the supply chain is all but shattered and the retailer has had to push in store prices up (a first) to keep their margins, now asking where’s the beef. It’s absurd. The monopoly enjoyed by the meat mafia of old used the system to hijack all the top quality beef at record low prices for a prolonged period and crushed supply. In turn they created there own prolonged market crises with record high prices and many smaller feedlots and auction marts have closed due to low volume. You reap what you sow. So I give the big retailers the same message I received loud and clear back in 2003, it’s capitalism, supply and demand. Your demand has gone up, you took short term profit over long term health of the industry and now you will pay. There’s no end in sight my friends, buckle up!!! (Or get out, your choice)