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.

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.

“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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