Ontario beef market stabilizing

Cow numbers have stopped their decline and beef price spread with the U.S. is shrinking

Kevin Grier had some good news for a change for beef farmers at their recent annual meeting.

Canadians are continuing to consume beef, while paying high prices for that meat.

Why it matters: There’s a lot of negative information about meat consumption, but population growth and continued support from most consumers mean demand continues to grow.

Beef prices have been high for a few years, Grier told the annual meeting of the Beef Farmers of Ontario. Historically high prices have mean declining meat demand. That hasn’t happened.

Related Articles

“Canadians are eating beef at very very very high prices,” said Grier, a long-time meat market analyst. Yes per capita beef consumption has declined since 2013, but if prices had been as high then as they are now, there would have been a lot less consumed, he says.

“There is demand for what you produce. You are producing something in strong demand and the demand for it is improving,” he said.

Grier has recently completed a study on the impact of the Ontario Corn Fed Beef program, a producer-run branded beef program that continues to expand after 20 years of existence.

From 2013 to 2017 the gains in the priority markets of the Ontario Corn Fed Beef program outpaced the gains of the rest of the Ontario beef market, he said.

There’s value in the Ontario Corn Fed Beef brand because it is producer owned, said Grier. Japanese buyers especially like it and in Ontario it falls under the “local halo,” he said.

The OCFB program “gives you leverage in your local marketplace.”

Ontario beef cow numbers had been in decline since 2003, but have stabilized the past three years. Some of that is attributable to the growth of the OCFB program that now uses 35 to 40 per cent of the beef processed in Ontario.

Grier also talked about the beef market in general and showed evidence that, while still not equal to U.S. price, the spread between Ontario and U.S. pricing is narrowing.

The long-term price of Ontario beef has been $8 under the U.S. price, but that spread has moved to $6 and now to $4 under per hundredweight.

A lot has been said about the spread between Ontario and Alberta beef prices. Historically the Ontario market has been stronger, but for the past couple of years, the Alberta market has been higher. Grier said that Ontario farmers should look instead at the U.S. market to compare pricing, as the Alberta market is unique, with enough packing capacity to keep prices healthy there — in fact among the healthiest in North America. Any growth in beef production in Ontario is held in check by the lack of any expansion of packer capacity, a frustration for beef feedlots who want to grow. That packer capacity has also kept beef prices soft here, compared to Alberta.

Calf prices have also been stronger in Ontario compared to the U.S., with pricing slightly above or slightly below American prices, he said. That compares to historical prices of $12 below the U.S. calf price in Ontario.

“I think there’s something different happening in Ontario and I think Ontario Corn Fed can take some credit it for it by making the Ontario industry more competitive.”

Global beef fundamentals decent considering U.S. production

Brian Perillat, manager and senior analyst at Canfax told the meeting that with 2.8 million beef cows added to the U.S. herd, there will likely be record beef production this year and next.

The American herd expansion has started to slow and that’s helping to keep beef prices from dropping significantly, although he doesn’t predict a stellar year for cattle feeders.

Pork prices, which are currently low, haven’t dragged down beef prices, but that’s a concern for Perillat. When beef cutout wholesale prices are three times that of pork, the beef price doesn’t usually hold, and prices are well above that. He’s hoping to see pork prices rise toward the beef price, not the other way around.

About the author

Editor

John Greig has spent his career in agriculture journalism and communications. He lives on a farm near Ailsa Craig, Ontario. Contact John at [email protected] or follow him on Twitter @jgreig

Comments

explore

Stories from our other publications