How did COVID-19 affect Alberta beef prices?
By Bree Rody
New data published by the University of Calgary’s School of Public Policy took a look at the impact of the pandemic on the Alberta beef industry – and the farm owners who work in it.
Overall, the data showed that Canadian consumers paid more for beef products due to the various impacts on the supply chain. But those higher prices, according to the study, went more toward processors, wholesalers and retailers rather than producers.
All the while, producers are currently dealing with a backlog of more than 90,000 excess cows awaiting slaughter.
Karen Spencer, project coordinator at the Simson Centre and author of the study, tells Manure Manager that the reaction from the government and subsidies has been generally welcome, although some producers wish that measures would go further.
Back in March 2020, the onslaught of the pandemic caused a massive surge in grocery shopping form Canadians, with a year-over-year increase in retail grocery sales of 46 percent for the week of March 11. Beef sales that week increased by 55 percent year-over-year. But as supply dwindled and processing plants fell victim to major outbreaks, Statistics Canada data shows that cows slaughtered in Canada fell drastically throughout April and May, as much as 19 percent in May. Feedlot gross revenues fell by an estimated $379 million year-over-year, a reduction in income of 6.7 percent. This represents losses in slaughter cattle prices; “feeder” cattle leaving cow-calf operations also fell by 2.8 percent, with prices falling as much as 12 percent in April.
Processors and retailers downstream in the chain received higher prices, according to the report. The average price for beef in Canada was $20.41 per kilogram, up 6.2 percent from that time in 2019. Double-digit percentage increases continued through June and July, which were 18 percent and 13 percent higher, respectively. Despite reduced volumes, downstream retail revenues for beef were estimated at 3.3 percent higher year-over-year, or $563 million in additional gross revenues.
Although the study examined prices, revenue, supply and demand, it did not measure by units or weight sold.
In May 2020, the Province of Alberta announced a $42 million “set-aside” program to subsidize feedlots as they held over cattle that they could not move due to backlogs.
The set-aside program is a combined effort by the Federal and Provincial Governments. “A feedlot owner commits to signing a contract that says, ‘I will commit to keeping this many cattle for a number of days,’ and the government pays them a certain amount per cow per day,” Spencer explains. She adds that it’s still a crunch on resources because feedlot owners ultimately don’t have unlimited space. The maximum number of days the cattle are set aside is 63 days. Spencer says it was helpful, but one point of contention was that it was for feedlots only, not cow-calf owners. “The feedlots buy cattle from the cow-calf operators, and that price fell quite a lot last year, especially during the spring. Cow-calf operators ended up seeing lower revenues at their farm gate prices, and have no improvement in their cash flow.”
She says it was still very positive, particularly the fact that “the government saw right away that we needed something like this. Volumes were way up and prices plummeted. So the idea and concept of the program was excellent. [But] tweaks could have been made.” She adds that the program has done a good job at stabilizing cattle prices for feedlots. But the 63 day period of the cattle that were committed in January will end in late March, leading producers toward another potential bad period for pricing, she says.
Spencer says an extension of the set-aside program until spring or summer would offer greater relief to the industry. Additionally, she says, because plant closures are still occurring – Olymel’s Red Deer plant being the latest – one helpful initiative would be to change the approach to vaccines slightly, upping the priority for people working in the meat processing sector. Spencer adds that this wouldn’t necessarily require extra capital expenditures. “If all of those workers are going to receive vaccinations anyway in the next six to eight months, it could ultimately reduce the costs [to governments] in other ways. It increases stability in the supply chain.”
She says that in general, the Canadian beef industry is always under some pressure due to narrow margins. “In Canada, the beef industry exports over 40 percent of its production, so it’s a low-margin industry dealing with global market prices,” she explains. “For us to have a successful part of the economy in this sector, it’s a fine balance with all the different parts of the supply chain. So if there’s a temporary bottleneck, like we saw in some plants, it might be temporary… but in the end, we have so little control of the price that the margins disappear.”