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Food prices not yet seen cutting beef demand

(Resource News International) — Rising prices in general for food in Canada’s grocery stores haven’t yet translated into reduced demand for beef products, according to an official with the Beef Information Centre (BIC).

“Is the Canadian beef sector immune from the rise in prices?
I would say not, but there does not appear to be any pull-back in
demand for these products yet,” said Ron Glaser, executive director for public affairs at BIC, the Canadian cattle industry’s beef market development wing.

Statistics Canada released figures in May that
showed beef disappearance, or the amount of beef that is moved
through the Canadian system through both imported and domestic
sources, on a per capita basis, was up 2.7 per cent in 2007 versus 2006, he said.

The average retail price, which is the average of seven
different cuts of beef, went from an $11.60 per kilo average to
an even $12 per kilo in 2007.

“There was a small increase in disappearance, but also
somewhat of an increase in price,” Glaser said.

Beef prices from 2005 to 2006, meanwhile, dropped by one cent per
kilo.

No statistics for 2008 were yet available, but Glaser, using
the consumer price index, said the average price for fresh and
frozen beef in Canada actually fell 0.6 per cent in April 2008 from the
level seen in April 2007.

“I don’t think you are seeing the price inflation with beef
that you are seeing with other types of food,” Glaser said. “I
think a lot of the food inflation that you are seeing is crop-related.”

Glaser said there are cyclical price increases in beef
products; for example, in the spring and summer there
is greater demand for beef products for the barbecue season in
Canada.

The increase in feed for live cattle producers in Canada has
also not necessarily translated into a significant change in the
retail price for beef, Glaser said. “The price of beef is
influenced by many other factors, and the price of the live
animal is just one of those.”

Glaser said that as a result, there has been nothing to
indicate that disappearance of beef productions during 2008 will
change much from the trend established in 2007.

Small increases expected

He also pointed out that consumers typically are used to
beef product prices inflating from year to year.

“Small price increases are expected by the consumers with
the actual hike in value dependent on the beef cut,” he said.
“Because there are so many beef cuts to choose from for the
consumer, there are varying price points.”

Glaser said it all comes down to the price budget of the

consumer.

The retail sector adapts as well, he said. “If they are
not moving prime rib steaks, for example, at some point values
will be lowered to make that product price acceptable.”

Prices for comparison meats also are a factor. Certainly
beef competes not only with types of other proteins such as pork
and poultry, but other imported beef, Glaser said.

The imports of beef products have grown on a year-over-year
basis, he said.

Canada’s share of the domestic beef market dropped to 80 per cent during 2007 compared with 85 per cent in 2006, Glaser said. A further
decline was anticipated during 2008.

“The decline in market share can be directly attributable to
a number of economic factors, and not necessarily consumer
preference,” Glaser said.

Strong loonie

He said the Canadian packer sector was struggling with the
high Canadian dollar.

“The strong Canadian dollar also impacts all types of
manufacturing including food processors,” he said, noting that
the firm dollar has also made Canada’s beef more expensive to
process and sell abroad. Labour rates are also higher in Canada,
as are taxes, he said.

The removal of specified risk materials (SRMs, the tissues in cattle known to harbour the misfolded protein that causes BSE) also adds costs for
the Canadian packer that U.S. packers do not currently have, he
said.

Those factors have resulted in higher levels of live cattle
from Canada being exported to the U.S. The cattle are then
processed in the U.S., with the beef then being sold into Canada as
imported U.S. beef, Glaser said.

The Canadian beef processing sector is looking for a way to
differentiate itself from competitors in an effort to improve
demand for Canadian beef, Glaser said.

Efforts were underway to streamline some of the
administrative costs the Canadian beef industry currently faces, he said.

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