Shoppers should brace for higher food prices, driven by beef and pork

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Meat lovers who head to the butcher before the first barbecue of the season could be in for a shock: prices for steaks and pork chops are up double digits this spring.

The price of a sirloin steak has risen 12 per cent and pork chops are up by more than 15 per cent from a year ago, according to Statistics Canada's report on consumer prices released Friday.

Overall, Canada's annual inflation rate rose by just 1.2 per cent in March. But food prices climbed by 3.8 per cent, driven by big increases in beef, pork and bacon.

Kevin Grier, an independent food analyst in Guelph, Ont., said shoppers should brace for even higher prices this summer as the size of the North American cattle herd remains at multi-year lows, and consumer demand outpaces supplies.

"You can expect more of the same, only worse," Mr. Grier said by phone.

Over the past 10 years, North American ranchers have culled their herds as the price of feed soared amid new demand for grains from ethanol makers, and a U.S. drought that reduced the size of the harvest for corn and other crops.

High prices are keeping the slaughter small, as ranchers hold back heifers to breed in a bid to boost herd size and take advantage of a strong market. But increasing a herd size does not happen overnight: a cow does not breed until age two and calves are not ready for market until they are one year old.

The weekly number of cattle going to slaughter in North America has plunged to 540,000 from a 10-year average of about 700,000. "Instead of sending cows to slaughter, they're keeping them, so that makes things even tighter," Mr. Grier said.

Pork prices have risen in the past couple years as a piglet-killing virus has swept through North American barns. In response to the reduced slaughter, bacon and wiener prices have each risen by 21 per cent in the past year.

Mr. Grier said hog producers are managing the spread of the disease, known as porcine epidemic diarrhea, and the number of pigs going to market is on the rise. While this should mean shoppers see some relief on their grocery bills, he said retailers are slow to cut prices because they are enjoying the better margins, especially when the substitute, beef, is no bargain.

He noted prices for packaged food have risen slightly, a sign retailers are ending the cutthroat price wars waged during Target Corp.'s brief but failed foray into Canada.

Statistics Canada painted a varied picture for a basket of other foods on Friday. Prices for apples and oranges fell by 6 per cent and 5 per cent, respectively, while carrots and celery rose by about 7 per cent each from a year ago.

The weak Canadian dollar is playing a role in driving up prices for imported food at the grocery checkout. Canada imports some $40-million worth of food in a year, a total that has risen as the loonie has weakened and food plants have closed.

Linda Delli Santi, executive director of the B.C. Greenhouse Growers Association, said Canadian shoppers and growers are not seeing much price impact from a drought that has gripped California, one source of the fresh produce Canadians buy. But she said prices could rise if the dry spell persists for a few more years. "What's starting to happen is the low-value crops are starting to go out of production and the fields that don't produce as well are going out of production, but the greenhouse crops are still humming along nicely," Ms. Delli Santi said.