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Relax, meat won't be butchering your grocery bill forever

Soaring meat costs are supplying plenty of fodder for headline writers just as we cast off the last traces of a nasty winter and head straight into prime barbecue season.

What better time to raise prices? Mix pent-up consumer demand with well-publicized shortages of beef and pork, stir in legitimate worries about a piglet-ravaging virus, and you have the ideal recipe for a string of increases from farm gate to table.

Canadian food prices in general were up a modest 1.9 per cent in April from a year earlier, slightly below the inflation rate. But many beef and pork prices surged by double-digits, including a 16-per-cent jump in pork chops and a 12-per-cent advance for sirloin. Meat prices are expected to rise another 6 per cent or so this year.

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The hikes south of the border have been more dramatic. An 8.4-per-cent spike in meat prices to record levels was the main culprit in a 2.7-per-cent rise in U.S. consumer food costs in April, the biggest increase in more than three years.

The outlook for the next couple of years looks even bleaker. A severe multi-year drought across a large swath of cattle country has taken a heavy toll on U.S. herd sizes. And pork production is expected to plunge 7 per cent this year – the biggest drop in more than three decades – now that the pig virus has reached more than two dozen states.

Major supermarket chains in both countries have had to absorb part of the higher costs because of fierce competition and flat or declining volumes. The outlook, though, is for more sticker shock at the checkout counter. And as most shoppers can attest, once prices head upward, they typically stay at loftier levels long after the crisis has passed.

Before you rush out to load up on sausages, steaks or shares of Maple Leaf Foods Inc. (which has raised prices to protect margins), it's worth noting that we've seen this volatile picture before. Take this headline from The Globe's Report on Business: "Few Meat Bargains In Sight for Public, Packing Chief Says."

The worrisome story cites shortages of finished beef and pork. Hog production had stumbled into a cyclical downturn and beef was hit by high feed costs stemming from a drought in Western Canada. The article graced the front page of the first national edition of the ROB on Feb. 6, 1962.

The then general manager of J.M. Schneider Ltd. (today part of Maple Leaf Foods) intimated that while tight supplies could hit the consumer in the pocketbook for some time, prospects were excellent for beef producers. They could be expected to increase herds, stabilizing farm incomes in the West and exporting excess supplies to the U.S.

So switch your barbecuing to cheaper cuts, lower-cost meats like chicken, or other protein alternatives and grill more vegetables. Either that, or be prepared to fork out more cash for pricier steaks and bacon. But don't worry. Prices will come down again, as demand slows, feed costs fall and production rises. Then we can do this cyclical dance all over again.

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About the Author
Senior Economics Writer and Global Markets Columnist

Brian Milner is a senior economics writer and global markets columnist. In a long career at The Globe and Mail, he has covered diverse business beats, including international trade, the automotive industry, media, debt markets, banking and the business side of sports. More


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