Rising cattle costs driving up beef prices, with relief still years away

Canadians are still feeling the high cost of beef, much of which can be traced back to the start of production, where cattle prices have surged.

The latest market data compiled by Trading Economics shows cattle prices are up nearly 20 per cent over the past year. Meanwhile, Statistics Canada reports beef prices have climbed almost 14 per cent compared to a year ago outpacing overall food inflation.

The increases are being felt across the system from ranchers, to feedlots, to consumers at the grocery store.

On Kolk Farms near Lethbridge in southern Alberta, where thousands of cattle are finished before heading to processing plants, CEO Leighton Kolk says the price of animals has climbed significantly since the pandemic.

“Five years ago, we could buy a young baby calf from our rancher for $500 or $600,” Kolk said.

“(Now) I’ve heard prices as high as $2,500 for a baby calf.”

That increase carries through the entire production cycle, which can take more than a year from calf to finished animal.

“One of the big things we need to really focus on is trying to purchase our animal and be able to project what we can sell it for a year from now,” Kolk said.

A combination of drought and rising input costs has made it more expensive to raise cattle.

Dry conditions across Western Canada and the U.S. Midwest have reduced available grass and driven up feed costs, forcing some producers to cut back.

Those pressures have contributed to a shrinking cattle supply.

“Cowherd numbers went down. Not enough calves were born,” Kolk said.

“And now we’re trying to get the ranchers to say, make more calves.”

Kolk says those rising costs eventually work their way down the chain.

“Cattle beef is considered a commodity business. It tends to go back to the cost of production,” he said.

“So if the cost of production is high, eventually the end product has to come up to pay for that cost of production.”

Analysts agree that tight supply is a key factor behind rising prices.

“We’re seeing historically low supplies of cattle in both Canada and the U.S., which fully supports where the live cattle futures are headed,” said Jamie Kerr, an analyst with CanFax.

Even with higher prices, demand for beef remains strong helping keep prices elevated.

“In spite of these high prices, we still see consumers wanting to purchase beef,” Kerr said.

“If consumers start to pull back, then it’s expected prices will start to come down.”

Producers say rebuilding the national herd will be key to easing price pressures, but that process takes time.

Even with some growth underway, Kolk says expansion is slow, in part because crops such as canola, wheat and corn are competing for the same land base needed for grazing and feed.

Industry experts say it could take one to two years before increased supply begins to translate into lower prices for consumers.