Domestic Beef Production:
Canadian domestic beef production is down by 1% compared to last year and 3% below the five-year average. Production levels have been maintained by younger cattle primarily used for high-demand cuts like steaks and roasts, but overall, there is still a significant shortfall. Production from mature cattle, mostly used for ground beef, has fallen sharply, down 11% from last year and 6% from the five-year average. This reduction affects the supply of economically priced beef products, pressuring both retailers and consumers to adjust.
Impact on Food Service Sector:
Rising beef prices and reduced domestic supply are influencing the food service industry, where sales increased by 4.6% in the first half of 2024. Full-service restaurants saw a 3% sales boost, while fast food and takeout rose by 6%. However, food service price inflation, averaging 3.8%, reflects the higher costs that restaurants are passing on to consumers. With retail beef prices at record highs, consumers may opt for more affordable proteins, influencing menu choices across the industry.
Increasing Beef Imports and Distribution Adjustments:
In response to declining domestic supply, Canada significantly ramped up beef imports, increasing volume by 15% and value by 24% from January to July 2024. Canada’s top beef suppliers include the U.S. (48.2% market share), Australia, New Zealand, Uruguay, and Mexico, which together make up 86% of imports. Notably, imports surged from the U.K. (+196%), New Zealand (+196%), and Australia (+150%), with a smaller but notable increase from Argentina. As Canada’s cattle cycle enters the consolidation phase, a continued reliance on imports is expected to meet consumer demand and prevent further upward pressure on beef prices.
Conclusion:
With the consolidation of the Canadian cattle herd, beef production levels are unlikely to recover in the short term, pushing demand towards imports to fill gaps. This trend will likely persist as restaurants and consumers face higher prices, and food service establishments may continue adjusting their offerings to balance consumer demand with rising protein costs.
