Ask John Wildenborg if he thinks Canadians will be paying more for steak during future barbecue seasons, and the owner of Calgary specialty butcher shop Master Meats doesn’t hesitate.
“Prices are definitely going to go higher, no ifs, ands or buts about it,” he said.
“It keeps me up at night, actually, thinking about coming into the summer and where prices are going to be. It’s not a good situation.”
Beef — whether in the form of a juicy burger or a classic tenderloin steak — is a mainstay of many Canadians’ diets. Its popularity is the reason why consumer demand for beef has historically remained strong, even through periods of economic downturn when Canadians have less money in their wallets.
But the business of beef is changing, in large part due to consecutive years of severe drought across North America’s main cattle-producing regions. From parched southern Alberta to water-scarce east Texas, ranchers have been downsizing their herds due to a lack of grass for grazing. The resulting shortfall in cattle supply is reducing overall beef production and helping to push retail beef prices higher.
“A 10-ounce New Yorker right now … would cost around $20. Three years ago that was maybe a $15 steak,” Wildenborg said.
“And this is usually the slow time of year for beef, but wholesale prices haven’t dropped off at all since Christmas. I’m paying 40 per cent higher than I was last year at this time.”
Food in general, as consumers know, has increased in price over the last three years due to the COVID-19 pandemic and an overall rising cost of living. But while inflation is starting to moderate in a number of food categories, the drought factor means beef prices are not.
“When you talk to producers, whether it’s in the Canadian provinces or key cattle-producing regions of the United States, many producers will tell you they’ve had to experience two ‘hundred-year droughts’ back-to-back over the course of 10 years,” said Lance Zimmerman, a Kansas-based senior beef analyst with Rabobank.
“Add to that a global pandemic and all the challenges that go along with that, and we’ve had a 10- to 15-year period that’s been particularly challenging for a lot of cattle producers. It has led to a lot of liquidation.”
Liquidation is when a rancher makes the decision to sell off a greater proportion of heifers and cows for slaughter rather than retaining them to grow his or her herd. Ranchers may decide to do this because of a variety of factors, including high input costs, limited labour availability and high interest rates, as well as the challenges associated with long-term drought.
In Canada, the size of the national cattle herd has been declining for years, a trend that continued last year amid a punishing drought in Western Canada. This country’s beef cow inventory fell in 2023 by 1.5 per cent to 3.66 million animals — the lowest level since 1989.
South of the border, U.S. Department of Agriculture figures show an even more dramatic story. There, the national cattle herd has been contracting for five years, reaching 28.2 million animals in 2023. That’s the smallest number of cattle the U.S. has seen since 1961.
Fewer cattle means less beef production, which translates to fewer exports as well as higher prices at the retail counter.
“Unfortunately for the consumer, those prices are going to ratchet higher,” said Zimmerman.
“On a U.S. basis, retail beef prices are currently about US$8 a pound, and by our estimation, over the next several years we can expect another dollar-and-a-half increase, quite easily.”
In southeast Alberta, near the tiny community of Jenner, rancher Brad Osadczuk shipped some of his cattle east to Saskatchewan last summer to graze on rented pastureland. It was the only way he could feed them because his own grassland was entirely depleted by drought.
“This past year was the worst year for drought in adult life and I was born in 1971,” Osadczuk said. “Our native prairie just never turned green.”
While Osadczuk was able to avoid reducing his herd size, he said many ranchers in his area have been choosing not to replace cows after they sell them for at least the past five years.
“We’ve been mitigating drought for a long time,” he said.
“So we’re kind of at a point in this part of Alberta where our herds are pretty small already.”
Even if the current drought cycle were to end this year, cattle numbers can’t rebound overnight. That’s why experts say the new era of higher beef prices is here to stay, at least for a while.
“This isn’t a short-term thing,” Osadczuk said.
“For a female calf that is born today, it’s four years before that female can have its own calf that can end up in the food chain.”
Anne Wasko, a Saskatchewan-based market analyst with Gateway Livestock, said North American cattle and beef supplies will remain tight for several years, and much is riding on Mother Nature.
“We’re going to be looking at smaller supplies in ’24, ’25 and possibly out as far as ’26,” she said.
“We truly need moisture, first and foremost, to turn this boat around.”
This report by The Canadian Press was first published Feb. 25, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
