Mike von Massow
Revisiting Canadian Beef Processing: Is Everything Back to Normal?
Nicholas Bannon, Alfons Weersink, and Michael von Massow
At the beginning of June, a Food Focus blog post spoke about the significant disruptions felt throughout the Canadian beef sector stemming from the COVID-19 pandemic. The culprit was a widespread outbreak at Cargill’s High River, Alberta, facility which happens to be the largest beef processing plant in Canada. This outbreak saw a two-week period in April and May where the weekly number of cattle processed in Canadian facilities was reduced by a staggering amount of over 60 percent compared to one year prior (Figure 1).
Figure 1: Weekly Cattle Processed in Canada, 2019, 2020
Source: Beef Farmers of Ontario
With 2020 coming to a close, the industry has had plenty of time to adjust to the new realities caused by the COVID-19 pandemic. Processing plants and farms have implemented new health and safety measures, and consumer behaviour is more predictable compared to the early stages of the pandemic which saw empty grocery store shelves. With these changes in place, it is worthwhile to explore where the Canadian beef sector is currently at and the long-term implications that the pandemic will on the sector into 2021 and beyond.
As of the beginning of December, it appears that the sector is in an encouraging position. Total cattle processed in Canadian facilities in 2020 is only 3 percent lower than levels in 2019 and weekly production is near or even above 2019 levels, despite the increased health and safety measures. The rebound of cattle processing has resulted in retail prices for beef to begin to return to prices observed before the pandemic.
Consumers most likely noticed the impact of the pandemic on the beef sector during May and June, when prices for more expensive cuts of beef jumped by more than 15% compared to prices in the previous month (Figure 2). In some cases, there was even localized supply shortages in grocery stores. However, it should be remembered is that while the supply of beef products may have been scarce in grocery stores at the height of the pandemic, it wasn’t because of a shortage of cattle, but rather labour shortages resulting from processing plant closures. As long as major plant-wide outbreaks can be avoided in the future there should be minimal disruption in the processing of beef into 2021.
Figure 2. Monthly retail prices for beef products in Canada
Source: Statistics Canada
In addition to the price implications plant closures had on beef in retail stores, the closures greatly affected the price farmers received for their cattle. The closure of the Cargill High River plant meant that many farmers had cattle ready to be slaughtered but had nowhere for it to go. This put downward pressure on prices for fed cattle and in late April cattle prices were more than 30% lower compared to the 5-year historical average (Figure 3). Farmers had to navigate these lower prices for their cattle while also facing higher input costs due to keeping their cattle for longer and increases in feed prices. These price challenges have since dissipated as processing plants re-opened and demand for cattle increased giving farmers a place for their cattle to be slaughtered.
Figure 3. Weekly fed steer price in Canada, 2019, 2020 and 5-year average
Source: Sources: Canfax (2020) Personal Communication
So, following several major processing plant closures, is Canada’s beef sector back to normal? The answer is not as simple as a yes or a no. COVID-19 has caused a general uncertainty across all sectors and the beef sector is no exemption. While weekly cattle processed in Canadian facilities has returned to pre-COVID levels, the effects these closures had on prices, particularly at the retail level, lingered into the summer. The sector was quick to implement measures to help mitigate the impacts of COVID-19, however, whether large price swings occur in 2021 at the farm or retail level will largely depend on if future plant-wide outbreaks can be avoided. There are some plants experiencing issues right now, notably the Cargill plant in Guelph, but the risk of substantial closures is reduced by mitigation measures put in during the first wave. While the high numbers in the second wave are a reason for concern, it is unlikely that significant disruptions happen again. Additionally, COVID-19 has exposed other concerns relating to Canada’s beef sector, such as worker wellbeing and the tight concentration of the industry. It can be expected that calls for increased worker protections and more regionally dispersed smaller processing plants will continue well after the pandemic is over.
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Recommended citation format: Bannon, Nicholas, Alfons Weersink, Michael von Massow. "Revisiting Canadian Beef Processing: Is Everything Back to Normal?". Food Focus Guelph (107), Department of Food, Agricultural and Resource Economics, University of Guelph, December 17, 2020.