Meat price inflation to slow as cattle, hog prices drop

The prices of live cattle and hogs have dropped sharply this fall from their peaks earlier in the year, meaning cheaper meat may be on its way to supermarkets next year.

After this summer's expensive barbecue season, cattle prices are under pressure because of a strong U.S. dollar and consumers who have changed their eating habits in both Canada and the U.S.

"Demand for beef has moved down in the U.S. because of very high retail prices," said Patricia Mohr, a commodities analyst at Scotiabank.

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She says consumers are choosing cheaperpoultry and pork products in response to the high price of beef.

In U.S. trading, feeder cattle are $165 US per hundredweight (100 pounds), down more than 24 per cent this year and well off a May peak of $214 US. Hogs are down 27 per cent on the year.

Canadian cattle prices also are off their spring highs of close to $199 Cdn per hundredweight and in October were trading in the $167 range.

"The price in Canada is influenced by the price in the U.S.," Mohr said.

The high prices in late 2014 and earlier this year were a result of tighter supply, she said.

But this fall, the U.S. has been exporting less beef because the strong dollar is making it too expensive for most of the world. That has increased the supply in the U.S. and brought down prices, shesaid.

Canadian meat prices 9.5% higher

The drop in the price of beef has been slow to reach the supermarket shelf, while pork and poultry prices are dropping in the U.S. because of increased supply. That is having an impact on consumer buying habits, Mohr said.

Statistics Canada figures for October of this year show the price of fresh and frozen meat, excluding poultry, in Canada had risen 9.5 per cent in the past year.

But whether your grocer will pass on the cheaper prices he or she pays for meat to the consumer is another question, according to food marketing expert Sylvain Charlebois of the University of Guelph.

"You might see some sales, but the supermarket chains are wary of getting caught in another price war," he said.

He believes meat price inflation will stall, but prices may not drop in real terms.

"Bringing prices down and moving them up again is much more difficult than keeping them at a certain level," Charlebois said.

Canadian producers have had a banner year because of high beef prices, but that may be coming to an end.

Country of origin labelling laws in the U.S. that demand meat-packers outline where cattle are born, raised and slaughtered have increased the cost of handling Canadian cattle in the U.S.

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Those laws have been overturned by the World Trade Organization, but the U.S. still maintains them.

Canadian producers primarily send live cattle into the U.S. markets to be fattened in feedlots.

Mohr said despite the labelling laws, exports of Canadian cattle to the U.S. remain strong.

Producers this year are benefiting from a low Canadian dollar andfeed and energy prices that have dropped substantially. Feed grains are often the highest cost to cattle producers.