Readers Question

Any idea as to why the beef prices have gone up so high? Feed problems? Mad cow? What is going on with the price of food?!!

“When you to go the meat counter and say, ‘Wow, that steak’s only $3.99.’ But it’s not a pound. It’s eight ounces,” says John Kleist, lead agricultural hedge strategist,, a brokerage and research firm.

The reason steak dinners aren’t getting any cheaper: livestock markets, including cattle and hogs, have seen significant increases in prices, and consumers are feeling the pinch.

There are, to put it simply, fewer animals to eat. During 2014 herd sizes for cattle and hogs were down versus the previous year, and chicken flocks were also lower. It’s an unusual occurrence for all three to have smaller numbers, said analysts at Urner Barry, a firm that closely follows protein prices.

That led to record-high futures prices for cattle and hogs, which translated to high prices at the supermarket meat counter

The origins of the record-high cattle prices lie in ethanol and the 2013 Midwestern drought. Cattlemen compete with ethanol producers for corn. A shriveled US corn crop in 2013 intensified that rivarly and sent grain prices to unprecedented levels. The drought also baked pastures, which is where cattle spend most of their lives.

Unable to profitably feed the animals, ranchers culled them, which caused the herd size to shrink to its smallest tally since 1951 in 2014

Hog production slid in 2013 and into the first quarter of 2014, caused by losses from the highly infectious porcine epidemic diarrhea virus known as PEDv. Infected older pigs at a minimum lose weight, and the disease is usually fatal to piglets. It doesn’t affect humans or meat quality.

But as producers started to better control PEDv, hog futures and wholesale pork prices fell. This year’s drop in corn prices because of a record harvest encouraged producers to, well, pig out

Side note pork prices are holding steady in Canada more so and in some cases went down because our government and the Russian government have been have tit for tat issues.

Canada announced new economic and travel sanctions against Russian banks and high-ranking officials Wednesday, just ahead of Russia issuing its own ban on Canadian agricultural products.

In retaliation against Western sanctions, Russian President Vladimir Putin on Wednesday signed a decree limiting the import of agricultural, raw and food products from countries that imposed sanctions against Russia. The decree lasts for one year, a spokeswoman for the Russian Embassy told CBC News.

Russia’s sanctions on Canadian agricultural products are expected to hit the pork industry, although a spokesman from the Canadian Pork Council said the industry has “not received any official notices that would indicate a disruption in trade at this point

In 2012, Canadian agricultural exports to Russia were worth $563 million, with pork and pork products making up most of the top five exported agricultural products from Canada to Russia. Numbers from 2011 indicate Russia was Canada’s 13th-largest agri-food export market that year, although the pork industry says Russia is Canada’s third-biggest market for its products.

In 2013, Agriculture Minister Gerry Ritz visited Russia to try to improve exports to the country and announced Canadian livestock companies had signed deals worth up to $11 million. The visit came a month after Russia imposed new restrictions on meat imports

Then come the next hit

California is the primary source of many of Canada’s imported fruits and vegetables, including:

  • 84 per cent of broccoli and cauliflower.
  • 76 per cent of fresh strawberries.
  • 68 per cent of lettuce.
  • 69 per cent of carrots, turnips and other root vegetables.
  • 89 per cent of almonds.

Prices of some of those products have increased in the past year, but it’s hard to draw a clear line between those increases and the drought, say Bishop and others.

Between February 2014 and February 2015 prices rose 3.5 per cent for fresh fruits and 8.4 per cent for fresh vegetables — compared with overall inflation of 2.1 per cent.

Lettuce prices have jumped about 40 per cent in that period. Part of that is likely due to the shift Californian farmers have made from so-called row crops, such as lettuce, carrots and tomatoes, to higher-value perennial crops like nuts and wine grapes. But it’s hard to separate the effects of the drought from other factors that affect retail prices, such as:

  • Fuel prices, which have been falling and made transport cheaper.
  • The low Canadian dollar, which has made U.S. produce more expensive.
  • Other weather events, such as frost.
  • Labour disruptions, such as the farm workers strike in Mexico, where some produce comes from in winter, and wage pressures.

“Periods of drought often get exaggerated in terms of their impacts on retail food prices,” said Richard Barichello, professor of food and resource economics at the University of British Columbia. “The larger likely effect is to shift land away from producing hay and livestock feed and more into valuable crops.”

No substitute for fruit and veg

The University of Guelph’s Food Institute estimates the price of fruits and nuts will go up between one and three per cent in 2015 while vegetable prices will increases by three to five per cent.

Sylvain Charlebois, lead author of the forecast, says if California produce gets too expensive, Canadian grocers will have to find a cheaper alternative because unlike meat, which can be substituted with other food that provides protein like eggs or fish, fruits and vegetables “have no substitutes.”

And although locally grown produce is finding a foothold in some grocery chains, it could never make up the volume of lost Californian imports

As you can imagine, I really disagree on the idea that we could not produce our own food here in Canada but sadly we hit a real problem..  lets look at bc fruit, they are contracted to sell their crops out of country, we grow it but we are getting eat only small or in some cases non of it..

  • B.C.’s two largest tree-fruit crops are apples and sweet cherries.
  • In 2013, B.C. growers produced more than 103,000 tonnes of tree fruits including apples, sweet cherries, peaches, pears, plums/prunes, nectarines and apricots, as well as other tree fruits. This is almost a quarter of the total Canadian production.
  • B.C. exported $41.7 million in cherries in 2013 with the top markets in Hong Kong, United States, Taiwan and China.
  • B.C. apple exports have increased almost 30% in the past two years. In 2013, B.C. exported $19.1 million in apples and top three markets were the United States, Mexico and Taiwan.
  • The B.C. tree fruit packing industry has just completed more than $5 million in upgrades to its fruit packing equipment and to help packinghouses modernize.

I really could go on, but its just more and more examples of the above, its all interwoven, bottom line..  in a rough quote, when hedge funds start buying farms because the money is made because everyone has to eat.. they want their profits

The prices will rise.. I see no end to it in truth.. grow your own if possible, and I think you will see a even bigger split between the have*s and have nots..

If you knew there was a very safe Canadian investment that skyrocketed by 20 per cent last year, you’d probably say that was a good thing.

But when the thing that’s going up in value is farmland, Christie Young says it’s a crisis in the making.

The latest survey by Farm Credit Canada shows the price of farmland in Quebec rose by a staggering 19.4 per cent last year. Nationally, Canadian farmland from coast to coast has risen by an average of 12 per cent a year since 2008. That’s more than five times the rate of inflation.

For people who already own farmland, soaring prices are a windfall.

But Young, executive director of FarmStart, a group trying to help young farmers get into the business of farming, says Canada is facing a sea change that bodes ill for agriculture.

“The average age of farmers is 60 years old across Canada,” says Young.

“According to StatsCan data, about 50 per cent of our land assets will be transferred in the next five years. And of the retiring farmers, 75 per cent of them don’t have successors. It’s a transition we’ve never seen before in agriculture. And it’s one we are wholly and completely unprepared for.”

FarmStart has two incubator farms in southern Ontario to bring new farmers into the business, but at current prices, Young says there is no way those starting out could earn enough from their farms to make a living and pay their mortgage.

Overpriced land

It is a problem that Rejean Girard, who farms southwest of Montreal, understands.

He bought his small plot of land near Saint-Cesaire 20 years ago. But Girard says the return he gets from the sheep he raises would never pay for that land today. By that measure, he says, the land is overpriced by about three-quarters.

The steadily rising price of land has caught the attention of savvy Canadian investors. Global investors have an interest, too, but in most provinces only Canadians are allowed to own farmland.

That has created an opportunity for Canadian farmland investment funds like Bonnefield, Agcapita and Assiniobia, which have been assembling blocks of farmland and selling shares to high net worth Canadians.

The president of Toronto-based Bonnefield, Tom Eisenhaur, says farmland has been one of the most lucrative and secure investments especially when markets are volatile, and “a better hedge against inflation than gold.”

Eisenhaur says he expects the price of land to continue to rise, if not at the same rate as over the past decade.

He quotes a United Nations survey that shows world food production will have to double over the next 20 years.

“While it’s trite to say, no matter how bad or how good things get in the markets, people still have to eat.”

Profits from rising prices

While Eisenhaur is profiting from rising prices, he scoffs at the idea that funds like his are responsible for the land boom.

He says that while farmers buy and sell some $15 billion worth of land each year in Canada, third-party investors like his company trade a mere $100 million worth.

So it seems clear that farmers’ pursuit of more acreage is helping to push up the price of the land.

That seems to be in direct conflict with what Girard, Young and many others say about the difficulty of paying for farmland with a farm income.

That is, until I speak with Gary Brien who farms near Chatham, Ont

“The way we’ve looked at it is more of a way of life. It just so happens the land has gone up as we accumulated it over our lifetime,” says Brien. “I really don’t think we own it. We’re just using it while we’re here. The value to us may not be in a dollar value.”

Brien says that the last few years, bumper crops have pushed up farm incomes to record levels, so farmers have had cash to spare. And when farmers have money on hand, their non-monetary way of thinking of land, combined with the tax rules, encourages them to put that spare cash into farmland, whatever the price.

“Farmers don’t like paying income tax,” says Brien. “And if they get a bunch of money and have a choice to pay income tax, or buy more land, they buy more land.”

Bigger and bigger

That tends to mean existing farms are getting bigger and bigger, able to take advantage of the efficiencies of expensive modern farm machinery and make the money to buy more land.

But that doesn’t help the farmers who are just starting out small, without inherited family land and little prospect of paying off a mortgage, even if they could get one.

“We have farmers in rural areas paying far over the productive value of the land that they are buying because they have the income or there are such scarce land resources that they’ll pay anything,” says Young.

“For a new entrant looking at that landscape, it is almost impossible to conceive of buying a farm.”

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2 Responses to Readers Question

  1. Marie-Hélène says:

    Oh dear. We’re in trouble. 😦

  2. Deb Weyrich-Cody says:

    Good Lord!! Okay, just so you know, I only read about 25% of this post before heading for the Comments…
    I am totally FED UP – pun intended – with people fiddling with food prices (like futures and commodity markets): sickened with food being produced only to be burnt as fuel (as the original intent of bio-fuel was to make use agricultural waste like straw, and spent fryer oil, etc. – things which would have otherwise gone into landfill.
    With all of the nonsense going on these days, I can not wait for everyone to WAKE UP to the effect our actions – yes, every one of us – are having on this planet which we all call home; to consider and DO what is right, not simply what’s most expedient, or makes profit for shareholders.
    Farming is a Vocation which takes drive, passion, skill and uses knowledge passed down through the generations… AgriBusiness is NOT farming and has no place on the Land.
    And now, I need to go back and finish reading the rest of the bad news contained herein…

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