Study: COVID-19 and the Beef Supply Chain: an Overview
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Released: 2020-11-17
The COVID-19 pandemic rattled the Canadian beef supply-chain this spring by forcing the shutdown of many slaughterhouses and meat processing plants, pushing consumers to panic-buy beef in fear of a shortage. Consumers saw atypical increases in the prices of beef, while ranchers received lower prices for cattle sold.
In 2019, beef was the type of red meat with the largest amount available for consumption per capita (18.2 kg/person). With news media reporting on potential food shortages and of a lockdown for an unknown timespan, some consumers prepared by stockpiling food in mid-March and fresh beef sales rose by over one-third (+36.0%) compared with their average 2019 monthly sales.
COVID-19 outbreaks at meatpacking plants affect the beef supply chain
The beef supply chain's strength was further tested when COVID-19 outbreaks shuttered two plants in Alberta, effectively halting just over two-thirds (70.0%) of Canadian beef processing and creating a backlog of livestock bound for slaughter. With nowhere to send their cattle, animals stayed on feedlots for longer than usual, corresponding to a month-over-month live cattle and calf price decrease of 6.0% in April.
The temporary shutdowns of meat processing plants in April coincided with slaughter rates dropping by over one-quarter (-27.5%) on a year-over-year basis. The average price of cattle and calves (-11.2%) also declined year over year—as the ranchers that were able to sell their animals sold at a loss. This avoided raising cattle past their prime, cut losses and prevented culling, as well as created space to raise new calves.
Slaughter rates were down sharply again in May (-31.1%) year over year, but bounced back in June (+92.8%) compared with a month earlier.
Tight supply leads to higher prices
The lower capacity in meat processing plants this spring meant that the supply of beef decreased. This decline could partially explain why wholesalers' purchase prices (+9.4% year over year) and consumer prices (+8.5% year over year) increased in April. Beef product prices were adjusted upwards with the declining stocks.
The drop in slaughterhouse output in April corresponded to higher purchase prices for wholesalers, who adjusted their selling prices to maintain margins. Year over year, margins more than doubled (+103.8%) to reach an average price of $1.30/kg in May. Margins grew because selling prices (+23.4% to $14.50/kg) rose at a faster pace than purchase prices (+18.5% to $13.20/kg). The ability to maintain and increase margins attests to the sustained demand from retailers and food service establishments.
Amid the supply shortage and sustained demand, prices for fresh and frozen beef products rose 13.7% in May, followed by the largest month-over-month price gain in five years in June (+21.6%)—likely reflecting that the pandemic was the main driver behind the higher beef prices.
Note to readers
Statistics Canada has released the interactive dashboard for wholesale and retail services price indexes. This web-based application give access to wholesale and retail margin data by category.
Statistics Canada has launched the Producer price indexes portal as a part of a suite of portals for prices and price indexes. This webpage provides Canadians with a single point of access to a wide variety of statistics and measures related to producer prices.
The video "Producer Price Indexes" is available on the Statistics Canada Training Institute webpage. It provides an introduction to Statistics Canada's producer price indexes—what they are, how they are produced, and what they are used for.
Products
The study "COVID-19 and the beef supply chain: An overview," released today as part of the series StatCan COVID-19: Data to Insights for a Better Canada (45280001), is now available.
Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).
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