That is the grim reality that is being keenly felt by many Canadian households
“Prices for cattle have been climbing now, probably for about 10 years,” he said.
But it’s also important to note that his operating costs compared to just five years ago are significantly higher when it comes to equipment, labour and feed.
“We’ve looked at the topline and said prices are going up, so why are prices going up?” Mike von Massow, a food economy professor at the University of Guelph, said. “The truth is, these are much more complicated issues, and they are really individual.”
Take beef. In the five-year period starting June 2019, beef prices rose more than the pace of overall food inflation. During that time, the price of beef top sirloin cuts jumped 48 per cent, beef rib cuts increased 37.1 per cent, beef striploin cuts rose almost 30 per cent and beef stewing cuts increased by 38.8 per cent.
Kevin Grier, a livestock and grocery market analyst, said these price increases are due to a perfect storm of factors, such as drought and the historic cycle of herd sizes.
“There is something called a cattle cycle; we’ve had a cattle cycle for 150 years,” he said. “The herd gets smaller and smaller because the returns to the farmer or the rancher are poor.”
Once supply falls too low, demand starts to drive prices up again and farmers start to expand their herds again. There are usually 10 to 15 years between the peak of the herd and the next peak of the herd, Grier said.
“The cow herd in North America is getting smaller and smaller, and that’s the primary reason why beef prices are higher,” he said. “It’s going to get worse because those ranchers are finally starting to make money because the herd has gotten so small and they’ve become more valuable.”
As for the weather, some regions of Canada and the United States have in recent years experienced droughts, which present a host of complications for ranchers, including the loss of good pastureland for their herds and an exponential rise in feed prices.
Fulton experienced a drought on his farm in 2021 and again in 2023. He said ranchers must make hard economic choices when this happens.
“Ranchers make a decision on whether or not they can rationalize paying the high prices of hay or sell some of those mother cows,” he said, “which would reduce the need for feed.”
Fulton said losing those mother cows essentially means a rancher will lose the economic driver of their herd since you have fewer breeders.
The total amount of calves and cattle slaughtered decreased by 4.6 per cent in the first six months of 2024 compared to last year. However, exports climbed by 15.5 per cent in the same period, supported by higher prices in the international market.
“Right now, we’re dealing with a unique situation where, coincidentally, the droughts and the demographics of the industry have driven the supply down so tight that it now has high prices,” Fulton said.
He said beef demand is very resilient and he hasn’t seen it fall off in recent years, which means the rising price of beef remains a supply story.
“If it wasn’t moving at these prices, it would be backing up, it would be going into storage,” Grier said. “The other part of the equation is that beef demand in Canada and particularly in the United States has been great. If we were not buying them, these prices would not be that high.”
More than beef
The price of beef isn’t the only one outpacing overall food inflation. For example, the average monthly price for one litre of olive oil rose to $17.14 from $8.24 between June 2019 and June 2024, according to Statistics Canada data.
But in the case of olive oil, the main factor at play, just like with beef, is multiple years of drought.
The biggest olive-oil-producing countries include Spain, Greece, Italy and Turkey. With unfavourable growing conditions there, olive oil producers are now producing much less product compared to a few years ago.
“Because we get many of our products from a relatively small area, we are susceptible to big changes in prices due to big changes in availability,” von Massow said. “When we look at what happens with olive oil, there are not that many places in the world that produce it, so when we do get a crop failure, it is much more isolated and has a much more significant impact on prices.”
One of the world’s largest olive oil producers in Spain is Deoleo SA, whose brands include Carbonell, Carapelli, Bertolli and Sasso.
During the annual stakeholder meeting this past summer, chief executive and chair Ignacio Silva highlighted the difficulties brought on by two consecutive bad harvest seasons, with the company having to drop its production numbers as a result.
“The strength of Deoleo’s key brands, efficiency in commercial management and cost control have been central to defending and maintaining our unit gross margin through 2023,” he said, according to a release.
Von Massow said any improvement in olive oil prices will depend on whether the biggest olive-growing countries get a good harvest year. But that likely won’t happen this year since Greece, Italy and Spain are currently experiencing the worst drought in decades.
Another example that made headlines during the inflation crisis was infant formula, whose monthly average price in June had jumped by 53.56 per compared to five years ago. The story of why infant formula prices are so high is also a complicated one.
In 2022, Abbott Laboratories, one of the primary manufacturers of baby formula, had its plant in Sturgis, Mich., shut down for months after the U.S. Food and Drug Administration detected Cronobacter sakazakii bacteria in the plant.
Elecare Similac and Alimentum Similac powdered infant formulas were recalled, causing a massive shortage in the U.S. and Canada that lasted from 2022 into 2023.
At the time, Canada relied on a very limited number of producers, primarily importing from the two biggest ones: Abbott Laboratories and Reckitt Benckiser Group PLC.
“When you only have two or three players, it becomes a supply and demand issue,” said Michael Graydon, chief executive at Food, Health and Consumer Products of Canada, a national association that represents members from the manufacturing side of the food industry.
Canada also has stringent regulatory requirements for baby formula. Graydon said these manufacturers must clean their plants before making products for Canadian consumers.
To help stop the shortage, Health Canada introduced an interim policy that allows the importation of other infant formulas on the market while their manufacturers wait for final approval from the agency. This policy has been extended until the end of 2025.
“Until recently, there was zero manufacturing of infant formula in Canada; it’s all imported from the United States,” Graydon said. “The regulatory environment that exists here in Canada kind of chased away the manufacturers.”
In March, the Canadian Food Inspection Agency approved infant formula manufacturer Canada Royal Milk ULC as a producer here. The manufacturer is a subsidiary of China-based company Feihe International Inc., which recently built a plant in Kingston, Ont.
The creation of one domestic manufacturer may not fix the supply issues, but it is an important first step for regulators.
Generally, however, most food prices are up compared to five years ago, though there are some exceptions. For example, the average price of strawberries was down by a bit more than 11 per cent in June and broccoli was down nearly three per cent.
“We’re coming into the Canadian season and so depending on the year you are comparing it to, you may have had a bad growing season in 2019 and a good growing season in 2024,” von Massow said. “It was a good year for strawberries this year, but a bad year for peaches, for example.”
Pressure grows
During their testimonies, the CEOs defended their companies against accusations of price gouging and pointed to increased costs in the supply chain as the main driver of retail price increases.
The five companies represent roughly 80 per cent of the market and there has been significant market consolidation since there were eight major grocery chains in 1986, according to a report by the Competition Bureau.
“I am one of those people who believes that the Canadian grocer market is a very competitive market,” Grier said. “I believe the reason we don’t have more foreign companies coming here is because they know it’s already a competitive market with not much low-hanging fruit.”
He points to the failure of Target Corp.’s expansion into Canada in 2015 as an example of how difficult it is for a foreign competitor trying to compete here.
Industry Minister François-Philippe Champagne has been courting foreign grocery chains from Europe and the U.S., but nothing has come from those efforts so far.
“Even the Competition Bureau’s report said they talked to a foreign grocer, and they said they looked at the Canadian market and they don’t know if they can compete,” von Massow said. “The problem is it’s not just building stores and building a bunch of stores on expensive real estate; it’s also building distribution infrastructure and building relationships with suppliers.”
“The grocery code of conduct is not a bad thing to do, but I think it has been arbitrarily and incorrectly held up as something that will reduce food prices,” von Massow said.
The code of conduct is expected to be launched in June 2025 and will be membership-based. It’s designed to help grocery retailers, manufacturers and producers settle negotiations more fairly and will hopefully give the nearly 10,000 independent grocers a more level playing field.
Graydon, chairman of the interim board for the code, said it’s designed to help reduce the compliance fees that manufacturers are hit with when their orders do not meet forecasts set by the retailer and the manufacturer. The code could also provide better negotiated outcomes on these matters.
“I think it will help stabilize pricing; it’s not going to have a deflationary impact overnight,” he said. “The compliance fines manufacturers pay are material; they’re in the billions of dollars.”
Graydon said reducing those fines could help manufacturers reinvest in their businesses and could help improve pricing by suppliers in the long term.
In the meantime, food insecurity has only grown. Food Banks Canada said there were nearly two million visits to food banks in 2023, a nearly 80 per cent increase from 2019.
A global problem
Food costs are becoming a political and economic issue elsewhere, too. In August, U.S. vice-president and presidential candidate Kamala Harris called for a new federal law to “ban price gouging on food” during a campaign speech in North Carolina.
In February, the Federal Trade Commission (FTC), the consumer protection agency in the U.S., filed a suit to block the merger between supermarket giants Kroger Co. and Albertsons Cos. Inc. The trial began in August, with the FTC arguing that the merger would create less competition in the grocery market.
In the United Kingdom, a survey by the Food Foundation said that 15 per cent of households experienced food insecurity in January. U.K. Prime Minister Keir Starmer has delayed post-Brexit border food checks on fruits and vegetables imported from the European Union, which is estimated to annually cost British consumers 200 million pounds.
And Australia has held countless inquiries into grocery prices and the grocery industry. Its federal government has decided to make participation in its existing grocery code of conduct mandatory.
As governments attempt to grapple with rising food prices, Fulton said he wants Canadian consumers to know that there is a disconnect between the cost you may see at the grocery store and what the farmer is receiving at the beginning of what is a complex value chain.
“A perfect case in point, I think, is the beef industry, where these inflationary factors have been developing for three to four years, and it’s really only now that I can say that it’s profitable to be a cattle rancher,” he said.