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All Things Considered: October 2011

No Sense to Price Differences

I want someone to explain retail pricing. I understand that there can be loss leaders to bring people into the store. I understand that supermarkets may use bread to bring people in so they can sell more deodorant and I get that there is competition even in a one-grocery-store town like the one I live near.

What I can’t understand is why there was a 100 per cent price difference in the price of bone-in, skinless chicken breasts between British Columbia and Toronto in late June. I also don’t understand how or why chicken bone-in breasts in Toronto were less per kilogram than fresh whole chicken.

Those are just a couple of examples drawn from Agriculture Canada’s regular survey of retail food prices for the end of June into early July.

But there is much more. For example, at that time, fresh whole chicken was selling for an average $4.87 per kilogram in the Maritimes while it was $7.02 in Quebec outside Montreal. In Montreal it was $6.12.

Meanwhile boneless chicken breasts were $10.81 in Montreal and $18.83 in the Maritimes.

Chicken leg quarters were $9.82 in Toronto while they averaged $3.58 in Canada as a whole. And chicken wings were expensive in B.C. and comparatively cheap in Toronto. The same holds for turkey breasts, which were 50 per cent more expensive in B.C. than in Toronto, which had the lowest prices in the country.

All of this makes a bit of a mockery of using so-called average prices to justify any argument. Most often and most loudly heard is the argument that Canadians are paying two or three times more for chicken than they should. That certainly wasn’t true for fresh whole chicken in retail outlets in the Maritimes at the end of June, but it may have been true for boneless chicken breasts.

I suspect that Maritime consumers were sharp enough to look at the price of chicken breast and move on down the meat counter. Maybe they decided on a whole chicken (which was much less costly) or maybe they settled on a ham, some beef or fish. Which brings me to the point of this ramble: Pundits and think-tanks can rail against supply management and politicians can preach their support as loudly and as long as they want, but the future of supply management is in the hands of consumers.

If they decide chicken or turkey or eggs are too expensive, they’ll stop buying. They’ll buy other foods. And they don’t need anyone to tell them something is too expensive, the prices are in front of them every time they go to the grocery store.

In some respects the debate over supply management is reminiscent of the fight over Canada’s long-gone two-price wheat system.

You may not recall but Canada once had a two-price system for domestically consumed wheat. It set minimum and maximum prices that millers would pay. As one might expect, when the minimum they paid was more than the international price millers complained. When the maximum was less than the international price farmers complained. As I recall, when the system was dropped millers were paying more than the international price and had been for a while. They argued, and I guess the politicians believed them, that bread prices would fall after the system was eliminated. I don’t recall bread prices falling.

Similarly, I wouldn’t expect retail prices for chicken or turkey to suddenly plummet if supply management came to
an end.

Retail prices rise and fall mysteriously. It’s almost as if someone or some computer in a back room awakens and decides that on Tuesday chicken breasts will be twice as expensive in Halifax as in Toronto. Or that Niagara Falls is in deep need of discounted chicken wings while Swift Current should see deep price cuts on whole chickens.

None of it makes much sense. What would make sense would be to add up their costs, tack on a profit margin and set a price. But that would be far, far too simple and probably in violation of some rule taught in business school or grocery college. An alternative would be to operate like an old-time bazaar where the merchant lists a price that he knows no customer will pay and then prepares to haggle. Bargaining customer by customer is inefficient, but it is entertaining and everyone knows the rules. North American retail stores aren’t entertaining and few know or understand the rules.