Poultry Price Inflation: Sticker shock

To hear Canadian food distribution expert Sylvain Charlebois tell it, higher chicken prices are here to stay for the foreseeable future.

But he says the sticker shock that millions of Canadians got in January, when a picture of a package of chicken breasts selling for nearly $27/kg at a Loblaw store in Toronto circulated rapidly on the Internet, will soon fade.

“When things go viral, it distorts reality,” says Charlebois, a management and agriculture professor at Dalhousie University and a leading expert on Canadian food prices.  “The truth is that, like with any commodity, the price of chicken varies.”

He notes that the price of skinless, boneless chicken in the GTA fell 20 per cent a week after the viral video. But that drop, which went largely unreported, failed to stem the tide of national news stories and coffee-table conversations that continue to reverberate about the high price of meat and eggs in Canada.

What’s to blame?
Some blame Canada’s supply management system for the price hikes; others point fingers at food processors and big grocery chains, which in February reported double-digit increases in profits in their fourth-quarter results for 2022.

Also in February, Statistics Canada released its inflation numbers for January, showing chicken prices rose nine per cent compared with December, the highest monthly increase since 1986.

“Among other factors, chicken prices rose amid stronger seasonal demand as well as ongoing supply constraints, elevated input costs, and issues related to avian influenza,” reads the StatsCan report.

For Charlebois, the truth about the reasons for higher chicken and egg prices lies somewhere in the perfect storm of inflationary and supply and demand issues that are driving costs to produce, process and market chicken and eggs in Canada inexorably higher – and that show no signs of abating. 

“On the supply side, producers have to cope with higher prices for everything from feed to energy and transportation costs, and those prices won’t be coming down anytime soon,” Charlebois says.  

Meanwhile on the demand side, he says poultry, which is part of what he calls a “meat trifecta” with beef and pork, is having a tough time competing with the latter in recent times.

“Right now, pork has the upper hand as the go-to value meat protein for consumers,” Charlebois says. “But it’s not an issue of costs and margins. Positioning at meat counters also plays a big role.”

Supply management defended
A spokesperson for Chicken Farmers of Canada (CFC) was quick to defend both producers and Canada’s supply management system for either causing or contributing to the viral January spike in chicken prices.

“Canadian chicken farmers don’t set the prices consumers pay – those prices are set by retailers and restaurants, and can be based on a number of factors such as regional influences, store locations, loss leaders, competition, and more,” says Lauren Kennedy, CFC’s director of public affairs. 

According to Kennedy, Canadian chicken farmers receive only a small percentage of consumer food dollars. And those margins haven’t changed recently, even though feed prices – the single most important component of the chicken farmers’ negotiated farm-gate minimum live price, which is currently set at $2.122/kg in Ontario – have continued to rise.

She also notes that on a 12-month rolling average, chicken prices in Canada have gone up seven per cent, while beef and pork have respectively risen 11 per cent and five per cent. By comparison, she says chicken prices in the U.S. have gone up 14 per cent over the same period, while beef and pork prices have risen 11 per cent and 12 per cent.

“That indicates that supply management has no impact on inflation (and) continues to ensure a steady supply of high quality, safe chicken raised with care that Canadians trust,” Kennedy says.

A processor’s view
For his part, Yannick Gervais, president and chief executive officer of Olymel, Canada’s biggest pork and poultry processor, tells Canadian Poultry magazine that Canada’s supply management system enables poultry producers to increase their prices annually, forcing companies downstream to do likewise or see margins their shrink.

“Chicken producers have increased the prices for the live birds we slaughter for four consecutive years,” says Gervais, whose company accounts for roughly one million of the 12 million chickens that are slaughtered every week across Canada. “We use this as the base, and after that, if we have to we increase the price to make the margin. For us, as processors, if the live birds are pricier, and we have to do some movement on wages in salaries, and all the inflation on transportation costs, for us we just have to pass on the cost of those prices.”

Gervais also says he was surprised by the magnitude of the public reaction over the sudden spike of chicken prices in January, given all the news about the high rates of inflation over the past year.

“To be honest, I saw the story but I don’t see the issue,” Gervais says. “Year over year it’s about a 20 per cent increase in the retail price. But the big thing with inflation is that it affects everyone along the chain. We’re not making more money than ever, despite what some people might think.”

When asked when and if chicken prices will fall, Gervais gives a one-word answer: “Impossible,” he says. 

“Usually when there are increases, it’s pretty rare the price goes down. Maybe something we don’t see will bring the price back down.  

“But again, with the quota system, there’s a specific amount of birds and it’s tough to get meat from the U.S. Still, chicken remains an affordable protein, compared to beef.”

The true culprits?
For Bruce Muirhead, a history professor and foreign trade expert at the University of Waterloo who is Chair in Public Policy for Egg Farmers of Canada, the hue and cry over the recent spike in chicken and egg prices has failed to zero in on the true culprits: greedy food retailers and extreme market volatility in a neoliberal global food system that has run amok over Russia’s ongoing invasion of Ukraine and continued COVID-related supply chain issues.

Even worse, he says opponents of supply management have used the price-spike issue to attack a system that he believes provides big benefits for both Canadian consumers and chicken and egg producers.

“It is just insanity to say that supply management is a hindrance,” says Muirhead, whose research for EFC focuses on the workings of supply management and how our system – the only remaining one of its kind on Earth – functions and compares to comparable sectors in Australia, New Zealand and the U.S. =

“It is a data-less approach and an entirely ideological position to blame supply management for higher chicken and egg prices.”

In a recent op-ed article, Muirhead and fellow academic Jodey Nurse, a lecturer at McGill University’s Institute for the Study of Canada whose research focuses on agricultural marketing schemes, defended supply management as a model that allows local dairy, egg, and poultry producers to earn a decent living.

“Certainly supply-managed commodities have increased in price, and some have outpaced the average overall food price inflation,” they wrote. 

“But there are many non-supply managed commodities that saw even more significant increases.”

They also noted that dairy, poultry, and egg prices have increased even more – in addition to egg shortages and deteriorating farming conditions – in several G20 countries, including the U.K., U.S. and Australia.

They also credited the supply management system for helping Canada avoid a more severe fallout from the avian influenza virus. 

“As media critics well know, supply management is not a conspiracy to raise food prices but rather an effective system that has proven beneficial to both farmers and consumers for more than 50 years,” the op-ed reads. 

“Beyond providing a bedrock of stability in rural Canadian communities, the system has worked effectively to mediate power asymmetries in supply chains, enhance Canada’s food sovereignty and security, and ensure safe, stable, and healthy domestic foodstuffs at a very fair price.”