THE giant Costco warehouse supermarket chain says it plans to introduce Australian imported beef into its 88 Canadian outlets, as higher quality local Canadian beef becomes harder to procure.

Australian F1 Wagyu, mid-range marbling score

An item last week in Canada’s Western Producer newspaper says Costco plans to sell 45,000t of beef this year in its Canadian operations, but it has been forced to buy from Australia and the US to supply its needs, due to the shrinking of the Canadian cattle herd.

Costco Canada was the first company to exclusively sell AAA beef, Canada’s high quality domestic grade, approximately equivalent to USDA Choice. The high quality product proved popular, but fewer cattle and a shrinking domestic Canadian herd have made it increasingly difficult to source.

Consequently, products from the US and Australia are displacing domestically-produced beef in Costco’s Canadian stores. That development came as sobering news for stakeholders attending the annual Canada Beef Inc forum in Toronto last month.

Costco representatives said they had no choice but to substitute domestically-produced AAA Canadian beef with USDA Choice and Canada Prime (marbling score +3) using imported Australian F1 Wagyu product.

“We sell US Choice, but not by choice. Are you forcing us to switch our current program to USDA Choice?” Claude Gravel, Costco’s head of fresh food purchases, asked the producer forum.

Costco Canada started offering US tenderloins and striploins, rib steak and sirloin tip roasts in June. Rather than carrying the red maple leaf, the product carries a USDA sticker on the pre-pack in the chilled cabinet.

Fresh meat buyer Chris Tindall said there were not enough Canadian cattle and not enough qualifying to fill Costco’s AAA-grade requirement. He said 45 to 50 percent of Canadian cattle graded AAA, but Costco struggled to get enough supply when the percentage dropped to the lower end of the range.

“As well, more retailers will want to stock AAA beef as they understand its value, and there is increasing competition for the volume of meat that’s available,” he said.

The company launched a Canada Prime program at 11 stores in Canada in 2009. Only 1pc of domestic Canadian cattle grade Prime at any given time, so supply was extremely limited.

However, customers were willing to pay more for a high quality product, hence the introduction of Australian F1 Wagyu beef to fill the highly marbled segment.

Costco Canada said it planned to increase its beef turnover by 50pc within five years, adding further challenges to supply.

Mr Tindall told the Canada Beef Inc form that local producers needed to expand and develop the right kind of cattle and feed regimes to get them to the AAA level.

Saskatchewan beef producer Garret Hill told the gathering that economic pressures had forced many producers out of business and they were unlikely to return.

“I appreciate the fact that you want us to produce more beef, but the last ten years have been pure hell. We have lost a lot of people in this industry,” Mr Hill said.

“The message we heard is we have to produce it cheaper. That is why you don’t have anybody left producing.… If you are going to pay for it, fine. We have to get paid before you get any beef on the shelves.”

Costco officials said the entire Canadian beef industry needed to work together because everybody in the chain had to make money. However, one sector often profited at the expense of another over the years, and a new approach was needed to ensure the Canadian industry had a future.

“We don’t have any problem paying the market value for beef. What we choose to sell it for is our business,” Mr Tindall said. “We would love to get it back if it is available and the consumers will pay the premium.”

Costco met with the Canada Beef Inc board two years ago over concerns about the shortage of high grading cattle that would fit its AAA program.

“They really do not want to understand the production side,” said Chuck McLean, past chair of Canada Beef.

“Marbling levels can be affected by weather or feed changes. At other times cattle are sold to meet packer contracts for certain delivery dates, even though they need more time in the feedlot to add fat. If they were kept on feed longer, the grade would change.”

“We can get the specs but every once in a while you get a hiccup in the system,” Mr McLean said.

Canada hungry for Australian imported beef

Meanwhile, MLA reports that Australian beef imports into Canada continue to grow, with 24,918 tonnes received this year through to September 30, up 109pc on the same period last year.

Australia has an annual quota into Canada of 35,000t, but not constrained by quotas, the US is the only larger source of beef entering Canada.

The increase in Australian exports comes on the back of a 20-year low domestic Canadian cattle herd. As of July 1 this year, total Canadian cattle numbers were 13.33 million head, a size not seen since 1993.

Over the last ten years cattle slaughter has also declined, from 4.45 million head in 2004 to 3.04m in 2013 and a forecast 3.01m for 2014.

Over the same time frame, Canadian beef imports have increased 131pc to 173,767t in 2013.

With the US also experiencing low cattle inventories, Canadian beef imports, and imported beef prices, have continued to trend higher year-on-year each month, up until August.

For August, prices for imported 90CL were 6.69 CND/kg, up 51pc year-on-year, and 80CL averaged 5.79 CND/kg, up 47pc.

Domestic Canadian beef supply may continue to tighten, with low feed costs and good pasture conditions, producers are reportedly gaining confidence to hold on to cattle.

In Alberta and Saskatchewan, which account for 60pc of the beef herd, cattle placements on feed were lower year-on-year in July (-29pc) and August (-30pc). Most of the decline was made up by fewer heifers entering feedlots, as producers prepare to rebuild their beef cow herd.

Between June and August, feedlots in Alberta and Saskatchewan had 24,867 fewer heifers (-25pc year-on-year) placed on feed.

With the US limited by their own supply problems and Uruguay (the fourth largest exporter into Canada after New Zealand) already filling the majority of its export quota, Australia is currently well positioned to continue meeting Canadian demand.

• In a comment posted on Beef Central on Wednesday, regular Beef Central reader Richard Hughes, from Wentworth, near Clermont,  said “I am in Alberta Canada at the moment and sales last week saw 230kg weaners selling for $1700. A friend sold a deck of cull cows and bulls for $49,000, I hope we see this in Australia sometime soon.” Click here to view Richard’s, and other comments on the article, “Record grid price claim stands up to scrutiny – but how does it measure up in real terms?”