Monday, July 28, 2014

Canadian Cheap Chicken

Sobey's and Olymel have teamed up to bring the people of Ontario inexpensive, Canadian chicken.  My heartfelt congratulations and thanks to everybody at Sobey's, Olymel, and elsewhere who made this possible.
Cheap Chicken for Ontario at $4.34/kg ($1.97/lb)
is about the same as the everyday US price

As I was cruising the Foodland grocery store looking for bargains, I happened to spot the sign "Whole Chickens $1.97/lb."  Wow! Now there is a bargain.

This is the second time in two months that Foodland has run a similar sale on chicken (see Blog posting Affordable Chicken for Canada Day)

This price is close to, or the same as the every-day price of whole chickens in the North East United States (eg. Michigan, Ohio, Illinois, etc.).

Cheap chicken, or inexpensive chicken?  In other words, is this junk chicken?  The label says "Canada Grade A", but is that good enough?

On some quick investigating, I learned that these chickens being sold are Flamingo Brand, produced by Olymel LP.  The box label has CFIA Establishment # 39G, which is Olymel's St-Damase, QC abattoir.

Just because they were processed in Canada doesn't mean these chickens were Canadian born and raised.  A "Canada Grade A" can be awarded to a chicken of any nationality.

Wholesale chicken label, fresh "Flamingo" branded
Canada Grade "A" chicken from Olymel
Ms Sarah Stover, Communications Manager for Sobeys Ontario (owners of Foodland) informed me that these chickens are not "spent chickens", and they are raised on a Canadian farm and processed in a Canadian abattoir.

I bought one of these chickens for a quality taste test.  In my opinion, this on-sale chicken is of equal quality to the regular commercial, mega farm chicken that is typically offered in the grocery stores.

OK, typical commercial quality chicken it is.  Let's dig a little deeper.

The eviscerated weight is 1.262 kg (2.78 lbs.).  The live to eviscerated weight ratio is usually 0.68628 so we estimate the live weight to be 1.839 kg.

According to CFO's Form 101, that is a Category 5 bird, which earned the farmer $1.622/kg live weight in Quota Period A-124 (May 17, 2014 until July 12, 2014), according to CFO's Live Price Bulletion 1626.

Converting back to evicerated weights, we get the farmer's gross income as $2.363/kg of eviscerated chicken.

We therefore conclude, that a Canadian #ChickenMafia overall system markup (from farm gate to grocery store shelf) of 183.66% is still occurring at this "cheap chicken price".

I previously posted that the US wholesale to retail chicken price markups were at a rock solid constant of about 40.2% (see previous Blog posting Chicken Price Parity: Will it Ever Come?).   If we assume that the same wholesale to retail markup in the US is good for Canada too, then the chicken processors are taking a 31% markup for their abattoir services.

It is rumored that at the price of $4.34/kg., Sobey's is selling at about $0.25/kg below their costs.  If true, that puts their wholesale purchase price at $4.59/kg.  We know the farmers received at least $2.363/kg., so that is a processor markup of 194% gained by Olymel in this case; one of the largest pork and chicken processors in Canada.

If US retailers sell chicken day in, day out at $1.99/lb ( $4.378/kg) and wholesale to retail price markup is 40.2%, that puts the wholesale price of US chicken at $2.79/kg.  If Ontario farmers are getting $2.363/kg, that leaves $0.427/kg (equivalent to $0.539 per bird) to send it through the abattoir.

There is little justifiable reasons for an abattoir to charge by the kg., as their costs don't really change with the weight of the bird.  The fair way to charge is $ per bird processed.  Greed however, justifies many things.

If Canadian abattoirs ran at a 40% markup like in the US, the Canadian wholesale price would be $3.308/kg.  If Sobey's was to gain $0.25/kg for their shipping, handling, and overheads, then the retail sale price would be $3.558/kg.  This is still considerably cheaper than the typical prices Ontario shoppers are forced to pay.

ISO Polar estimated that the freight rates for 53 foot refrigerated trucks are about 10 to 15 percent more than non-refrigerated equipment because the carriers have to factor in the additional fuel consumption. A refrigeration unit consumes approximately one gallon of diesel per hour. A typical freight charge is about $0.082/tonne-km.  Assuming 500 km of refrigerated shipment for the chicken, that adds $0.041/kg to the price of the chicken.

Some interesting math.  In the end, we conclude that Sobey's and Olymel are doing Ontario consumers a favor with chicken selling at a price similar to US chicken.  Hopefully everybody will realize that it is in their best interest to continue on this path, and that others in and near the #ChickenMafia come to join them.

One day soon, perhaps it won't be for just a 3 day sale once a month that we deserve affordable chicken.

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