Coronavirus curbs returns to cattle producers

By John O’Connell

Intermountain Farm and Ranch

Idaho cattlemen face slumping prices and a supply glut, despite extremely strong retail sales and mounting concerns that a national meat shortage may be looming.

Food producers nationwide are reeling from lost sales to restaurants and food service providers forced to close or offer only delivery or carryout service amid the COVID-19 pandemic. Meanwhile, retailers are struggling to keep up with new business following a shift in demand in their favor.

With prices so soft, many cattlemen have held onto livestock they'd planned to sell.

Exacerbating the situation for national meat producers — especially those who raise poultry, pork and beef — some major packing plants have been forced to temporarily close due to large numbers of coronavirus cases among workers.

"On the poultry side we received word two days ago some chicken producers were taking entire houses of broiler chickens and gassing them because they had no place to take them," said Chris Young, executive director of the Pennsylvania-based American Association of Meat Processors.

On April 12, Smithfield Foods indefinitely closed its large packing plant in Sioux Falls, S.D., where about 5 percent of the U.S. pork supply is processed.

“The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply. It is impossible to keep our grocery stores stocked if our plants are not running," Smithfield President and CEO Kenneth M. Sullivan said in a press release. "These facility closures will also have severe, perhaps disastrous, repercussions for many in the supply chain, first and foremost our nation’s livestock farmers. These farmers have nowhere to send their animals."

The company emphasized that the U.S. Food and Drug Administration has found no evidence of food or food packaging being associated with COVID-19 transmission.

On April 13, JBS USA announced the temporary closure of its Greeley, Colo., meat packing plant after at least 43 employees tested positive for the virus, and two workers had died. The company hopes to reopen the plant on April 24.

"There’s no doubt there could be shortages with these big plants closing, but to me I don’t know how you predict that," said Young, whose organization represents small and mid-sized meat packers. "There is always a concern when plants that big shut down there certainly will be ripple effects. How the supply chain will feel that, I think we're in uncharted territory."

Young emphasized that the producers who aren't benefiting from the strong retail demand already make thin profit margins.

Cameron Mulrony, executive vice president of Idaho Cattle Association, said Idaho cattle are sent to facilities throughout the West for processing, including in Greeley. While pork and poultry producers can raise protein relatively quickly, Mulrony noted cattlemen are now marketing animals resulting from breeding decisions made more than two years ago.

"I think we're going to see a lot of cattle that can't get in on their kill date or their processing date, but I don't know how many that will be," Mulrony said.

Mulrony said his members are optimistic they'll emerge from the COVID-19 crisis stronger than before, but for now, many are "holding onto cattle that would normally have sold" because of soft prices. The futures price on feeder cattle was at $1.16 per pound on April 13, compared with nearly $1.50 in November and $1.30 on March 23.

"They can get a price; it’s just not where they feel they need be on their margins," Mulrony said.

Mulrony's organization has sent a letter to USDA inquiring about an apparent discrepancy between futures prices of beef and live animal sales. For example, at an April 10 auction in Caldwell, Mulrony said 550-pound steers were still selling at $1.50 per pound. His board has also questioned USDA about a discrepancy in prices charged at retail compared with returns to producers.

"People are definitely wondering what has led to this situation," Mulroney said. "We would like to see the guys on the cow-calf side ... be functional and profitable, as well."

At the request of industry interests including the National Cattleman's Beef Association, the Trump Administration has been investigating a steep jump in boxed beef prices and the simultaneous drop in prices paid to producers following an August 2019 fire at a large Kansas packing plant. Recently, NCBA also asked the administration to investigate the discrepancy between beef futures prices and the live cattle market amid the COVID-19 crisis.

"Now, six months into that investigation, we are asking for the current market volatility to be analyzed and incorporated into that ongoing investigation in the hope of identifying whether inappropriate influence occurred in the markets, and to provide our industry with recommendations on how we can update cattle markets to ensure they are equipped to function within today’s market realities," NCBA President Marty Smith, who is a Florida cattle producer, wrote in an April 8 letter to President Donald Trump. "We ask that USDA work closely with the Department of Justice throughout this process, conclude this investigation quickly and release the findings to the industry as soon as possible."

Smith predicted in the letter that market woes for producers will grow as more packing plants are slowed or shut down.

Nonetheless, Young said the price of hamburger at retail jumped about $1 per pound "overnight" because of the coronavirus crisis.