The next few weeks could bring an unparalleled challenge for livestock producers, processors and consumers, said Oklahoma State University Agricultural Economist Derrell Peel in a letter to Extension agents called Cow/Calf Corner.
The Covid-19 virus has packer after packer announcing plant closures, slowdowns or chicken depopulation efforts. Production of beef, pork and poultry are threatened as infections affect labor availability and processing capacity.
POSSIBILITIES GRIM
The severity of the processing effects will depend on specific situations and locations but could include costly delays in holding animals until slaughter, backlogs in production facilities or even disposal of animals, Peel said.
Such disruptions could result in reduced flows of fresh meat to consumers, compounded by bottlenecks from the reduction in the food service sector of roughly half, he said. Since early March, these bottlenecks resulted in limited meat availability in retail grocery despite an ample supply of meat production.
The next few weeks could result in continuing shortages of meat at retail grocery due to a reduction in processing capacity and reduced supplies of all meats, Peel said. Wholesale and retail meat prices may move higher as a result of limited supply.
At the same time, limited processing capacity may limit demand for slaughter animals and push farm-level prices lower, he said.
EFFECTS EVIDENT IN BEEF INDUSTRY
The effects may already be showing up in the beef industry, Peel said. Estimated cattle slaughter for the week ended April 11 was 536,000 head, down more than 14% from the previous week and nearly 16% lower than the same week last year.
Those reductions included steer and heifer slaughter as well as cow and bull slaughter with both categories down double digits year over year, he said.
This predicament could result in a situation not previously seen in the beef industry, Peel said, as it may not be possible to slaughter animals in a timely manner.
Last summer, the loss of a single packing plant in Kansas resulted in relatively little decrease in overall cattle slaughter as production was shifted to other plants and increased Saturday slaughter largely offset the loss of the fire-damaged plant. But in the current situation, closure or reduced chain speeds across multiple plants may make it impossible to keep up with slaughter needs.
Feedlots could be faced with slowing fed cattle finishing or holding animals on maintenance rations until slaughter can be scheduled, he said. Cull cows and bulls may have to be held in drylots or pastures until slaughter capacity becomes available.
A slowdown in feedlot marketings could result in slower feedlot placements and more feeder cattle staying on pasture, Peel said.
The beef industry ultimately has considerable flexibility to adjust cattle flows and timing, but these responses would increase production costs at all levels but probably would not be as severe as might result from similar disruption in pork and poultry industries where bottlenecks and backlogs are much more acute.
CATTLE, BEEF RECAP
Cash cattle traded in the Plains last week at $105 per cwt on a live basis, down $7 to $8 from the previous week. Dressed-basis trade was at $168, down $10 to $12.
The USDA choice cutout Monday was up $1.93 per cwt at $225.86, while select was up $3.07 at $211.40. The choice/select spread narrowed to $14.46 from $15.60 with 98 loads of fabricated product sold into the spot market.
There were no deliveries against the Apr futures contract tendered on Monday.
The CME Feeder Cattle index for the seven days ended Thursday was $116.22 per cwt, up $1.25. This compares with Friday’s Apr contract settlement of $115.02, down $4.50.