Beef producers get a raw deal

Prime Cuts with Steve Kay

North America’s cattle producers were the first in the beef chain to be impacted by the spread of the COVID-19 virus from epidemic to pandemic. Yet they are getting a raw deal from their national governments in terms of financial or other aid. The Canadian and U.S. governments were quick to declare that meatpacking was an essential service. But they ignored the fact that beef plants cannot operate efficiently without a steady supply of cattle from ranch to feedlot to plants.

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The big lesson from the COVID-19 crisis so far is that the beef chain’s most vulnerable link is packing plants. This showed up in the U.S. last August when a fire put Tyson Foods’ Holcomb, Kansas, beef plant out of commission for the rest of the year and badly hurt the live cattle futures and cash markets.

Plants were always likely to be virus hotspots because of the large number of people who work in close proximity. So it proved to be in April and May. Numerous large U.S. beef and pork plants were forced to close temporarily after workers tested positive for the virus. Plants introduced a multitude of measures to protect workers. But this meant chain speeds slowed, especially as absenteeism increased.

The result was that the first week of May saw pork and beef production fall 35 per cent from a year earlier. Pork plants operated at 55 per cent of capacity and beef plants at 58.5 per cent. The next week’s beef production levels showed a modest increase to 452,000 head. But at the time of writing in early May, it is hard to imagine that U.S. cattle slaughter will reach 500,000 head per week in May. The industry last May processed just over 661,000 head per week leading up to the Memorial Day holiday week.

Beef plant vulnerability was even more evident in Canada where two Alberta plants represent 70 per cent of Canada’s beef supply. So the two-week closure of Cargill’s High River plant and reduced production at JBS Canada’s Brooks plant not only put a huge dent in that supply, it severely disrupted the orderly marketing of fed cattle and caused many millions of dollars of losses to cattle feeders.

The reduction in processing capacity resulted in a backlog of 100,000 cattle that were ready for market with nowhere to be processed, noted the Canadian Cattlemen’s Association (CCA) in early May. An additional 6,000 to 9,000 cattle per day are being added to the current accumulation due to continued reductions. These 100,000 head of cattle alone cost C$400,000 a day to feed and care for and the value of a market-ready animal has dropped more than C$500 per head since the start of COVID-19. CCA estimates that left unaddressed, the Canadian beef industry will lose half a billion dollars by June on market-ready cattle alone.

No wonder then that CCA said it was deeply disappointed that the May 5 federal funding announcement fell well short of the comprehensive approach needed to help Canadian beef farm families manage through the COVID-19 crisis. The funding included C$50 million for a set-aside program for fed cattle, such as was used after Canada’s first BSE case.

Unless I missed it, there was nothing in the announcement about funding for cow-calf or other producers. Yet declining prices for calves and yearlings have also had a deep impact on producers. U.S. cattle producers have been promised US$5.1 billion, although this falls well short of the $13.6 billion of losses that an industry study estimated. It is difficult to comprehend why the Canadian government has not promised similar support to the vital nursery of its beef industry.

About the author

Contributor

A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

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