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Livestock, meat markets in turmoil during W16/2020 due to COVID-19 among workforce

21 April 2020

US - Livestock and meat markets were in turmoil last week as major cattle and hog processing plants were either idled or reduced shifts due to cases of COVID-19 in their workforce, according to Steiner Consulting Group, DLR Division, Inc.

There are media reports of other major hog, cattle and poultry processing plants dealing with positive cases of COVID-19 among their workforce. Whether they can continue to stay open, albeit with reduced capacity, will depend on the scale of the outbreak, local government responses and the ability to implement a comprehensive testing regime. Any way you look at this it appears the issue will continue to impact livestock markets this week.

There are also reports of manufacturing plants closed for two weeks. While key livestock and poultry plants are seen as key bottlenecks given the sheer number of animals they process a day, it is important to remember that the disease is impacting the entire supply chain. Often the animals that are processed will then go to further processing plants where they are either converted into case ready products or prepared for sale at grocery stores at foodservice operators.

As such plants work at reduced capacity or are closed altogether, this could result in less product available at the grocery store. Further compounding the issue is that the supply chains to service retailers and foodservice operators are not always interchangeable. That 20 pound bag of beef that the distributor normally would send to the local restaurant cannot simply be put in the retail meat case.

Faced with labor constraints, we think packers will be forced to adjust how they process livestock, limiting the number of cuts they harvest. Labor intensive cuts may be reduced and more beef will probably go into ground beef packages. Over time this will tend to reduce the overall value of the carcass although, in the near term, strong retail demand continues to underpin the beef cutout.

It was positive that at the end of last week USDA announced a $19 billion Coronavirus Food Assistance Program. According to the press release from Senator Hoeven (ND), producers will get $16 billion in direct payments, with cattle producers getting $5.1 billion, dairy producers $2.9 billion and hog producers $1.6 billion. We plan to discuss this more at length this week as more details become available.

The table at the bottom of this page recaps some of the key production and price data from the previous week. Total cattle slaughter was estimated at 502k head, down 21.8 percent from the same week a year ago. In the last two weeks cattle slaughter is down 19 percent or 241k head from the same period a year ago.

Fed cattle slaughter has been impacted more than non-fed slaughter, in part because of the closure of the JBS Greeley plant and the Cargill plant in Fort Morgan going to one shift. We think fed cattle slaughter last week was 378k head, 26 percent lower than a year ago. Please keep in mind that these are estimates at this point.

Actual slaughter data for last week will be released on Thursday, 30 April. That update will better capture the effect of reduced shift capacity that some plants are reportedly struggling with. Hog slaughter last week was estimated at 2.236 million head, 148k head or 6.2 percent lower than a year ago. The decline reflects the loss of processing capacity at Smithfield Sioux Falls and Tyson Columbus Junction.

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