Cattle set aside program gaining momentum
While a program that would pay feedlots to slow down cattle to relieve the processing bottleneck is gaining support in the cattle industry, not everybody thinks it's the right way to help struggling producers.
The COVID-19 pandemic caused unprecedented disruptions to the United States meat processing sector, which has seriously backed up the marketing of livestock. Market analysts estimate over 1 million head of cattle have been backed up and are gaining extra weight in feedlots with packing plants across the country partially or completely down due to COVID-19 related illness among workers.
In response to this unusual circumstance, some industry leaders have been working on a cattle set aside program which in recent weeks has been gaining momentum. The program suggested would pay the owners of feeder cattle to keep them on a maintenance diet for 75 days. The thought behind the program is that it would compensate feedlots for their extra expenses in keeping cattle longer in order to allow the bottleneck at processing plants to gradually ease.
Past Nebraska Cattlemen Association President Troy Stowater says a group called the Beef Alliance championed the concept and has done much of the legwork. He is also a member of the National Cattlemen’s Beef Association working group which has also been looking at the mechanics of the program, which would pay producers to put cattle on a maintenance ration for 75 days.
“The number that has been thrown out there is $2.90 per head per day, and those cattle would go on a maintenance diet so they aren’t gaining a lot of weight during that time period,” he says.
The hope is that will allow processors time to get chain speed back at capacity and catch up, thus gradually easing the backlog of cattle.
They think it will take until September to work through the animals that are backed up, even with weekly cattle slaughter near normal levels. Stowater says they are hoping to avoid a train wreck.
“We want to be able to manage if we’re behind on marketings, we want a tool other than euthanasia. We think its important for the optic that we’re here to feed the hungry. We know there are people that are hungry and so to destroy food is not something we would embrace at this point,” he says.
The set aside would be part of a second COVID-19 aid package, and cattle producers are currently lobbying Congress to have it included in the HEROES Act. So far, the cost has been estimated at around $300 million. Stowater says that is a small amount considering the amount of money that has already been paid out in the stimulus program.
“It’s not a real high dollar program," he says. "The challenge is, you know, I don’t have a lot of faith in USDA today to do anything in a timely manner.”
He says without timely marketing, the supply bottleneck will become worse.
Not all cattle producers agree with the approach. Past South Dakota Cattlemen’s Association President Todd Mortenson says while it will be painful, he thinks the industry needs to work through the supply hiccup. “
We know what we’ve got in front of us, we know that we’ve got to get through it. Let’s get through it. Let’s not artificially slow it down and drag it out, let’s just bite the bullet and get it over with,” he says.
He says while these cattle that weren't hedged are losing money, there are producers that have made some pretty good money from cattle that were hedged. Plus, he says the packing plants are back up to weekly slaughter capacity of 650,000-plus head a week and demand is picking up, which will help move the cattle through the supply chain.
Stowater says the set aside is attracting interest but admits they don’t have any lawmakers that have stepped forward to introduce the bill. Sen. Mike Rounds, R-S.D., says Congress has been more focused on COVID-19 response and getting meat products to consumers. He says lawmakers in cattle country understand the challenge producers are facing and the need to slow production with supply chains backed up. However, Rounds says when consumers are facing a shortage of product it is a fine line to walk.
“We’ve got to be careful how we work that through because we’ve got to be able to explain to folks that we’re not trying to slow down the production because we’ve got too much getting to them. Its that we have to be able to match the ability of our packers who have to be able to get their plants back up and operating when they have a shortage of workers due to the COVID-19 pandemic,” he says.
Rounds also thinks things that should be addressed by the U.S. Department of Agriculture through existing programs.