COVID-19 hits livestock industry hard
The coronavirus pandemic has shocked the nation and the markets and that has an impact in the country on the agricultural and food production industry.
The coronavirus pandemic has shocked the nation and the markets and that has an impact in the country on the agricultural and food production industry. Many of the agricultural futures prices have dropped like the stock market on fear of recession and slower near-term demand.
While social media posts depict empty grocery store shelves and meat cases, once that supply is restocked, the reality is more Americans will be making meals at home and are not eating out at restaurants and this curbs demand. The cattle market has been especially sensitive to that fact.
South Dakota Farm Bureau President Scott VanderWal is also a cattle producer from Volga. He says cash prices for fed cattle rebounded some toward the end of March and the basis is positive, which is helpful for producers that were hedged. However, there are many cattle producers that didn’t have that protection and have watched the live cattle futures drop 30% from the 2020 highs.
“If you’re forced to sell right now, it’s really a tough time and obviously cattle and livestock is not something that has a shelf life that you can just string out for a couple months. They have to go when they’re ready," he says.
The meat markets are also fearful of slower long-term demand tied in part to record unemployment. The United States jobless claims on Thursday, March 26, hit a record 3.28 million and those consumers will not have the ability to buy beef but instead may opt for cheaper priced poultry or other proteins.
“People are still going to eat, whether it’s restaurant food or whether it’s at home. But still people are going to start economizing because if they’re laid off from work, I think everyone’s going to be really cautious," says South Dakota Pork Producers Council President Craig Andersen.
Another concern for the agricultural industry is the lack of adequate labor for food harvesting and food and meat processing. Andersen says if plant workers have illness in their family, or do not have daycare for children that are not in school, it may be difficult or impossible for them to work.
“When we’re tight on labor in the first place and you make it tighter, how slow does it slow down the chain speed?” he says.
Immigrant labor is also a big part of the ag workforce and he says the National Pork Producers Council has asked the Trump administration to exempt those workers from travel restrictions, especially on the Mexican border. They had issued a directive to stop processing most visas for U.S. entry in offices across Mexico.
The U.S. Department of Agriculture provided some assurance when they deemed inspectors as essential workers and said they would make sure they were on the lines at the plant to keep the food supply moving. The agency also indicated they would not shut down lines if workers tested positive for COVID-19. The Department of Homeland Security followed that up with a statement that recognized agriculture as an essential industry.
Andersen says that was reassuring but there is still uncertainty about sectors of the agricultural supply chain being disrupted.
“We don’t need to have any type of a backup in any of the supply chain, whether it’s feed, whether it’s trucking, whether it’s at the harvest plant. Same thing if we start backing up on truckers. We needed to have extended hours of service possibly. The load limits that we have right now, can we get those added to?” he says.
Andersen adds that farmers and ag workers can’t telecommute but must be hands-on to feed Americans.
With the negative impact of COVID-19, Congress did include the industry in the $2 trillion stimulus package.
As part of the CARES Act, or the “Coronavirus Aid, Relief, and Economic Security Act” signed by President Donald Trump on March 27, 2020, USDA will have more funding to craft an aid package in response to the market losses sparked by COVID-19. It includes a $14 billion boost in funding authority for USDA’s Commodity Credit Corporation to allow the agency to provide more direct aid to producers. The legislation also includes a $9.5 billion assistance program for livestock operations in particular. VanderWal says that will be helpful and welcomed by farmers, even cattle operators.
“We’re hearing more people in the cattle business now saying 'you know, we had the MFP, Market Facilitation Program, the last two years.' Some of them are saying maybe we need something like that for the cattle industry as well," he says.