Closure of Packing Plants Threatens Livestock Industry

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The U.S. meat industry has entered uncharted waters with the COVID-19 pandemic and now the closure of processing facilities threatens to further exacerbate the situation. COVID-19 infections are affecting labor available and the processing capacity in multiple facilities across the country.

It’s an issue that the cattle industry anticipated early on in the pandemic. Cattle organizations were almost instantly reaching out to USDA to make sure that packing plants were deemed essential and stayed operational.

However, numerous plants across the country are dealing with outbreaks of the virus. The Denver Post reported at least 50 workers at JBS USA’s beef plant in Greeley, CO had tested positive for COVID-19 and two workers from the plant had died from the virus. JBS in Grand Island, Nebraska, has reported at least 28 workers that have come down ill from the coronavirus.

On Monday, JBS made the decision to suspend operations at the Greeley plant until at least April 24th. At full capacity, the JBS plant in Greeley can process roughly 5,400 cattle a day, making it one of the largest beef plants in the country. It’s actually similar in size to Tyson Foods’ Holcomb, KS beef plant that was closed by a fire last August and sent the markets on a downward spiral.

Many other plants continue to shut down as well. National Beef closed a facility in Iowa, Cargill closed a plant in Pennsylvania and has slowed production at a plant in High River Alberta, and Smithfield closed its plant in Sioux Falls, the 9th largest hog processing facility in the country.

All that just adds to already rampant uncertainty for cattle and hog markets. If animals can’t be processed in a timely fashion because of reduced processing capacity, the supply starts to backup. Then the industry is faced with costly delays holding animals until slaughter capacity opens up or even disposal of animals.

There’s no shortage of meat in the U.S. Actually, the U.S. beef, pork and poultry industries are all on track for record production in 2020. However, the next few weeks could result again in shortages of meat at grocery stores due to that reduction in processing capacity. That would likely result in further divergence in beef and cattle prices. Derrell Peel, Livestock Economist with Oklahoma State Extension says the limited supply of retail meat could push prices higher, while the limited processing capacity may limit demand for slaughter animals, forcing the price producers receive lower.

The cattle industry saw significantly reduced slaughter levels last week. The USDA estimates cattle harvest for the week ending April 11th at 536,000 head, down almost 90,000 head from the week prior and over 100,000 head less than the same time last year.

Peel says that many feedlots could try to slow the pace for finishing cattle or holding the animals on maintenance rations until shackle space opens up. Feeder cattle as well as cull cows and bulls could end up staying on pasture to adjust the timing and flow of cattle. That would surely increase the cost of production but may be the best available option. The beef industry does have more flexibility to adjust production than the pork and poultry industries where backlogs are much more severe.

This is an extremely difficult time for livestock producers. It’s nothing short of a natural disaster and will take a concerted effort from both the industry and the government.

President Donald Trump late last week said that USDA would be coming soon with an aid plan for U.S. ag producers, with the package to be around $16 billion. That figures to be the $9.5 billion in the third round of COVID-19 aid that is to “support agricultural producers impacted by coronavirus, including producers of specialty crops, producers that supply local food systems, including farmers’ markets, restaurants, and schools, and livestock producers, including dairy producers.”

Plus, there is around $7 billion to $9 billion in Commodity Credit Corporation (CCC) authority remaining.

Sources have told DTN that indications are that the plans for the aid will head to the Office of Management and Budget (OMB) this week, with announcement of the relief effort either yet this week or next week.

 

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DTN/Daily Livestock Report/Derrell Peel-Oklahoma State Extension/Northern Ag Network


2 comments

Neva Hascall April 17, 2020 - 7:53 am

As a small rancher (150 head), before covid hit, I was losing nearly $200 per mother cow, and was on track to dispose of 80% of my herd to try to stabilize losses. I am on a century ranch and am the 4th generation to be a cattle rancher on this property. It is ridiculous that we work so hard to get a safe, high quality product to market, to get no financial reward.

Reply
Jennifer Erickson April 28, 2020 - 8:28 am

In an effort to provide a market for beef and pork, I propose that small processing plants or privately owned meat markets be allowed to process meat and sell to individual customers. States could allow for this change of rules NOW – TODAY, rather than forcing cattle ranchers and hog producers to dispose of their animals and eliminate any income from them.

Tyson is asking for government assistance to adequately protect its workers from covid 19, and yet, they are the world’s second largest processor and marketer of meat products. In 2014 Tyson had more than $40 billion in sales. It is the American rancher and farmer that needs assistance.

Reply

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