Coronavirus creates complications for livestock marketing
As if marketing livestock wasn’t complicated enough, the global coronavirus pandemic presented producers with an even greater challenge. After factoring in unstable markets and plant shutdowns, marketing livestock in today’s economy seems as challenging as ever.
Therefore, Iowa State University Extension Livestock Marketing Economist Dr. Lee Schulz and Oklahoma State University Extension Livestock Marketing Economist Dr. Derrell Peel say producers need to stay as current as possible when marketing their livestock in these tough times.
A situation like never before
“We’ve had shutdowns in the past, but it was typically only one plant and the others were operating normally, so they could absorb the extra volume,” says Schulz. “With this situation, it’s not a single plant, which makes it more difficult.”
“We’ve never had a situation where we’ve seen a reduction in plant operations across multiple species,” Peel adds. “In this environment, everything can change so quickly.”
In fact, hog processing plants in Columbus Junction, Iowa and Sioux Falls, S.D. temporarily shut down or indefinitely suspended operations as of April 14, while beef processing plants in Tama, Iowa and Greeley, Colo. also temporarily suspended operations due to a large number of employees being diagnosed with coronavirus.
“It’s a huge challenge when we back up a lot of meat, especially pork,” Schulz says. “With cattle, we have more options as far as placement and marketing. We don’t have that luxury with pork or poultry.”
Even though cash and futures prices are already looking bleak, Peel notes there is still some downside risk in the livestock market.
He also says he advises producers to keep an eye on risk management opportunities, since they will likely be few and far between this year.
“The bulk of the impact is already here,” Peel says. “Some producers had coverage in January and saw the benefit, but others didn’t.”
“Prices could drop even more over the next few weeks,” he adds. “Feeder cattle sales were down in March as more producers hang on to calves.”
Peel continues, “Once we get past this and prices don’t go a lot lower, that’s when we’re probably at the bottom of all of this. Of course, we’re going to be coming out of this virus in a recession, so there will still be challenges.”
In response, Peel says some feedlots might choose to feed cattle only enough to maintain weight. He also notes cattle numbers are usually seasonally higher this time of year, resulting in more beef destined for grills and restaurants.
“We essentially have about half of the market shut down because of the closing of the food service industry,” he states. “Beef destined for restaurants is now being moved into the retail sector.”
He also explains further disruptions with packing plants could make the situation even worse, since a slowdown could result in a brief shortage of meat.
Schulz says wholesale and retail meat prices could increase with more plant shutdowns, while at the same time decrease the price at farm level.
“It is imperative producers stay as current as possible when marketing, since plant shutdowns and low prices make it such a challenge,” he says.
Hannah Bugas is the assistant editor for the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.