Supply and Demand
By Dennis Sun
Like all commodities, the price of meat for the consumers’ plates is driven by supply and demand.
The COVID-19 virus has certainly had an impact on our nation’s meat products. From hoarding, to the shutdown of processing plants, our meat products have suffered many ups and downs during the past nine months.
The negatives have been huge, but I believe the positives have been bigger. The negatives have been driven by a term we’ve not heard too much of in the hills, which is “slaughter capacity limits.”
The capacity to process the number of animals ready for slaughter was limited. But, there is an added component thrown in there that is hurting us at this time. This component is the loss of food service demand as a result of restaurant closures or limited seating in those that have reopened.
Cutting up a carcass for a restaurant plate is different than processing it for your own plate. The restaurant trade in America is huge, and when we add the fast food service to it, it is really huge.
When I talk about meat products, I’m referring to beef, lamb and pork. They have a lot in common, but are different in the ways they are fed, raised and processed – especially pork.
Supply is most likely the factor that has been a positive. But, it may have been a negative to some, especially producers. While it wasn’t the producers’ fault, it did affect prices.
Before the pandemic, packers said they wanted more supply, but drought and lower prices for cattle and lambs forced some producers to winter less livestock.
Packers could only handle the supply because they started working on Saturdays.
Today, demand is by far the largest positive in the beef world. People staying home because of the virus has really improved beef and pork demand at grocery stores. Slow cookers, electric pressure cookers and indoor grills have all helped those at home cook meals. Another positive is people have recognized leftovers for tomorrow’s lunch again.
Somehow the lamb industry has to get lamb cuts out into the backyard BBQ and smoker. Once people try it and learn to prepare it, they will like it.
I think people are eating healthier these days. They want their food grown or raised locally, which means they have bought another refrigerator and a freezer. The demand to buy their meat from a local producer and have it processed by a local plant through direct marketing has never been better.
The only holdup is demand has sparked the need for more small to medium packinghouses.
“This may be the only time where we’ve seen packer profitability, incredible export market access and increasing consumer demand for beef both for internationally and domestically” said Dustin Aherin, an animal protein analyst for Rabobank in an article published in Progressive Farmer.
Aherin added the numbers in his assessments on pre-COVID, so the trend he is basing his review on was prior to 2020 and has only been magnified this year.
“This is a conversation the industry should be having with or without COVID-19,” Aherin said.
Since 2014, beef herd expansion has outpaced packing capacity, so the leverage goes to the packers.
And that is why we need more packinghouses – so producers can get the leverage back.