Federal lawmakers on both sides of the aisle have been clamoring all year for legislation to “fix the broken” live cattle market. They have recently introduced measures that would upend the way the majority of live cattle are purchased by packers. They argue the measures they propose would put more money in producers’ pockets.
How, then, would they explain that cash live cattle prices from mid-October increased $15.21/cwt in just seven weeks, with $11.88 of that coming in the last four weeks? In fact, the $5.06/cwt surge in live prices the week before last was the largest weekly advance since prices rose $7.81/cwt the week of May 17 last year. The $138.17/cwt live price (for a five-area steer) was the highest weekly price since the $144.60/cwt prices for the week ending May 7, 2017.
In other words, the much-maligned cash live cattle market has hit its highest level in more than four and a half years. It finally has the traction that cattle feeders have been waiting all year for. Why has this occurred? Certainly not because of any new federal laws or regulations, but because of the simple rules of supply and demand. The market had labored for 18 months under the weight of a front-end supply of cattle, which on June 1 last year, was 1 million head larger than the total on the same date the previous year.
The fact that it took all this time to clear the backlog was of intense frustration to cattle feeders. But there was no nefarious plot by packers to keep prices depressed. Put simply, there were too many cattle for packers to harvest until recently. Beef demand at home and abroad was stellar during the 18 months. But packers simply did not have enough workers to run their plants anywhere close to capacity.
If you don’t believe me, allow me to point out that Tyson Foods, the largest processor of fed cattle in the U.S., ran its six processing plants at only 78 percent of capacity in its 2021 fiscal year (Oct. 3, 2020, to Oct. 2, 2021). Its maximum daily slaughter capacity is 25,800 head. But labor shortages meant it harvested only 6.2 million head in the fiscal year.
I continue to be disappointed, but not surprised, that lawmakers and even beef industry leaders are saying little or nothing about the labor shortage. Instead, they have largely focused on measures that would set the industry back years in producing the kind of high-quality beef that meat lovers at home and abroad increasingly demand.
The worst impacts of the COVID-19 pandemic are now behind the processing industry and the country as a whole. But beef packers still face challenges in finding enough workers to fully staff their plants. The shortage is most acute in beef plants because they are much more labor-intensive than other meat processing plants. Tyson said it ran its pork processing plants at 88 percent of capacity in fiscal year 2021, and its chicken processing plants are fully staffed for the first time in two years.
The labor shortage in beef plants has only slightly eased, despite companies’ best efforts to alleviate it. Packers spent hundreds of millions of dollars in multiple ways from early in the pandemic to protect their workers, dramatically raised starting wages (to about $22 per hour) and continue to spend a lot of money on everything from free vaccinations and bonuses for getting the shot to free community college for workers’ children.
What the beef processing industry desperately needs, as do many other agricultural sectors, is a federal foreign worker program that would allow men and women to enter and reside in the U.S. under strict rules for a certain period of time to work in our meatpacking plants. Such programs have been running successfully in Canada and Australia to help alleviate their critical labor shortage in meat plants.
It’s well past time for the National Cattlemen’s Beef Association and other trade groups to campaign ferociously and publicly for the Biden administration to introduce such a program. Having fully staffed beef processing plants is the best way I know to increase prices for live cattle, and feeder cattle for that matter. — Steve Kay
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
