The No. 1 problem for the cattle industry is packer throughput. Livestock processors have been hammered by the COVID-19 virus to the point that health agencies are starting to consider them as virus hot spots, like New York City.
Packers would normally be processing 650,000 head a week this time of year, which is the high point for seasonal beef demand. Grilling season is upon us and we can’t get enough beef to consumers. We’re lucky to get 500,000 head a week processed. The Choice beef cutout had a big run last week; Thursday it was at $275 cwt, which I think is a new record.
The bad part is that cattle producers are taking it in the shorts because of packer problems. It’s nobody’s fault except for the virus and how are you going to blame the virus? On the flipside, is the government going to spend billions of dollars making folks whole?
Cattle were trading for $95 last week and the cash volume was pathetic. It’s a good time to have a formula and grid to sell your good cattle on. Formula grid sales last week were $175 dressed while cash dressed cattle were trading at $150.
Calf and yearling markets have been up $10-20 one week and down the same the next week. Fed cattle have lost $350 in value since January when the market was $120.
I realize that cattle producers feel taken advantage of because the cutout is at record highs and who knows how low fed cattle can go? June futures are looking at an $80 market on live cattle. So, cattle producers, you deserve some of the government stimulus money. Don’t feel bad about it; just take it.
We haven’t seen many real details on how the stimulus will be distributed, but I can assure you, you’re not getting a check next week. Most everyone in America received a check last week. We’re in some strange times and it’s time to be ultra-cautious.
When it comes to markets, it’s hard to understand how oil can go -$40; not sure how that works. It’s got to have some value, even it its for paving roads. Can you imagine paying someone to take your cattle? Oil futures didn’t stay negative very long but the fact that it did at all is alarming.
Folks want their meat protein and they love beef. The problems packers have endured staffing their plants has been an issue way before the coronavirus showed up. Most folks who work the packing plants are immigrants or refugees from all over the world; it’s tough, laborious work. They also have different living standards and there is a cultural thing at work here that would not promote their safety.
It’s been suggested that packing plants are becoming hotspots for coronavirus. Several plant workers have died from it and now they are afraid to go to work. Plants have closed for intensive cleaning and workers are getting protective gear. But what they want is testing so they know it’s safe. These packing plants need to be as clean as a surgery room.
Let’s be honest: There is nothing pretty about the processing side of the meat business. It is a highly regulated business. But last week a bunch of Democratic senators penned a letter to several agency leaders about the safety of the food supply and the workers. It was silly in the sense they were asking about coordination with local governments and contingency plans and other administrative nonsense. Reading who signed the letter you could tell it was more politically charged than process driven. I’m having visions of Upton Sinclair’s book, The Jungle, popping up. I guarantee packers are doing everything possible to keep plants running to feed America. We’re not used to having shortages in this country.
Most of the country has been sequestered for the past three weeks and a lot of folks want to get the economy going as soon as possible. We’re going to have to have a mask handy and you’ll have to maintain your social distance. Hopefully this thing fades away in the next few weeks. Who would have thought we would have a pandemic in the modern world with everything we know about viral science? The last pandemic struck over 100 years ago in 1918, the Spanish flu.
What we need is to get the pipeline moving quickly and get rid of the wall of cattle developing. We can’t let politics get into this situation or it will get worse. — PETE CROW
