Some of the great economic minds are working hard for all you cattle producers. The NCBA is working with USDA and Secretary Perdue to figure out your direct losses from this COVID-19 virus episode. There is no question that it has changed the world forever.
A group of well-known ag economists—ones you and I know personally—have worked to provide to the secretary justification to give the cattle industry direct payments on the number of cattle you own…from the cow-calf level to the feedlot.
These economists have estimated the losses to the cattle industry to be $13.6 billion. That’s a lot of money that will be dished out to producers. They figure that the losses for cow-calf producers is $247.15 per cow. Their estimates are in two parts. First, that estimates the impact on calf sales in the current year. And per-head damages stated in terms of total inventory of mature breeding animals (cows and bulls) are $111.91 per head. So, look at it as if the feds are going to give you a rebate for the bulls you just bought.
Second is that the cow-calf sector is a fixed-cost industry and losses inevitably accrue to the primary production sector as reduced asset values. The discounted value of these future impacts is estimated at $135.24 per head. Add the two up and cow-calf producers could get a direct payment of $247.15 per head. So, the average WLJ reader, who has 376 head, according to our 2018 survey, would receive $93,000 in direct payments. That’s a pile of free money.
The cattle business has always been proud that they have never pursued any government support programs. Most commodities have a government support mechanism to control losses. Or to keep them producing. For those reasons, we have inexpensive food in this country. In 1967 consumers paid 18 percent of their disposable income on food. Today it’s 9 percent. You could say the government pays half your grocery bill.
For stocker operators, COVID-19 estimated damages are $159.98, $118 for cattle under 500 lbs. and $184 for cattle over 500 lbs. To estimate these price losses, they used seasonal price differences, the swing in the CME Feeder cattle index and LMIC, and CattleFax price forecasts. They also used a seasonal price index for Oklahoma City auction prices.
The cattle feeding sector estimated damages were between $205.96 and $211.76 per head based on a simple calculation of price movements before Feb. 7 through the third quarter of 2020. From the cattle feeding perspective, damages began in February and are expected to last through September 2020.
Total damages to the U.S. beef industry is estimated to be around $13.6 billion. The entire beef industry is valued at $77 billion. There is no doubt a lot of folks were hurt; some directly and some more passively. If you had to sell cattle in the past month it hurt badly. Cow-calf guys who have their minds on calving won’t need to worry about marketing for a while, and you still have a lot of options on these spring calves.
I am told that this program will happen, and the cattle portion will go down as explained, perhaps not at the same values they hope for. But you should get in touch with your Farm Services Agency office and be first in line. I’m hearing that the Small Business Administration is already running out of money to help small business.
These are wild times we’re living in. For the most part we accepted a partial business shutdown to save lives. But if we don’t get this economy going very soon it will also hurt lives. The state governors and the president have some big decisions to make. I think the regional opening of the economy is the safer way to go. That’s what cattlemen have been preaching about if we ever got hoof-and-mouth disease because we don’t want the entire beef industry to shut down. Just quarantine the cattle that are sick.
I’ve never seen the cattle business ever ask the government for direct payment relief. This must have been a difficult decision for our leaders to make. In a matter of six weeks the federal government has been working to disperse over $2.5 trillion in economic stimulus. You can’t distribute that much money in a short amount of time and do it well. But all the feds want is for you to spend it all quickly to keep the economy running. — PETE CROW
