It seems as if the world is changing before our very eyes. This coronavirus pandemic has changed everybody’s thinking about everything. We’ve been told to hunker down for a good three weeks. If you’re a non-essential business, you’re told to shut down. Thank God that media companies are an essential business, so WLJ is open for business.
Cattle prices have been in a death spiral while wholesale boxed beef prices went through the roof. Tyson felt so bad about the price disparity between fed cattle and beef prices that they said they would pay a $5 premium on live cattle and an $8 premium on dressed cattle. They realized just how important cattle feeders are to them. I haven’t heard if all the other packers are doing the same thing. This would be the second time in eight months that packers got a windfall in profits due to panic selling in the futures market. Let’s hope they buy a lot of cattle this week, which I’m sure they will.
Are we in survival mode? I think the cattle business will be in good shape in the second quarter. Beef demand is great right now, folks have stocked up on meat, freezers are full. If you have a big freezer you’re good for a while. But taking all that beef off the market in a short period of time will be interesting. It might be several weeks before they need come out of quarantine and buy more. Right now, Choice boxed beef is trading at $255. We received the spring rally in beef prices in about three days instead of three weeks.
The government has pretty much shut down commerce, unless you’re an essential business, like food and information. But no one can travel or dine out at restaurants, which, by the way, is where 50 percent of the food dollar is spent. There are a lot of people who have lost—or are about to lose—their jobs and perhaps business; they need help.
Economists have told me that we could see a 10 percent drop in GDP in the second quarter of 2020. This means that consumers may not be buying as much beef. This pandemic could be very destructive to the global economy and our way of life. This is a world-changing event.
Lawmakers have been talking about using the National Guard and even the Army to fight this virus. What are they going to do? Police the self-quarantine? Stop the looting, if it happens? Sounds like martial law may be creeping up on us. With the magnitude of this virus it wouldn’t surprise me. A pandemic will bring the best out of some of us, but it will also bring the worst out in others.
In just three weeks markets have dropped 20 percent or more. Cattle are down a full 20 percent while boxed beef prices have gone up 25 percent. Consumers see beef costing more while cattlemen see cattle selling for less. All the consumers care about is the price of beef.
Last week the NCBA was busy trying to get your piece of the $2.5 trillion bailout. Ethan Lane, NCBA’s vice president of government affairs, went on CNBC to discuss the beef industry supply lines and the fate of the producer side of the supply chain, and how the cattle industry needed to be part of the $2.5 trillion economic bailout. It was a rough moment when the interviewer said beef is selling at historically high prices, but you need a bailout? Lane had to explain the difference between producer economics and packer/retailer economics.
We all know the problem is that all this money being dumped into the beef industry by consumers isn’t making it all the way down to cow-calf producers. Cow-calf guys start the whole process and if there is no margin for the stocker and feeder guys, they take it out on the cow-calf guy with lower prices.
I learned that NCBA did get the job done in this stimulus package. The Fed is going to provide $14 billion for the Commodity Credit Corporation. Ag gets $9.5 billion that will be shared with livestock and dairy producers, growers of specialty crops like fruits and produce, and then a chunk will go to local food systems, like farmers markets and their vendors.
I’m confident that our food system is secure, but folks need to quit hoarding so grocery stores can get back to normal. So, stay clean, calm and be safe, and don’t forget to pray for spring rains. — PETE CROW
