Sort & Cull

The impact of the coronavirus pandemic throughout the United States has significantly affected the food production and meat segments. Both producers and consumers are at the mercy of things that are not in their control. And as the days tick by, the situation continues to get worse. The meat industry relies heavily on all segments of the industry working seamlessly together to maintain an efficient and effective food chain. This includes livestock producers, packers, processors, distributors, retailers, food service providers and, ultimately, the consumer.

As connected as the agricultural and meat industry is, the packing and processing chain continues to be the essential "bridge" between animal producers and end consumers. Very few meat consumers would have any idea of what to do with a "side of beef" on their doorstep, not to mention a market-ready live steer or barrow in their front lawn. The disconnect between production agriculture and most end users has been significant for a long time. One could argue that this gap has widened significantly over the past couple of decades as more consumers have little interaction with production agriculture.

The processing chain has always been a significant part of the livestock industry, including the thousands of dedicated workers who work in non-ideal conditions every day. Industry consolidation has created fewer but much more complex and larger "bridges" between producers and consumers. For example, the annual livestock slaughter report released Wednesday afternoon put the focus on a few large plants processing the majority of livestock in 2019. In cattle slaughter, the 12 largest beef slaughter plants harvested 52% of all cattle slaughtered through the year. The 14 largest hog plants are responsible for 59% of hogs moving through the system.

The magnitude of the numbers of animals moving through the system is mind-boggling. An estimated 9,697,000 cattle and 40,538,000 head of hogs are expected to move through the packing system in 2020, slightly lower than cattle slaughter in 2019, but an expected 4% increase from 2019 hog slaughter. This accounts to well over 55 billion pounds of red meat production in 2019 with 2020 numbers expected to top these numbers -- that is "billion" with a "b!" This continues to put the focus on a system in which consumers around the nation and world rely on a few livestock producers and very few packers to supply them with high-quality beef and pork.

With coronavirus issues, the avenue to get products to end users has been significantly limited. Currently, packers are struggling to maintain production levels at plants, creating an even wider gap between production and consumers than may have been seen for years. In the past two weeks, cash cattle and hog prices have seen significant pressure and active losses have been seen in futures markets as well. Meanwhile, wholesale beef and pork values have seen rocket-like gains based on concerns of limited supplies of meat available at grocers' shelves.

At this time, the relationship between wholesale meat values and live animals has widened significantly due to the lack of processing ability. And the ability to pass on higher wholesale meat prices to consumers remains in question. With all states under a state of emergency, it is uncertain if and to what extent price changes will be seen at retail levels for all meat productions. Each state has differing "anti-gouging laws." But, in general, it appears price levels throughout the crisis have stayed tied to average price levels seen before the emergency was declared.

With consumers becoming even more concerned about the ability to gain access to meat and grocery products -- and livestock producers having nowhere to ship market-ready cattle or hogs -- opening packing plants, keeping production as steady as possible and keeping transportation systems running is essential for both the front and back end of the food chain.

The hope that these current conditions will be quickly resolved is on the minds of everyone involved in the industry. Hopefully, through this process, it will bring even more focus to and awareness of the essential role each segment of the system plays in the livestock and meat industry. No matter what happens throughout the rest of the COVID-19 crisis, it is becoming evident that all participants of animal agriculture are more connected than many were aware. Each segment should not be overlooked as an important player in feeding the world.

Rick Kment can be reached at rick.kment@dtn.com

(BE/AG)

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