Call the Market

One of the Missing Pieces in the COVID-19 Rebound

ShayLe Stewart
By  ShayLe Stewart , DTN Livestock Analyst
Seeing how large the foodservice share of the U.S. food dollar is helps readers understand why pre-COVID-19 prices aren't being met. (Photo courtesy of USDA Food Dollar)

One of the biggest problems with the human psyche is that when we stumble upon a problem, we will ourselves to find a solution and expect the problem to immediately go away with the right tactic and appropriate approach.

But the longer we walk, dance or stumble through life, we realize that a lot of our plans don't turn out as anticipated.

As frustrating as it may be, Black Swan events are a lot the same. When the packing plant burnt down in Holcomb, Kansas, cattlemen were among the first to sit down and sharpen their pencils to figure out a way for the market to absorb the chaotic disruption to the cattle supply chain. But finding the right tactic on how to deal with the impact of COVID-19 has been one of the most challenging tasks for not only our nation, but also the beef industry.

The challenges have been numerous for cattlemen in shoring up the loose ends that were quickly frayed from COVID-19's outbreak. Before the packing industry saw massive shutdowns (for the week ending April 4), year-to-date 367,395 more cattle had been processed in 2020 than by the same time in 2019.

Now, for the week ending Aug. 15, actual slaughter data shares that the industry has processed 910,059 fewer head than what had been processed by this time in 2019. Although the nation's slaughter is still lagging and unable to surpass year ago levels, at least consumers aren't walking up to empty meat coolers.

Feeder cattle prices aren't ringing the same high that the market concurred in 2014 and 2015, but cattlemen have been appreciative of the market's rally versus what was offered earlier this spring. And despite this week's recent downward trend in cash cattle prices, the market was able to successfully trade cattle for higher prices for nearly two months, helping to shore up the backlogged supply and relieve feedlots of their market-ready cattle.

However, despite all the efforts to bring back some sense of normalcy, one of the biggest hinderances to the rebound of the beef industry has been the lack of demand from our nation's restaurants, eateries and foodservices. A study conducted by the USDA shared that for the U.S. food dollar, $0.08 went to farm production, $0.14 went to food processing, $0.02 went to packing, $0.03 went to transportation, $0.08 went to wholesale trade, $0.12 went to retail trade and $0.12 went to energy, finance and advertising combined -- but the biggest sector was the foodservice industry, which claimed $0.37.

COVID-19 has affected most industry groups, but the strain that the food-service industry has endured is devastating for the beef supply chain.

Read the full study here: https://www.ers.usda.gov/…

It's easy to comprehend how the foodservice industry has been vastly affected by the virus, but when you consider that there isn't a known end to the hardship, unfortunately the cattle market will likely continue to suffer.

When will demand get back to historic levels? When will restaurants in all 50 states be back to full capacity? How many restaurants will end up closing permanently? And how will this change the foodservice industry going forward?

The truth of the matter is, we have no clue when this pandemic will go from being our current state to being something spoke about in past tense. For our nation's mental health, financial being and for the sake of the beef industry, we can only pray that this ends sooner rather than later.

In the meantime, as cattlemen and beef advocates, our job is to remain diligent and to navigate through these times with perseverance and steadiness. Although the foodservice industry is suffering, there are still ways to satisfy the yearning for beef dishes amongst consumers.

Direct sales have skyrocketed through this time and thankfully consumers are developing their own understanding of the farm to table movement. Exploring alternative ways to market through these adverse times is vital to ranchers and the well-being of their operations.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

ShayLe Stewart