COVID-19 has had profound impacts on our food and livestock production systems here in the U.S. With regards to the beef industry the impact has been felt locally and throughout the country. Locally here in Ohio, with the JBS plant in Souderton closed, and reduced packing capacity in other regional packing plants, the local cash market for fed cattle has been greatly diminished. For the past two weeks, auction markets in the state have asked cattle feeders to hold off on bringing fed cattle to market due to packing plant closures and overall lack of packer demand.
Like most of agriculture, timing is critical for the livestock production supply chain to flow as it is designed. What is the impact of holding market-ready cattle in local feedlots? Economically, cash flow concerns for small to medium size cattle feeders may arise as packing capacity remains limited. Immediate impacts for cattle feeders include increasing days on feed, selling heavier and potentially higher yield grade cattle once the market returns. Most packing plants have discount schedules of Yield Grade 4 and 5 cattle in addition to carcass weight specifications.
There have been discussions regarding slowing the rate of gain or transitioning livestock to a maintenance diet. As fed cattle sales are delayed, the cost of gain increases, more feed is required, and cattle are less efficient as they reach or pass optimal harvest conditions.
In a study commissioned by the National Cattlemen’s Beef Association and led by Derrell Peel, Breedlove Professor of Agribusiness and Extension Livestock Marketing Specialist at Oklahoma State University the total losses to the US beef industry were estimated at $3.7 billion or the equivalent of $111.91 per head for each mature breeding animal. The losses for the cattle feeding segment of the industry was projected to be at $3.0 billion or $205.96 per head.
Worth noting, one bright spot with regards to fed cattle is that demand at the local level has greatly increased. Local meat processors have reported record retail beef sales, however large increases in local demand are often tempered by the lack of cooler space available in small plants that are already working at capacity. The cattle supply is available, however, logistics remain a challenge.
While local stocker prices have been relatively stable, especially for calves going to grass; the NCBA study estimates that stocker/backgrounder losses averaged $159.98 per head or $2.5 billion countrywide.
Prior to COVID-19 cull cow and bull, processors were operating at or near capacity, given the current status in the dairy industry, that trend is likely to continue. Beef cow-calf operators have an opportunity to add some condition to cows currently on the cull sheet if it can be done at an economic cost of gain.
The beef industry and all of agriculture are currently navigating uncharted territory with the disruption to the supply chain caused by COVID-19. If you have questions reach out as additional information is available from state-level Extension, and the Ohio Cattlemen’s Association is available to assist producers in these difficult times.