Local And National Cattle Producers Face Uncertainty From Coronavirus Concerns

Apr 7, 2020


Shoppers may have noticed higher beef prices and empty shelves at the grocery store last month. At the same time cattle producers saw a significant drop in what they were getting paid. Panic buying, allegations of price-fixing and uncertainty in the face of a global economic fallout have all been effecting the cattle industry.

NO: Over the last month, beef prices in grocery stores across the country have hit historic highs. Tell us more about what that looks like.

RC: Right, so the boxed beef cutout -- basically the price of all the meat products like sirloin steak, brisket, ground beef, etc. that you get from an individual steer -- jumped up 25 percent from March 12 to the 19th. An economist with the American Farm Bureau Federation says the last time the U.S. experienced nearly the same increase was in 2017, but it was spread out over nearly a month, not one week.

Prices are starting to come back down, but they’re still higher than normal.

NO: Did the price jump slow down grocery store shoppers?

RC: Well, no. Americans bought about 77 percent more meat in mid-March than previous years. I talked to Bill Kennedy, the meat coordinator for Town & Country Foods, which has grocery stores in Bozeman, Belgrade and Livingston.

He says T&C absorbed about two-thirds of the price increase on meat to soften the costs for customers. He says shoppers bought double the amount of ground beef and chicken breasts than they normally buy this time of year.

“We can’t keep up. You know I told my guys one day, ‘We’re just done. We can’t do anymore,’” Kennedy says.

Experts say the U.S. doesn’t have a food shortage right now. The empty shelves people have seen are the effect of shoppers buying more than they need and stores struggling to keep up. Beef production during the last week of March was actually about 14 percent higher than the same time a year ago.

NO: You’d think ranchers and feedyards would be benefiting from higher retail prices and higher demand, but prices for cattle actually dropped around 30 percent in March. What’s going on here?

RC: Yeah, I mean, a lot of people are frustrated that there seems to be this mismatch. Groups like the Montana Stockgrowers Association, Montana Farm Bureau and Montana Farmers Union, along with Montana’s Attorney General Tim Fox and Senators Jon Tester and Steve Daines are urging the U.S. Department of Agriculture and Department of Justice to investigate possible market manipulation and a breach of antitrust laws.

“In the last month, coronavirus put a microscope on the livestock cattle market, and it's broken,” says Montana Farmers Union President Walter Schweitzer.

Four multinational companies -- Tyson Foods, JBS, Cargill and National Beef Packing -- control 80 percent of all the cattle slaughtered in the U.S.

Before COVID-19, the beef packers already faced litigation and a Department of Agriculture investigation for alleged collusion, price manipulation, restrictions of competition and other unfair practices. The USDA’s investigation is still ongoing.

“Companies are subject to antitrust laws and we hope that agencies like the USDA will go to bat for Montana farmers and American farmers and ranchers and make sure that all players in these markets are playing by the rules,” says Montana Farm Bureau Federation Director of National Affairs Nicole Rolf.

Secretary of Ag Sonny Perdue said on Twitter two weeks ago that the agency is, “paying special attention to the difference in prices from the farm gate to the grocery shelf.”

NO: So it sounds like this could be intentional. Are there other possible explanations for the high beef prices and low cattle prices?

RC: Michael Nepveux, a Farm Bureau economist, thinks it has more to do with ‘cattle futures’ on the Chicago Mercantile Exchange.

NO: What’s a cattle future?

RC: Basically someone offers a price now for cattle that will be sent to a feed yard or packing plant later.

Nepveux says people expect a recession is going to hit a couple months down the road, which means people won’t buy as much beef because it’s considered more of a luxury. So cattle futures are lower now even though current demand and retail values are high.

“It doesn’t always work the way people think it should, and I think that’s a lot of frustration for producers sometimes because it does have a direct impact on their bottom line,” Nepveux says.

Nepveux says something else that's causing uncertainty with the beef market are isolated cases of meat packing plants shutting down for a few weeks or running below capacity because of COVID-19.

The JBS meat packing plant in Greeley, Colorado is one of the largest in the country with more than 4,000 employees. But after reports of workers testing positive for the coronavirus, hundreds of employees stayed home last week.

“How long are these packing plants going to be continued to run if they keep having workers not able to show up either because they get sick, they have kids who are forced to stay home from school, and they have no where to take them so they can’t leave their kids and go to work. It’s a lot of this going on. It’s just created this mountain of uncertainty that’s really hard for the markets to work through right now,” Nepveux says.

The U.S. beef market has seen big fluctuations in the past decade, but the impact of COVID-19 has pushed the industry onto a thrill-level-five roller coaster with no end in sight.

NO: That sounds really dire. What do Montana ranchers have to say about all of this?

RC: Wyatt Donald is part of a multi-generational, family owned cow-calf and stocker operation in Melville, north of Big Timber. Like many ranchers in Montana, the Donald family sells their weaned cattle in the fall so COVID-19 isn’t affecting his family’s operation yet, but he added:

“We anticipate it to. We obviously don’t don’t know what cattle prices will be in September. But there’s just so many crazy things going on right now.”

Donald says they can’t control a global pandemic or cattle prices so they’re trying to focus on what’s in front of them -- the upcoming calving season, the health of their rangelands, the relationships they have with vendors and other people in the supply chain, and succession planning.

“I was just talking to my brother today, and we were saying it’s nice working with livestock because it just keeps going. You know, they need to be moved or some of them need to be fed each day, and that allows us some sense of normalcy whereas a lot of other people, their worlds are turned upside down, and our hearts go out to those people,” Donald says.