Beef market upended by COVID-19
With hopes of even greater exports of beef, pig, and chicken to China, the US meat and poultry business had a lot of potential at the beginning of the new decade. This followed a sharp increase in pig shipments in the latter part of last year. A phase one economic and trade deal between the United States and China was inked on January 15 and went into effect this past month.
On the other hand, January also saw the announcement of the emergence of COVID-19, a novel coronavirus, in central China. Then, as it spread to every continent save Antarctica, the rest of the globe observed with growing dread. It had turned everyday life upside down in the majority of the world’s countries by the beginning of March, particularly in Europe. By the next week, Millions of Americans were receiving orders to stay at home during the month.
The terrible face of the pandemic is the hundreds of deaths it has caused worldwide. However, there has also been a significant economic impact. There is now a good chance that the US and worldwide economy will enter a recession, which could have a big effect on domestic and international demand for beef.
The virus has wreaked havoc on the world’s commodities and equity markets. The harm has been really severe. The Dow Jones Industrial Average saw its biggest one-day percentage loss since October 19, 1987, on March 12 and 16. On March 16, it closed at 20,188, down from its peak of 29,398 on February 14. In other words, it dropped 31% in a month.
The livestock futures markets caused the first harm to the meat and poultry industry. From February 21 to March 16, all live cattle futures markets had a 20%–23% decline. These were the largest percentage drops since the 1973–1974 beef price freeze imposed by President Richard Nixon. Feeder cattle futures suffered a similar fate.
The 10% decline in cash live cattle prices was a result of the collapse of the futures. They decreased 14.4% from an average price $119.71 per CWT live at the end of February to $108.84 per CWT live in the second week of March. Prices were predicted by analysts in early January to average between $116 and $117 per cwt live in 2020. They may now average between $105 and $110.
Conversely, retail food sales have already shown a notable uptick, particularly for meat and poultry. Early in March, a number of grocery stores reported almost empty meat cases. The week ending March 15 saw such high sales of beef that stores had to work hard the following Monday and Tuesday to restock their shelves. As a result, since statutory price reporting started in 1996, the boxed beef cutouts staged their largest one- and two-day jumps. Despite certain reports to the contrary, customers are buying more beef, not less.
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Some analysts voiced concern that if processing plants had to close due to labor disputes or other challenges, the supply of meat and poultry might be affected. Tyson Foods alerted investors to the possibility of operational disruptions due to the pandemic on March 13. In the first two weeks of March, the price of its stock dropped by almost 30%, and the stock of other publicly traded meat companies dropped significantly as well.
at early March, the USDA made an effort to reassure meat producers that federal inspectors will continue to work at processing plants. The National Cattlemen’s Beef Association (NCBA) was informed by the department that it would handle staffing concerns during the outbreak by using its authority, all administrative tools, and any flexibility. The NCBA has previously stated that it was in daily contact with every area of the beef supply chain.
In order to guarantee the continuity of supply chains, the federal government collaborated with the most influential figures in the retail and food processing industries. President Donald Trump stated on March 15 that there are no visible food shortages and that retail food establishments will stay open while measures are made to slow the spread of the coronavirus infection. Right now, the most pressing concerns are: If a recession is imminent, how long will the coronavirus crisis persist and how much will markets recover once it is proclaimed over?