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Weekly kill: Desperate measures mooted, as US faces serious slaughter bottleneck

Jon Condon, 28/04/2020

THE prospect of meat protein shortages in the US has been raised this week, as the number of beef, chicken and pork processing facilities either closed or operate at reduced levels due to COVID-19 infection among staff escalates.

At last count, almost a dozen large beef and further-processing facilities across the US had been impacted by disease spread. When pork and chicken plants are added, concerns are being raised that the US has been left dangerously close to meat shortages as coronavirus outbreaks spread to manufacturing facilities across the nation.

At least 17 US meatworkers have died and more than 3300 have become ill from coronavirus infections, the Washington Post reported. It said there were outbreaks at 30 meat plants in recent weeks, with 15 plants closed because of them.

Almost one third of US pork capacity is now out of commission, and the first big US poultry plants closed on Friday. Some experts forecast that domestic meat shortages in the US are only a couple of weeks away.

While no positive COVID detections have yet been made in Australian meat plants, other large protein suppliers including Brazil, Argentina and Canada are also seeing plant closures.

US cattle slaughter last week was down 27pc from the same week last year, Steiner Consulting’s Daily Livestock Report issued yesterday says.

The reduction in US processor throughput is already pushing beef prices sharply higher, while the backlog on grain finished cattle that are ready for slaughter is simultaneously pushing finished cattle prices dramatically lower.

Steiner reported the USDA Choice grade beef cutout on Friday at $293.37/cwt, 23pc higher than a year ago and an all-time record.

“The jump in beef prices comes at a time when cattle prices continue to slump,” it said yesterday.

“Lack of processing capacity has significantly limited beef supplies, pushing prices higher, while leaving feedlots without a place to get their cattle slaughtered. Retail items including rounds, chucks and ground beef, have seen the biggest jump in value, as many retailers are struggling to keep the meat case full.”

US beef supplies are expected to remain very tight in the next two to three weeks as cases of COVID-19 continue to increase in US regions where meat processing plants are located.

Some US meat plants are currently closed as operators try to sanitise the work spaces, test their employees and implement new measures to protect workers. Others are working below capacity due to workers either being sick, quarantined or not showing up for work due to fear of contracting the virus.

On the positive side, JBS’s large cattle slaughter facility in Greeley Colorado resumed operations yesterday, but it was uncertain how long it will take for the plant to ramp up production. Also unknown is how the spread of the virus and measures taken to contain it will impact the plant’s capacity going forward.

“The shortfall in processing capacity is depressing cattle prices, while at the same time boosting meat prices,” Steiner said. “Product that traditionally sells at retail has seen a big jump in price, in part because demand in the very near term tends to be inelastic. Retailers have a certain number of products that they normally stock in the meat case, with ground beef a primary staple.”

So retailers face a big price increase while producers and feedlots are struggling to get their cattle sold, and have had to lower the price in the hope of getting a packer to schedule their cattle for slaughter first.

“It is a terribly unfair situation caused primarily by the supply chain dislocations created by the disease,” Steiner said.

Potential for humane disposal of livestock

Even more alarming are reports out of the US yesterday suggesting humane disposal of livestock may occur, as the back-up of slaughter-ready feedlot cattle, pigs and poultry grows.

US producers have warned since mid-March of a potentially disastrous backup on-farm of cattle and pigs if there was a slowdown at slaughter plants.

In its latest move, the US government has offered to help livestock producers locate contractors ‘skilled in killing herds or flocks of animals’ and to provide cost-share funding for their disposal, as the lack of slaughter capacity grows. The US National Pork Board held a webinar on Sunday that discussed step-by-step “emergency depopulation and disposal” of pigs.

“American livestock and poultry producers are facing an unprecedented emergency due to COVID-19, particularly with the closing of meat processing plants,” said the USDA on Friday night. It announced a National Incident Coordination Centre would be established to provide direct support to producers whose animals could not move to market as a result of processing plant closures due to COVID-19. The incident centre would “seek alternative markets for livestock, and if necessary, advise and assist on depopulation and disposal methods.”

“As pork, beef, and chicken plants are forced to close, even for short periods of time, millions of pounds of meat will disappear from the supply chain,” Tyson Foods said in a full-page ad published last week. “As a result, there will be limited supply of our products available in grocery stores until we are able to reopen our facilities that are currently closed.”

US feedlot operators were this week offered advice on ways to ‘slow’ feedlot cattle growth due to the COVID-19 pandemic, as it continues to disrupt cattle markets.

“Having a market that will take finished cattle at a suitable date has become a concern. In addition, the current live market prices, and limited sale opportunities for fat steers have left many cattle feeders searching for solutions to reduce their economic loss,” the University of Wisconsin said in a briefing.

“In times of depressed markets, many cattle feeders lean towards the ‘hold and hope’ method of selling fed cattle, where they retain their cattle longer than is ideal with the hope of waiting out the downturn in the market,” it said.

The strategy to hold cattle longer would depend on the goals of the operation and the stage of feeding of the cattle.

For feedlot cattle ready or near-ready for market it may be best to sell these cattle when opportunities present themselves, even if prices are not ideal,” the advice said, warning that cost of gain and maintenance was high for animals at this stage of growth.

“It is important to keep in mind the costs (feed and yardage) of owning the cattle longer and the potential losses from discounts due to oversized carcasses, high yield grades, and potential death loss.”

It was unrealistic to expect a group of cattle on feed to achieve zero gain while waiting for the market to regain ground, however reducing the rate of gain and holding condition may be possible if done properly, the University of Wisconsin said.

Australian beef kills remain flat

Back in Australia, rates of weekly kill have remained flat after the Easter break, with NLRS reporting a seven-day Eastern States kill for the week to Friday of just 129,777 head. That’s down about 12,000 head, or 9pc on the last full working week before Easter.

Direct consignment grid prices on cows in some company offers have risen this week, partly driven by changes in demand. One company’s grid lifted 20c/kg on better cows, while plainer cows are back a little.

Quotes from southern Queensland processors this week saw offers of 470-490c on heavy cows, as cull cow movements start to rise as pastoral companies start their first round musters and preg-testing starts to accumulate numbers of culls.

Heavy grass steers in southern Queensland ranged from to 535c to 565c this week (10c better on some grids for HGP-free), unchanged from last week.

A large northern NSW processor has offers for week commencing 4 May has four-tooth steer at 470c, and heavy cows 450c.

With the first cycle of cold weather forecast for southern Australia later this week, frosts will start to have an impact on pasture quality, which traditionally triggers a surge in slaughter cattle bookings during May. Whether that happens this year, with a national beef herd as low as it is, remains to be seen.

Australian exporters are monitoring the situation in the US (described above) closely, but are wary of rushing in, for a number of reasons. Firstly, product killed here in coming weeks will not arrive in the US for delivery for 8-10 weeks, and there is the distinct prospect that by then, US processors are again operating, and killing an enormous backlog of grainfed cattle, at very, very cheap prices.

As a comparison, US grainfed bullocks this week were worth the equivalent of 420c/kg dressed weight, in Australian currency terms – more than a dollar a kilo less than what the same cattle are worth in Australia this week – and the comparison is only like to get worse.

Another challenge being faced by Australian beef in the US at the moment is that large numbers of portion-cutters and retail-ready plants are shut or operating under restricted throughput due to COVID-19, meaning Australian whole primals held in storage cannot get into the retail chilled cabinet.

While China is starting to emerge from its post-COVID shutdown, trade is still a long way from where it was prior to March, Beef Central was told, and trade into Japan, Korea, the EU and other markets remains heavily constrained by food service closures and general flatness in trade.

“There’s another four to six weeks of pain yet, before we come out the other side, in terms of demand,” a large export processor said this morning. “The back half of the year might start to see beef trade slowly start to get back to normal – but it’s definitely a way off, yet.”

Some horror stories are emerging in the wholesale meat market this week about higher-end Wagyu and Angus branded product that is being sold, with some pack-date issues behind it, at desperately low rates – as supply chains feel the impact of food service market closures across Australia and overseas.

Other consignments were exported to the Middle East before deals were fully nailed-down, and are now on boats on their way home, as Wagyu demand and prices have collapsed.

 

 

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