Producers rail against beef market gap as product flies off shelves

The COVID-19 pandemic has consumers buying beef in spades, but producers say none of that positive is trickling down

Beef is clearing off the grocery shelves at both record pace and rising price due to COVID-19, but beef producers have seen little of that at the auction mart.

Farmers took to social media in mid-March to express frustration over the gap between beef prices and their own price for live animals.

Wholesale beef south of the Canada-U.S. border is at its highest level since 2015, Bloomberg reported March 17, reaching US$224.36 per 100 pounds of beef. The same Bloomberg article reported that U.S. cash cattle prices hit their lowest level since 2010.

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Those woes have translated to the Canadian side of the border. Rick Wright of Heartland Order Buying Co. in Virden estimated that Canadian live cattle prices dropped anywhere between 20 and 25 cents a pound in the first two weeks of March. At the same time, local auction marts noted a “wreck” in both the stock market and cattle futures, Glacier MarketsFarm reported March 13.

Meanwhile, business has been good for North America’s major packers. In a town hall meeting of the Canadian beef sector March 20, Canadian Cattlemen’s Association executive vice-president, Dennis Laycraft, noted that some processors were adding an extra day to their work week to meet the growing need for beef.

“There is quite extraordinary demand right now,” he said.

Tyson Foods has since announced that it would boost payments for cattle slaughtered in the third week of March, payments that were later reported to hit $5 per cwt on live cattle and $7.94 per cwt for dressed cattle, according to Reuters.

Processors such as Cargill and Maple Leaf Foods have also said that they would boost pay for plant workers due to the ongoing pandemic. Cargill did not respond to requests for an interview as of print time.

Wright, also the Livestock Markets Association of Canada executive secretary, called producer concerns, “an emotional reaction,” although he acknowledged that live cattle prices have recently taken a significant hit.

“If they look at the whole beef complex, what we’re seeing today is beef that is on the shelf that was probably priced anywhere from 40 to 150 days ago,” he said. “We’ve got strong demand, but a lot of it is, I think, hoarding that’s been prompted by fear of the grocery stores shutting down.”

Much of that beef is being taken home and stored rather than being eaten right away, he noted, and those consumers will not soon return to the store to buy more.

At the same time, he noted, the beef sector will eventually take a hit from things like sporting events shutting down, depressing the demand for products such as hamburger.

“In the interim, the packers are killing lots of cattle. They’re talking about going to six days (a week). They’re making lots of money off it,” he said. “But the feeder cattle we’re selling today will not be harvested for another 120 or whatever days down the road and we don’t know if the COVID-19 situation is going to be as severe 100 days from now as it is today.”

The demand brought on by COVID-19 was unforeseen in the futures market, and therefore has not worked that impact yet into prices, attendees were told during the March 20 beef sector update.

Wright equated the situation with North America’s stock markets, which saw significant drops in March and has also been linked to the current downturn in the cattle market. Potential volatility has similarly impacted the futures market in cattle, he said.

Wright expects there to be “decent” opportunity for cattle buyers over the next month. Some producers may be waiting for that market to rebound before shipping cattle, he noted, although that is running afoul of diminishing feed supplies, cash flow issues and the need for space as spring calving hits its stride.

Yearling prices might rebound if the COVID-19 situation eases and calf prices might rise to meet prices last year, Wright suggested, assuming that producers do not run into the feed shortage issues that have plagued Western Canada for the last two years.

“This is not going to get fixed overnight and, if they can wait it out, there’s a gamble that things could be quite a bit better,” he noted.

If it does not resolve, however, Wright warned that producers might face a tough market in the 2020 fall run.

The market is starting to pick up, both Laycraft and Wright noted, although the experts are still forecasting volatility.

Laycraft noted that the market is starting to move up, in contrast with the futures market, as of the third week of March.

“What we can say is that we’re doing our best to make sure that product flow is moving and we’re getting as many cattle processed (as possible),” he said. “The ability to export those live cattle as well helps in terms of price arbitrage and the number of bidders, but we are talking to the processors and retailers.”

It is Laycraft’s hope that prices will continue to rise as more cattle move through the system.

About the author

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Alexis Stockford

Alexis Stockford is a journalist and photographer with the Manitoba Co-operator. She previously reported with the Morden Times and was news editor of  campus newspaper, The Omega, at Thompson Rivers University in Kamloops, BC. She grew up on a mixed farm near Miami, Man.

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