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COVID-19 Impacts on Livestock Markets Persist, While Fed Says Ag Sector “Under Severe Stress”

May 27, 2020

Recent news articles continue to highlight the ripple effects COVID-19 is having on some aspects of the U.S. livestock market.  Meanwhile, the minutes from the Fed’s April meeting noted that, “The agricultural sector was under severe stress due to falling prices for some farm commodities and pandemic-related disruptions, such as the closing of some food processing plants.”

COVID-19, Livestock Issues

Last week, Washington Post writer Holly Bailey reported that, “Farmers here [Iowa] and across the country had entered 2020 hopeful about recouping some of their losses, after China agreed to a new trade deal in January that included commitments to buy billions of dollars in U.S. goods, such as pork. But then came the coronavirus pandemic, which has killed more than 90,000 Americans and upended life and business in ways previously unimaginable.”

The Post article explained that, “The disruption to the meatpacking industry has left a roughly two-month backlog of pigs across Iowa and in surrounding states, hundreds of thousands of animals that were ready to be slaughtered weeks ago but increasingly have nowhere to go.

“With packed farms and animals growing too large to be processed by plants not yet running at full capacity as companies try to keep vulnerable workers safe, many hog farmers are being forced to do the unthinkable: kill their pigs and dispose of their bodies instead of having them processed for food.”

Ms. Bailey indicated that, “The National Pork Producers Council has estimated as many as 10 million hogs will be euthanized by the end of the summer because of coronavirus-related disruptions in meat processing. In Minnesota, the situation is already dire — with an average of 2,000 pigs a day being killed, according to the state agriculture department. About 90,000 pigs have been euthanized in the state in the past six weeks.”

And on Saturday, Tammy Grubb repented at The News & Observer (Raleigh, N.C.) Online that, “Farmers statewide have started euthanizing 1.5 million chickens because of coronavirus-related slowdowns in the meat processing plants, a top agriculture official said Friday.

“It is the first time during the COVID-19 pandemic that North Carolina farmers have had to take the drastic step of euthanizing, or depopulating, their animals, Assistant Agriculture Commissioner Joe Reardon told The News & Observer.”

“Meat Workers Under Pressure And in the Dark,” by Michael Corkery, David Yaffe-Bellany and Derek Kravitz. Front Page- New York Times (May 26, 2020).

Michael Corkery, David Yaffe-Bellany and Derek Kravitz reported on the front page of today’s New York Times that, “Along with nursing homes and prisons, meatpacking facilities have proven to be places where the virus spreads rapidly. But as dozens of plants that closed because of outbreaks begin reopening, meat companies’ reluctance to disclose detailed case counts makes it difficult to tell whether the contagion is contained or new cases are emerging even with new safety measures in place. The Centers for Disease Control and Prevention said there were nearly 5,000 meatpacking workers infected with the virus as of the end of last month. But the nonprofit group Food & Environment Reporting Network estimated last week that the number has climbed to more than 17,000. There have been 66 meatpacking deaths, the group said.”

The Times article explained that, “After some slaughterhouses did close, restaurants and stores experienced significant shortages of meat, leading Mr. Trump to issue an executive order designating meat plants ‘critical infrastructure’ that must stay open.

But the order did not address crucial issues like testing, leading many companies to reopen plants or keep them operating without fully assessing whether employees had contracted the virus.

And on the front page of today’s Washington Post, Taylor Telford reported that, “Tyson Foods, the largest meat processor in the United States, has transformed its facilities across the country since legions of its workers started getting sick from the novel coronavirus. It has set up on-site medical clinics, screened employees for fevers at the beginning of their shifts, required the use of face coverings, installed plastic dividers between stations and taken a host of other steps to slow the spread.

Despite those efforts, the number of Tyson employees with the coronavirus has exploded from less than 1,600 a month ago to more than 7,000 today, according to a Washington Post analysis of news reports and public records.

What has happened at Tyson — and in the meat industry overall — shows how difficult it is to get the nation back to normal, even in essential fields such as food processing. Meat companies have spent hundreds of millions of dollars on measures such as protective gear, paid leave and ventilation systems since they were forced to shut dozens of plants that were among the top coronavirus hot spots outside urban areas.”

“Strain on Meat Industry Builds,” by Taylor Telford. Front Page- Washington Post (May 26, 2020).

The Post article pointed out that, “But the industry has still experienced a surge in cases, and some companies say they are limited in just how much they can keep workers separated from one another. Only a portion of the labor force has gone back to work — some workers kept away on purpose — and the nation’s meat supply remains deeply strained as barbecue season gets underway.”

And Sky Chadde, Kyle Bagenstose, Veronica Martinez Jacobo and Rachel Axon reported on the front page of today’s USA Today that, “The meatpacking industry now faces perhaps its greatest test of worker safety, as the novel coronavirus continues to sweep through its slaughterhouses and processing plants.

“As of May 20, officials have publicly linked at least 15,300 COVID-19 infections to 192 U.S. meatpacking plants, according to tracking by the Midwest Center for Investigative Reporting. At least 63 workers have died.”

“USA’s meatpacking plants ideal virus breeding ground,” by Sky Chadde, Kyle Bagenstose, Veronica Martinez Jacobo and Rachel Axon. Front Page- USA Today (May 26, 2020).

Harriet Ryan, writing in today’s Los Angeles Times, reported that, “The union that represents workers at a Vernon meatpacking plant where at least 153 have come down with COVID-19 called Monday for the immediate closure of the facility, saying there was no evidence measures taken to control the coronavirus were working.

“The outbreak at the Farmer John plant, a division of Smithfield Foods that produces Dodger Dogs and other pork products, is by far the largest in Los Angeles County to occur outside of a nursing home, prison or other residential setting, according to data from the county’s Public Health Department.”

Meanwhile, Reuters writer Tom Polansek reported last week that, “U.S. frozen pork inventories fell in April, when they typically rise, and beef inventories dropped more than normal as the coronavirus pandemic shut slaughterhouses and prompted grocers to limit customers’ buying, government data showed on Thursday.

“About 20 meat plants shut last month while consumers were stocking freezers during state-imposed lockdowns. U.S. President Donald Trump ordered the plants to stay open after meatpackers warned of shortages.

“Total pork inventories in cold-storage facilities declined about 2 million pounds to 614.8 million pounds as of April 30, compared to a month earlier, according to U.S. Department of Agriculture data. Normally supplies increase 27 million pounds from March to April, said Rich Nelson, chief strategist for broker Allendale.

“Total Frozen Pork- United States, Cold Storage Stocks, 2017-2020.” USDA- National Agricultural Statistics Service (May 21, 2020).

Total beef inventories fell by about 12 million pounds to 490 million pounds, exceeding the average decline of about 6 million pounds from March to April.”

More broadly, Reuters writer Ana Mano reported this week that, “Nearly 340 meatpacking workers at a single BRF SA plant in southern Brazil have tested positive for the novel coronavirus, the company said on Monday.

“Brazilian meatpacker BRF said in a statement that 6.6% of its 5,132 workers at its Concórdia plant in Santa Catarina state had tested positive for the virus.”

Agricultural Finances

On Wednesday, the Federal Reserve Board released minutes from its April meeting, which stated in part that, “The agricultural sector was under severe stress due to falling prices for some farm commodities and pandemic-related disruptions, such as the closing of some food processing plants.”

Minutes of the Federal Open Market Committee, April 28-29, 2020

“The #agricultural sector was under severe stress due to falling prices for some #farm #commodities and #pandemic-related disruptions, such as the closing of some #food processing plants.” ⬇️

— Farm Policy (@FarmPolicy) May 21, 2020

Also last week, Associated Press writer Roxana Hegeman reported that, “Farmers across the nation leaned more heavily upon the federal government last year to finance their agricultural operations amid low commodity prices and trade disputes, and more of the money they borrowed is now delinquent.

“Although the U.S. Agriculture Department said it has not seen a significant change in loan delinquency rates because of the coronavirus pandemic, it expects an impact if the economic fallout continues.

“Farm foreclosures have not increased, and the department has taken a number of measures to forestall them — including more flexibility for borrowers to extend repayments for annual operating loans.”

The AP article noted that, “A state-by-state breakdown for the last two years of delinquent direct and government-backed loans that The Associated Press obtained through an open records request from the USDA’s Farm Service Agency offers a glimpse into financial difficulties faced by producers that varies widely by geography and industry.

Most vulnerable are beginning farmers and smaller agricultural operations that typically get their financing through the agency’s direct loan program. Those are typically the riskiest borrowers who cannot get financing elsewhere.

“The agency directly lent those farmers more than $12.7 billion dollars, and more than $639.4 million of that amount was delinquent as of April 30. That represents an increase of $1.26 billion in direct loans under that program and a jump of more than $8 million in delinquencies compared with the same date a year ago. Nationwide, 18.76% of government direct loans were delinquent.”

Meanwhile, Wall Street Journal writer Bob Tita reported last week that, “Deere & Co. said the coronavirus pandemic will intensify a yearslong slump in agricultural equipment sales, as farmers further reduce spending amid lower demand for their crops and livestock.

“Deere on Friday reset its profit forecast for this year at a significantly lower range after tossing out its previous guidance in March as the pandemic disrupted its farm-and-construction equipment businesses.”

Source: Keith Good, Farm Policy News