Rebound on cattle markets not expected until packing plants can return to capacity

Calgary (Rural Roots Canada) — 2020 was supposed to be an excellent year for the cattle industry.

And then COVID-19 happened, and like most industries, the cattle industry was not spared, with prices taking a sharp decline.

“Having an impact on all markets, including the equity markets, which affects the commodity markets and cattle haven’t been immune to that certainly seen prices drop significantly,” according to CanFax Manager and Senior Analyst Brian Perillat.

He says there were plenty of reasons to be optimistic, heading into this calendar year.

“We were quite optimistic there seemed to be some really good economic demand, global demand, maybe even some supply, maybe the U.S. herd contracting a hair, by the end of 2020 seeing some positive results there, but it has been anything but that.”

Perillat says they have seen a significant drop off in prices since January.

“If we look at fed cattle prices from January you are looking into the 160s, we were into the 140s a couple of weeks ago, and this week with just the issues with the packing plants and packing capacity being constrained so much, some plants aren’t even on the market, we’ve seen cattle fed prices drop down to the mid-120s.”

One of the primary reasons is because capacity processing plants have had to cut back production as they deal with COVID-19 cases amongst their workforce.   Just this past week, Cargill announced that they were temporarily suspending slaughter of cattle at its High River plant, while they increased safety measures after several cases surfaced at that location.   This comes after Harmony Beef near Calgary had to shut down operations to deal with COVID-19 cases of there own.  Cases of COVID-19 have also been confirmed at the JBS plant in Brooks.

Perillat says producers have seen the price drop by as much as $450 per head in just three weeks.

Cull cattle, which had been in high demand and fetching prices in around 90 cents a pound, has dropped off to approximately 60 cents in most cases.

Where is this going?

Perillat says right now we are in the middle of the crunch, and they don’t know how much tougher it will be moving forward. However, he points out that things are in a good position right now, given the plants are still open and beef is flowing, and cattle can flow.

The U.S. outlook on cattle is not really there right now because they are having similar issues to Canada; there’s not much import demand on Canadian cattle.

Even with Cargill down and working on getting everything in place for the workers’ safety and health and hopefully later this week, they can get back to processing some cattle again.

“We absolutely need to keep processing open and going and the markets working as best as possible. ”

Perillat says it’s tough to say how long this will go for.

“Realistically, I believe these cattle prices could remain depressed until these packing plants can pick it up a notch.”

Double Whammy

As mentioned before, things were looking pretty rosy coming into 2020, part of that had to be there were more cattle being fed in the country than in previous years.

Perillat says they needed the packing plants running at full capacity.

“We needed cattle packing plants running on all cylinders going into this, and it has been anything, but; this has kind of exacerbated the problem.”

Packing capacity is down nearly 50 per cent right now, and it could be 30 – 50 per cent for a little bit here until these COVID cases (at the plants) get back to normal.

For more on the cattle prices and how they are being affected by COVID-19, check out CanFax’s webpage.