Cuts to US beef processing impact wholesale beef price

Tuesday, 28 April 2020

The beef supply situation in the US is rapidly evolving. Only a couple of weeks ago, wholesale meat buyers were not reporting widespread supply shortages, despite reduced slaughter capacity at some processing plants. However, as cattle processing continues to be beset by problems, wholesale beef prices have recently rallied sharply, while farmgate cattle prices have fallen further.

In its latest outlook (dated 15 April), the USDA raised the first quarter beef production forecast due to higher weekly slaughter and heavier weights. The production forecast for the rest of the year was reduced, with the coronavirus expected to depress both slaughter and demand. Weekly slaughter data has since shown a rapid reduction in April. The spread of the coronavirus among abattoir workers has significantly affected operations. US cattle slaughter in the week ending 24 April was estimated at 469,000 head, down 27% on the same week a year ago. This followed a drop of 22% the week before.

According to Steiner Consulting, the only major plant that had suspended operations was the JBS plant in Greeley, Colorado. Although, it apparently re-opened last Friday, albeit at lower capacity. The nation’s second-largest plant, operated by Cargill in Fort Morgan, Colorado, is reported to have gone to one shift only. There are also some other smaller abattoirs that have reduced daily kill capacity.

According to data from the USDA, the carcase cutout value, a key wholesale measure, was up over 12% in the week ending 24 April, compared to a week ago. In the same period live steer prices had lost a further 5%, and are now 24% lower than they were a year ago.

On Tuesday 28 April, an executive order was signed by the President of the United States, using the Defense Production Act (DPA) to order meat processing plants to stay open and designating them as critical infrastructure. The order will apply to all meat processing plants in the U.S. in an effort to prevent further disruptions to the food supply. 

Duncan Wyatt

Lead Analyst - Red Meat

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