The Beef Industry & The Impact of COVID-19

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COVID-19 has already disrupted the global economy and dozens of industries, including the beef industry.

Several weeks after the coronavirus started to spread to countries outside of China, cattle markets became volatile and dropped to new lows. Independent ranchers and major food companies are already experiencing losses.

The good news is that the cattle industry will likely weather this storm as it has in the past. However, ranchers and investors likely want to know the severity of COVID-19 on the beef industry and how long it will take to bounce back. Due to this there is a strong push to buy American beef.


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Beef Cattle Industry Losses May Total $13.6 Billion

Demand for beef remains strong in North America. Between 2015 and 2018, beef production increased by roughly 13%. The industry experienced lower cattle prices in 2019 and experts predicted an upswing for 2020. The coronavirus has thrown a wrench in those predictions with the industry taking a major hit.

A study completed by Oklahoma State University estimates that the beef cattle industry may experience losses of $13.6 billion due to COVID-19. The study also provided a summary of the damages:

  • $2.5 billion in losses to the US stocker/backgrounding sector
  • $3.0 billion in losses to the US cattle feeding sector
  • $3.7 billion in losses to the cow-calf sector in 2020
  • $4.5 billion in losses to the cow-calf sector in the coming years

The cow-calf sector is expected to experience the most significant losses. Researchers used multiple price forecasts and futures contract prices to estimate price declines from March 2020 to December 2020.

COVID-19 is not expected to impact beef production output for 2020 unless additional plant closures occur. The driving factor behind declining sales is an expected bottleneck in the supply chain. The uncertainty of COVID-19 has also increased the short-term volatility of the market for futures prices.

beef cattle in a field

Domesticated Livestock Cannot Transmit COVID-19

The declining cattle prices are not related to the health of the cattle. The Canadian Food Inspection Agency confirms that there have not been any reports of livestock being infected with COVID-19.

Meat that is handled by a person infected with COVID-19 is also unlikely to lead to transmission. COVID-19 infects people through the respiratory system. The virus is not known to cause illness when ingested through the stomach, eliminating the risk of illness from eating food that an ill person handled.

Food is unlikely a source or route of transmission for the virus. While beef remains safe to consume, some of the plants where it is processed have started to close due to the spread of COVID-19.

cutting fresh beef in a butcher shop

Plant Closures May Limit Beef Production Capacity

Cattle cannot transmit coronavirus and demand for beef remains high. However, the industry may still experience reductions in production capacity due to the closure of processing facilities.

About a dozen meat processing plants have closed in North America. This includes plants managed by some of the largest meat producers in the industry.

JBS USA closed its Colorado facility until at least April 24. The Colorado location slaughters close to 5400 cattle per day, which is about 5% of the total daily beef kills in the US.

A Tyson Foods cattle processing plant in Iowa is closed through April 20. Several poultry and pork plants have also closed throughout the country.

On March 27, the Harmony Beef company shut down its slaughter operations in Alberta, Canada. While some regions have experienced peaks in daily new confirmed COVID-19 cases, future outbreaks could lead to additional plant closures.

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Comparing COVID-19 to Previous Economic Slowdowns

COVID-19 is not the first time that the beef cattle industry suffered due to a major crisis. During the 2008-2009 global recession, cattle markets experienced losses and uncertainty.

The recession led to decreased consumer demand for beef. In 2008, cattlemen lost an average of $130 per head of cattle. Experts predict similar losses for the beef cattle industry in 2020.

As economies around the world started to stabilize and recover from the 2008 recession, consumer demand and production increased. The cattle market stabilized and started to grow.

If the 2008 recession is an adequate comparison, the beef industry should slowly regain its footing after countries start to reopen their economies.

beef dinner with veggies

Summary

The coronavirus has impacted the global economy. The North American beef cattle industry is just one of many industries to experience sharp declines in prices for certain cuts of beef.

Sales for beef have remained steady, as consumers stocked up on meat and other foods at the start of the pandemic.

Depending on how long the impact of COVID-19 lasts, losses could reach the billions of dollars. However, most experts agree that the beef cattle industry is complex and large enough to ride out the inevitable recession.

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