Amidst a nationwide pandemic of fast-spreading coronavirus, cattle producers experienced some panic of their own as they watched prices crash.
The price producers get for their cattle at the sale barn is down, but the wholesale cost of beef is up, and cattle producers said that’s cause for concern – especially at a time they’re looking to sell fat cattle to make room for newborn calves.
Dennis and Bryan Hanson saw it play out as owners of Fort Pierre Livestock Auction in central South Dakota. After considering the price they paid for the cattle, the feed and work that went into raising them, producers hoping to make a profit lost money when they sold at auction.
Cattle prices dropped significantly the week of March 16 as coronavirus-related cancellations, closures and isolation measures gripped the nation.
People were stocking up on beef and other food, and over a three-day period, boxed beef prices increased by $40. Dennis Hanson compared it to prices of hand sanitizer and bottled water that went up in light of panic buying spurred by the COVID-19 pandemic.
Common sense says it should translate to good profits for those raising cattle, Dennis Hanson said.
“These guys with fat cattle to sell should have a spike in their market, but it’s the opposite,” he said over the phone Thursday, March 19.
From what he’s heard at the sale barn, Bryan Hanson said producers were losing $300 to $400 per head.
Low prices come in the middle of a three-month span when fat cattle prices are usually high. It’s also a time when farmers are preparing to renew operating loans. The loss of revenue is not easily absorbed.
Many ranching families are on the brink of going under, said Sen. Mike Rounds, R-S.D., during a media call Thursday, March 19, as he announced new legislation that includes financial help for cattle producers in a COVID-19 response bill. This came after several cattle groups, including Nebraska Cattlemen, called on Washington delegates to provide relief and investigate meat packing companies.
“Because of the rapidly increasing spread between boxed beef prices and live cattle prices over the past week, our first priority is to demand USDA increase monitoring of price action and buyer behavior at the feedlot-packer interface and take swift action if undue price manipulation is discovered” Nebraska Cattlemen President Ken Herz said in a news release. “We are also pursuing a one-time “beef stimulus” payment for cattlemen and women that have dealt with rapid market declines and continued extreme volatility.”
Under Rounds' plan, ranchers would be compensated for the gap in prices. Losses would be figured by comparing monthly average cattle prices to 2020 projections from the U.S. Department of Agriculture. Others have suggested using a formula based on prices from January – before COVID-19 erupted and started affecting markets. Some suggested a one-time per-head payment.
“There’s no doubt that our cattle producers are suffering as a direct result of the COVID-19 outbreak,” Rounds said. “They need relief. We want to make sure that we find a way to address this situation before we start losing these producers.”
Bryan Hanson said cattle producers would rather have a fair market than a government handout. That’s where Rounds is hoping the payment can provide some relief while his other proposals work toward long-term solutions.
The senator is supporting country of origin labeling and requesting the Department of Justice investigate whether packers are breaking any pricing laws.
“These margins just don’t make any sense. We just want to know why,” he said.
Eric Jennings raises cattle in the foothills of the Black Hills and serves as president of the South Dakota Cattlemen’s Association. He’s not holding his breath for an investigation into packers turning up anything substantial. When authorities have looked into prices in the past, there’s always something to explain the market distortion, he said. Here it was a case of high demand for meat and full feedlots, giving packers no trouble when it came to procuring cattle to meet demand.
“The packers are in a very good position right now,” Jennings said.
He’s more worried about the futures markets and the way it pulled the cash market down when futures contracts started dropping. It should be the cash market that influences futures, he said.
Jennings supports offering compensation to cattle producers in light of the current market disruption, but he said creating a livestock insurance program similar to crop insurance could be a better long term solution.
“That would also take the government out of the disaster payment business,” he said.
While producers look to Washington for some relief, Jennings reminded people to continue to check on neighbors and family and care for their own mental health as well.
“These are pretty tough times,” he said. “It’s very stressful for people.”