COVID-19 Spurs Spike In Meat & Poultry Production
LMIC says that strong retail demand, and the resulting spike in processing margins, has incentivized processors and packers to ramp up production the last two weeks.
LMIC, which has provided livestock market analysis since 1955, is a joint effort of three types of participating institutions: 28 state Land Grant Universities, USDA agencies, and leading livestock organizations.
Regarding the current COVID-19 environment in the U.S., LMIC says, “Clearly, there is no shortage of protein available in the pipeline. But there are spot shortages of some products in some parts of the country when the normal supply pipeline could not catch up with panic buying and month supply that some consumers demanded.”
Widely reported was the wholesale beef and pork prices that spiked as much as 22% higher in mid-March. By the end of March, however, those wholesale prices were trending lower, suggesting the ramp up of production was having the desired effect.
For the week ended March 28, beef production was estimated at 561 million pounds, 13.7% higher than a year ago. Fed beef supplies were up even more. LMIC estimates total fed cattle slaughter the last week of March was 536,000 head, 11.5% higher than the previous year. Fed cattle weights in those last two weeks were running about 4% above year ago levels, suggesting fed beef supplies were up by more than 15% compared to last year.
“The increase in supply combined with a steady erosion in foodservice demand has significantly impacted higher value beef cuts,” LMIC says.
The closing of restaurants nationwide means “finding a home for some of the higher value cuts will be increasingly difficult.” USDA quoted a 15% discount on beef tenderloins the last week of March.
“As more people shelter in place and face an uncertain economic future, it will be difficult to push high value cuts through retail channels,” LMIC says. “Fed cattle (CME Live Cattle) show a dramatic discount into June, a discount that in part reflects the extreme uncertainty about beef demand in general and especially demand for high value cuts.”
LMIC estimated pork production last week at 592.4 million pounds, up 9.3% compared to a year ago. Hog slaughter was estimated at 2.754 million head, 8.9% higher than a year ago. In the last four weeks hog slaughter has averaged 8.5% above year ago levels. This is higher than the USDA estimate of the +180-pound hog inventory on March 1, which was pegged at +6.5% over year ago levels.
“The higher slaughter may indicate that some hogs are being pulled forward,” LMIC says. “Average carcass weights of producer owned hogs have moved lower in the last week or so, although the decline has not been especially dramatic. It appears that, in the near term, hog supplies remain plentiful.”
Some retail pork items have performed very well, but processed items have struggled.
“One would think that the low value of bellies so far this year would have resulted in lower bacon prices at retail but that has not been the case,” LMIC says. “For the week ending March 28, USDA noted the average price of bacon features was $5.27 per lb. Normally this kind of price would reflect belly primal values above $150. However, six weeks ago the average value of the belly primal was $71 per cwt and last week it was $64 per cwt. More bacon will need to be sold at retail, but current prices make that very difficult.”