Clements: The global COVID-19 pandemic has injected never-before-seen uncertainty into the animal protein markets. Producers face depressed livestock prices as processing capacity declines, but prices at the meat counter are increasing, widening the gap between the two, according to the American Farm Bureau Federation. AFBF Economist Michael Nepveux says labor struggles at meat processing facilities are limiting the number of animals being processed.
Nepveux: One thing that creates is almost an immediate oversupply of animals trying to come to market at this point. So, you’ve seen dramatic declines in fed cattle futures as well as lean hog futures. At the same time, since there’s been a reduction in processing capacity, you’ve also seen the wholesale prices of beef and pork pretty much skyrocket.
Clements: Nepveux says more than two dozen processing plants implemented closures of various lengths because of COVID-19, and facilities are slowing processing speeds to ensure worker safety.
Nepveux: If you look at cattle and hog slaughter, you can kind of use those as a proxy for how much actual decline in capacity we have seen. And, from its March highs, we’ve seen weekly cattle slaughter drop almost 40 percent and weekly hog slaughter drop 45 percent.
Clements: The gap in wholesale meat prices and livestock prices prompted President Donald Trump to ask the Department of Justice to investigate.
Nepveux: President Trump announced that he has asked the DOJ to look into price fixing or any potential manipulation by the processing facilities. Basically, what he was looking at is that spread between the wholesale price of beef and pork and the prices that producers are receiving.
Clements: Micheal Clements, Washington.