Cows in field

COVID-19 Cattle Producer Impacts - An Update

Much has changed since my last blog (April 7, 2020), which focused on how COVID-19 had impacted cattle producers in California. At that time, widespread processing plant slowdowns and closures hadn't even been conceived and consumer purchasing patterns, driven by shelter-in-place orders, were the primary driver of wholesale and retail price increases for beef. In the intervening period, processing plant slowdowns and temporary shutdowns created a substantial bottleneck and market-wide impacts that reverberated throughout the supply chain. 


  • How substantial was the bottleneck in beef processing?
    • Weekly processing volumes (i.e., cattle harvested) were 40% lower than last year in late April - early May. 
  • Have beef harvest facilities returned to full capacity?
    • Weekly processing volumes during mid-to-late August have been comparable to previous years with plants, in aggregate, running at above 90% capacity. 
  • How has COVID-19 changed the prices paid by consumers for beef?
    • Yes. Retail prices paid by consumers in June for beef and veal were 25% higher than one year ago. Prices have moderated a bit in July; 14% higher compared to same month 2019. 
  • How has COVID-19 impacted the prices that ranchers receive for their cattle?
    • Yes. Feeder cattle prices (i.e., young cattle being raised for harvest) dropped 24% from mid-February to the beginning of April this year. 

In this installment...

March 31, 2020 marked the first beef packing plant (JBS' plant in Souderton, PA) in the United States to suspend operations due to COVID-19. Since that time, media coverage became fevered as meatpacking operations throughout the country began slowing or suspending operations in response to worker health issues and concerns. 

Processing Plant Bottleneck - Meatpacking operations in the U.S. (including beef, pork, and broiler chickens) employ a very large workforce - approximately 525,000 individuals, which is about 30% of all of food and beverage manufacturing employees. Current Center for Disease Control and Prevention (CDC) estimates indicate that, as of May 31, 2020, there were 16,233 confirmed COVID-19 cases among meatpacking employees; an infection rate of 9.1%. 

When COVID-19 infection rates became prevalent in beef packing operations across the U.S., facilities became to slow operations or temporary close. Because of these actions, weekly beef production (figure below) dropped dramatically. In late April, weekly processing volumes were 40% below then same week in 2019. This created a substantial bottleneck in the supply chain that caused disparate impacts upstream (cattle producers) and downstream (wholesale and consumers). On April 20, 2020 President Trump invoked the Defense Production Act, which designated meatpacking operations "critical infrastructure." This designation motivated packing plant re-openings and assisted in the recovery of processing volumes in late June. 

Graph of weekly beef production

Downstream Impacts - The bottleneck in the processing sector, couple with the product form challenges and changes in consumer shopping patterns (discussed in this blog), caused wholesale and retail prices for beef to spike. 

The weekly comprehensive cutout value (figure below) is the gross value of the beef carcass based on the prices paid for individual beef cuts/items (e.g., ribs, chucks, rounds) comprising that carcass. This cutout value represents prices paid in the wholesale beef market. Late April - early May the cutout value increased more than 90% (from $220/cwt to $420/cwt). During this same time beef packer margins (the difference between the choice cutout and the fed cattle price) climbed from $34/cwt to $279/cwt. 

Graph of weekly comprehensive cutout value

Consumers are also paying more for beef at the grocery store, due to the processing plant situation. The chart below (created by USDA ERS) compares retail prices in June 2019 to those paid by consumers in June 2020. Overall grocery store prices increased 5.6% during this period while beef and veal prices were 25% higher in 2020, compared to 2019. We have seen some moderation recently; the Consumer Price Index for beef and veal decreased 8.2% from June to July; meaning that July prices for beef and veal are 14% higher than one year ago. 

Graph of changes in beef markets

Upstream Impacts - The processing bottleneck has had severe impacts for beef producers. The 5 Area weekly weighted average steer price (shown below) represents what is going on in the fed cattle market (i.e., cattle ready to be sold to packers for harvest). This year (2020) has been marked by significant volatility. Further, when processing plant slowdowns and closures were most widespread, fed cattle prices dipped substantially (from early April to early May). Overall, the fed cattle market has seen a 22% decline in prices from January 2020 to late April 2020. This decrease in prices was caused primarily by the processing bottleneck causing a significant increase in the available supply of cattle for harvest. 

Graph of 5 area weekly wtd avg steer price

Feeder cattle (i.e., younger cattle that are being raised for harvest) prices have also been very volatile. Below is a figure that shows the feeder cattle futures contract traded on the Chicago Mercantile Exchange (CME). In mid February 2020 the contract was trading at $152/cwt. By the beginning of April, the price bottomed out at about $115/cwt; a 24% decline. This mimics closely what was observed in fed cattle markets. This also make sense intuitively because feed lots (i.e., operations that buy feeder cattle and sell fed cattle to processors) would not buy feeder cattle when they are unable to sell the fed cattle they have finished due to processing shutdowns. This is how the processing bottleneck reverberates throughout the supply chain; imbalances in supply and demand in one segment of the supply chain create price impacts and production adjustments in other segments. 

Graph of feeder cattle futures

Cow-calf and stocker operations in California have been affected by these market-wide impacts. These operations rely on rangelands and pasture-based forage to feed their brood cow herds and feeder cattle until they are ready for sale. As such, the widespread drought in the northern part of California this year (see map from the U.S. drought monitor below) limits California ranchers' ability to hold their feeder cattle in order to wait for prices to improve. This lower-than-normal availability of forage is another aspect of 2020 that has threatened the economic viability of California's ranching community. 

Map of California drought

If you want more information about this topic, I recently participated in a webinar for the College of Agricultural and Environmental Science's COVID-19 conversations series. Please click here to watch