Beef supply bottleneck worries ranchers
A slowdown by the nation's meat processing plants due to outbreaks of COVID-19 has created a bottleneck in the supply chain, pushing prices lower across all cattle categories and forcing ranchers to make tough decisions about what to do with their market-ready animals.
The disruption comes during prime marketing season for many California ranchers, who sell their calves, steers and other cull cattle as warmer temperatures bring an end to the grass season. But with packing plants not processing at full capacity, feedlots are now backed up and buying fewer cattle, and at discounted prices, Calaveras County rancher Michael David Fischer said.
"The new feeder cattle aren't getting sold at a good rate because they have nowhere to go with some of the cattle," he said.
With no grass left for his calves and feedlots unavailable to take them, Fischer said he sold his cattle at $100 to $150 per head less than what he earned last year. Even though he normally markets his cattle in June, Fischer said he sold the calves in May at a lighter weight because smaller calves were selling for more money than larger ones, which "had nowhere to go." Lighter calves, he noted, could be put on grass longer, with hopes that by the time they go to the feedlot, the backlog would be cleared.
Some ranchers have retained ownership of their cattle, sending them to feedlots themselves, while others are holding on to their cattle longer, hoping the price will improve, San Joaquin County rancher Jack Sparrowk said.
"Of course, the grass only lasts so long, so it's time to get going," he said. "It's difficult because a lot of these cattle that are being marketed now are losing money."
Because he has irrigated pasture and hill ground for his cattle, Merced County rancher Dan DeWees said he's hanging on to his calves and culls until July, adding that he doesn't want "to give them away" at current prices. Other ranchers are also holding back, he said, noting that at a recent feeder sale in Turlock, there were just 1,500 head being auctioned, whereas the sale yard would normally see 5,000 to 8,000 head this time of year.
"It's a waiting game," DeWees said. "Everybody's waiting to see who's going to sell next and what's the market, what's the price."
Rancher Jerry Maltby has been holding his thousand-pound feeders at his own feedlot in Colusa County but said he plans to send them to auction this week, even though "the market is just horrible on them, the worst it's been in years." But he said he figures he will earn 5 to 6 cents per pound more for his cattle than he would have three weeks ago.
"I've kept them and kept them, and there's a certain point that there's a diminishing return on investment," Maltby said.
He noted the market has started to improve in recent weeks, particularly on lighter calves, so he plans to sell his in another week or two. But there remains "a lot of cattle sitting with the original owners, waiting for this market to go up," he added.
Cindy Tews, owner of Fresno Livestock Commission, said cattle prices have strengthened in the last few weeks, as more out-of-state buyers enter the market. The start of the summer grilling season also boosts demand for beef, she said, so that could move prices higher.
But market volatility has been particularly hard on ranchers whose livestock are entering the processing chain, including dairy cows and other cull cattle that are made into hamburger, she said. Whereas the price for butcher cattle shot up at the start of the shelter-in-place lockdown, she said, it's been on "a huge rollercoaster ride" since processing plants began to shut or slow production due to COVID-19 outbreaks.
As a rancher herself, Tews said "we haven't seen the returns that we would like to see," but as someone who runs an auction yard that caters to a lot of smaller buyers that use smaller packinghouses, she said "it is not all gloom and doom" for ranchers who sell to those niche markets, including farmers markets and other direct-market channels.
"We do have small processing plants here in our area and they have not missed one beat," she said. "In fact, they are now over capacity in just doing private processing."
Mendocino County rancher Peter Bauer said he plans to market some of his cattle via private sales and would like to do more direct marketing, but feels constrained by the lack of federally inspected meatpacking facilities in the state that process on a smaller scale.
"I would be inspired to do more direct marketing if I had an inspected facility to send my beef through, but that's a pain for us here in Covelo," he said, noting that the closest plant to him is in Eureka, which is nearly three hours away and a "logistical challenge." Other plants he's contacted say they're "maxed out," with appointments often months out.
Caleb Sehnert, manager of the University of California, Davis, Meat Lab and vice president of the California Association of Meat Processors, said meatpackers operate on a 2% to 3% profit margin, which means "you need to be running a lot of animals through in order to make any money on it." Smaller plants have been able to make those margins by catering to small ranchers with niche products and by being creative, such as having their own retail store, he said.
"We have had a bottleneck in California for quite a while as far as having enough (U.S. Department of Agriculture-inspected) slaughter plants and places for producers to take their animals," Sehnert said, adding that the situation worsened with the recent pandemic-related plant slowdowns.
Members of CAMP, which represents small meatpackers, are all "going full speed," he said, and so far, the small workforce in these plants has not been affected by the coronavirus, because employees have been able to keep their distance.
It is already a busy time of year for small packers, he noted, because they process many junior livestock, which are still being marketed despite fair closures. Increased demand for meat due to the pandemic and backup at larger packing plants have kept small butchers and meatpackers swamped, he added.
"I was talking to a really small meat shop in Vacaville and he said, 'Man, we've never been this busy ever,'" Sehnert said.
(Ching Lee is an assistant editor of Ag Alert. She may be contacted at email@example.com.)
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