Cattle industry projected to lose $13.6 billion in wake of coronavirus
In an effort to help USDA determine how to best allocate CARES Act relief funds to cattle producers, the NCBA recently commissioned a study. Conducted by a team of agricultural economists led by Derrell Peel, Breedlove professor of agribusiness and Extension livestock marketing specialist at Oklahoma State University, the findings estimate cattle industry losses will reach $13.6 billion due to the COVID-19 pandemic.
While the study notes that COVID-19 does not materially affect the projections for total beef production in 2020, if there is enough labor disruption in processing facilities to lower total slaughter potential for the year, it could create a backlog of cattle and push some production into 2021. These impacts remain to be seen, but even a short closure could have significant consequences for market prices and the total amount of available beef.
So far, there is a significant impact on beef supply chains and the short run timing of beef marketing. Cash fed and feeder cattle prices at all levels have been impacted along with Live and Feeder futures prices being sharply lower and extremely volatile reflecting expected impacts for the remainder of the year.
Cow-calf producers, the study says, will be impacted the most with losses totaling an estimated $3.7 billion, or $111.91 per head for each mature breeding animal. If there are no relief payments to offset that number, the losses could increase by $135.24 per mature breeding animal, which could mean an additional impact of $4.45 billion in the coming years.
The stocker/backgrounder segment is projected to lose an estimated $159.98 per head, for a total economic impact of $2.5 billion in 2020; while the feedlot sector is estimated to lose $3 billion or $205.96 per head.
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“This study confirms that cattle producers have suffered massive economic damage as a result of the COVID-19 outbreak and those losses will continue to mount for years to come, driving many producers to the brink of collapse and beyond if relief funds aren’t made available soon,” says Colin Woodall, NCBA CEO. “This study also clearly illustrates the fact that while the relief funds provided by Congress were a good first step, there remains a massive need for more funding to be allocated as soon as members of Congress reconvene.”
Relief funds that were meant to provide aid directly to cattle producers, Woodall pointed out, were divided among multiple commodities, the majority of which already receive production support under government programs. Because cattle producers have always maintained their independence from government programs, most operate without that safety net today.
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“It’s only because of the extraordinary circumstances we face today that cattle producers need relief. While we appreciate the many members of Congress who supported the cattle industry and ensured cattle producers were eligible for relief funds, we need these same members to do more to make certain every cattle producer who needs relief can access funding. That’s why we’re calling today for additional funds to be made available specifically for cattlemen and women,” Woodall says.
Estimated losses by sector
As of early April 2020, the study estimated the following loss in revenue to the U.S. cattle industry.
Cow-calf sector: $3.7 billion in 2020, which is equal to $111.91 a head for each mature breeding animal. If the damages are not offset, additional long-term damages of $4.45 billion or another $135.24 per mature breeding animal will impact the cow-calf sector in coming years. Estimated 2020 losses are based on multiple estimates of impacts on calf sales in the current year. Because cow-calf production is a long-term investment, the study predicts the impacts in 2020 will extend for years into the future.
Stocker/backgrounding sector: $2.5 billion in 2020, which is equal to $159.98 a head. Because stocker/backgrounding production includes a wide range of animal sizes, the average loss is based on separate estimates of losses for animals 500 pounds and less ($118.40/head) and animals over 500 pounds ($184.38/head).
Cattle feeding sector: $3 billion in 2020, which is equal to $205.96 per head. These estimated losses reflect the decrease in value for animals placed into feedlots prior to the COVID-19 impacts and projected to be marketed through the third quarter of 2020.
Because the current situation is very fluid and uncertain, more damages are likely.
The team conducting the study included Derrell S. Peel, Oklahoma State University; Dustin Aherin, Rabobank; Randy Blach, CattleFax; Kenneth Burdine, University of Kentucky; Don Close, Rabobank; Amy Hagerman, Oklahoma State University; Josh Maples, Mississippi State University; James Robb, Livestock Marketing Information Center; and Glynn Tonsor, Kansas State University.
View the executive summary here. View the full economic assessment here.