U.S. farm income may suffer due to coronavirus impact on livestock
Meatpackers are operating at high volume again after coronavirus outbeaks at their plants but the pandemic’s effects may be felt for the rest of the year, said the Kansas City Federal Reserve Bank. “Farm revenues could still decline in 2020 due to disruptions at meatpacking plants, which forced some producers to depopulate herds,” said the report by the regional Fed bank.
“Moving forward, modified operations and revised processes related to COVID-19 at packing plants may continue to put constraints on meat production,” said the Kansas City Fed. “In addition, higher retail prices, particularly in the midst of an economic downturn, could temporarily reduce aggregate meat consumption, further weighing on the outlook for producers and consumers of meat.”
The FAPRI think tank has estimated an 8% decline in livestock revenue this year, compared with 2019, with lower average hog, cattle, and poultry prices. Per-capita meat consumption would decline this year and take years to recover, said the University of Missouri think tank in June. Overall, it projected a 3% decline in farm income, thanks to record federal subsidies that would largely offset big losses in farm receipts.
Livestock farms generate more than half of U.S. farm revenue; cattle and hogs amount to almost half of livestock revenue. When the livestock industry suffers, the effect is felt broadly. “Greater financial difficulties for livestock producers could add stress to agricultural lending portfolios that already had increased before the pandemic,” said the Kansas City Fed, pointing to expectations among farm bankers of lower loan repayment rates by livestock operators. “Moreover, according to information gathered at the onset of developments related to COVID-19, farm income and loan repayment rates declined at a faster pace than in recent quarters.”
Nearly two-thirds of meat processing plants experienced cornavirus outbreaks and 20% closed temporarily, said the Kansas City Fed. The slowdowns and shutdowns led to an esimated backlog of 500,000 head of cattle and 3 million head of hogs.