Livestock industry responds to price, processing issues

Workers process hogs at a U.S. packing plant. Leaders of various livestock groups, featured during the Future of Ag Forum, say the industry is taking steps to address a tight supply of packing capacity that became a major issue early on during the coronavirus pandemic. (Illinois Farm Bureau file photo)

The coronavirus pandemic didn’t necessarily create new issues for the U.S. livestock industry perhaps as much as it sped up lingering concerns about limited processing capacity and price transparency.

At the height of COVID-related processing plant shutdowns last spring and summer, pork producers temporarily lost access to about half of the industry’s processing capacity while cattle farmers lost access to about 40% of shackle space.

Now, industry leaders and representatives continue to work feverishly to develop and install methods to avoid a crisis of that magnitude again.

Dallas Hockman, vice president of industry relations for the National Pork Producers Council (NPPC), Tanner Beymer, director of governmental affairs and market regulatory policy for the National Cattlemen’s Beef Association (NCBA), and Scott Bennett, director of congressional relations for the American Farm Bureau Federation, discussed the industry’s ongoing response during the Future of Ag Forum on Wednesday.

The Illinois Beef Association, Illinois Farm Bureau, Illinois Milk Producers Association and Illinois Pork Producers Association hosted the virtual event.

“We were set to have a profitable year and then COVID-19 hit,” Hockman said of the pork industry. “We saw a dramatic reduction of supply chain availability with about 50% of plants closed at one point.

“Price and availability are the real issues. The supply chain is very fragile,” he noted. “We’re having discussions now about product availability.”

Bennett said the processing capacity issues last year renewed interest in shifting from a just-in-time to a just-in-case supply chain. That could include making federal funding available to help smaller packers become federally inspected plants so they can process more animals along with putting more risk management tools in place.

“I think it’s apparent our meat supply chain is very much just-in-time,” Bennett said. “Farmers really wanted to help (move more products through the chain directly to consumers when the pandemic hit), but the bottleneck is in distribution and packing capacity. It’s not an issue of production (or a lack thereof).”

One of NCBA’s long-term goals focuses on increasing packing capacity by 7%, according to Beymer. Four firms currently control more than 80% of the packing market.

NCBA also seeks to improve price transparency and relationships through a voluntary effort to increase negotiated trade of cattle and supports the Price Act, which includes federal incentives for existing processing facilities to expand as well as the creation of new business ventures.

The combination of decreased cattle processing capacity and sizzling consumer demand for beef amid the pandemic created the largest split between fed cattle and boxed beef prices ($279 per hundredweight) since those records started in 1995.

“Lost access to processing capacity had a major impact on the marketplace,” Beymer said. “Cattle prices plunged and boxed beef prices skyrocketed.”

NPPC responded to hog pricing issues by helping launch a new pork cutout index through the CME Group.

“We feel it’s another financial tool available for producers,” Hockman said.

In the meantime, immediate efforts to improve safety measures for packing plant workers continues to keep meat cases stocked around the country.

“We’re back to fairly normal on the packing side of the equation, although it’s still tight,” Hockan added. “With foodservice off about 50%, we saw retail (demand) respond and saw overall growth in the meat sector (in 2020).”