The slowdown of processing plants due to COVID-19 continues to hang over the cattle market and limit typical animal movements around the country.
But the situation could ease and possibly even disappear by September or October, according to Derrell Peel, Oklahoma State University ag economist. He analyzed USDA’s cattle on feed report released Friday.
“This latest report showed another month of very low placements (in feedlots) and the cattle on feed inventory was down about 5% again,” Peel said. “Marketings were down, but we knew that. We’ve had a lot of disruptions in these packing plants and weren’t able to process more cattle.”
The inventory of cattle and calves on feed for the slaughter market totaled 11.2 million head as of May 1. Placements in feedlots plummeted 22% to 1.43 million head (the second-lowest total for April since the statistical series began in 1996), while marketings of fed cattle declined 24% to 1.46 million head (the lowest April total since 1996).
Why such huge declines? Faced with a sharp decline in the number of cattle leaving feedlots, operators put the brakes on the number of cattle entering feedlots, authors of the CME Group’s Daily Livestock Report noted.
“The disruptions (at packing plants) the past six s has done a couple things,” Peel said. “On the meat side, it created a shortage of fresh meat and we’ve seen a tremendous response to wholesale boxed beef prices.
“On the producer side, these fed cattle the market can’t process put a lot of pressure on prices and, more importantly, created a backlog of several hundred thousand head.”
Fortunately, beef packing plant capacity improved from down 35% just three weeks ago to a more manageable deficit of 22%.
In fact, cattle slaughter surpassed 100,000 head May 20 for the first time since early April.
“Packing capacity is coming back on line,” Peel said. “We’re not there yet, but we’re a lot better than we were three weeks ago.
“We’re not sure how fast we’ll be able to chip away at the backlog of cattle. We know the post-COVID capacity in these plants is less than pre-COVID because they have to slow things down for safety.”
In the meantime, fed cattle weights are 5% above year-ago levels, according to the Daily Livestock Report.
So, when will the situation improve? Peel looks for the backlog to ease in the next few months and possibly disappear by fall.
“Two months of very low placements creates a substantial hole in that feedlot supply that will be coming out,” the economist said. “By September, we’ll start getting into a lot less cattle that need to be processed.
“So, if we’re still backed up at that point, these two months of low placements should allow us to get caught up by September or October, if we haven’t already done it by then.”