April 6, 2020 - By Ching Lee - As shoppers stock their freezers and pantries in response to COVID-19, wholesale and retail beef prices have jumped, but uncertainty about the pandemic's long-term impacts on domestic and international demand has kept cattle markets floundering.

(Left) Uncertainties in the cattle futures market have been amplified by COVID-19 precautions that have led to restaurant closures and restricted export sales—key markets for higher-end cuts of beef. Photo/Richard Green

For now, ranchers with market-ready beef to sell are moving product as fast as they can, trying to replenish supermarket meat cases and quench surging demand as people hunker down and cook more meals at home.

Nevada County rancher Jim Gates, who markets his beef directly to stores, restaurants and individual customers, said increased sales in recent weeks have left his freezer "just about empty," even though restaurant orders have nearly stopped. Deliveries to stores have "just about doubled," he said, particularly for hamburger, of which he's now moving five to six times more.

"This just went out of sight," he said. "I would deliver and within a couple of hours the stores are yelling, 'Hey Jim, we're out.' We're even selling the beef bones like they're on fire."

Working with just one processor, which "could only cut so much beef," Gates said he's done his best to meet the rising demand.

In more recent days, Gates said shoppers' buying wave appears to have "slowed a little bit," adding, "I just don't see that people can continue to buy this volume of food" and have space to store it. He said he expects sales will drop, though the question is when—and how to be ready, noting the approaching spring marketing season for cattle.

"The cattle are all going to get good and fat, and they're going to be ready to go," he said, "and the market might actually just about dry up."

Cattle markets began to fall weeks ago, as local governments began imposing social-distancing orders and concerns heightened that restaurants and possibly packing plants would need to close, said Gaylor Wright, a cattle dealer, seller and buyer for California Fats and Feeder in Oakdale. The lack of rain and grass for cattle had ranchers "getting panicked," he said, as they were faced with either moving them, buying hay or selling cattle at low prices. March rains eased the urgency to sell for some ranchers, who are now "holding the cattle back," he added.

Based on the volume at auctions, John Rodgers, a rancher and cofounder of Western Video Market, a division of Shasta Livestock Auction Yard in Cottonwood, said he thinks most ranchers opted to wait. Whereas some markets should be running 1,000 to 1,500 cattle this time of year, they are down to 100 to 200, he said.

Rodgers described his video auctions as "business as usual," except for cancellation of the WVM convention scheduled for Visalia this month. For the yard's live auctions, only buyers are now allowed into the sale ring, he said.

Soaring demand for slaughter cattle, which produce ground beef, has ranchers and dairy farmers culling more cows and bringing them to market, Wright said, noting that sale yards that normally see 500 to 600 cull cows are now getting 900.

With meat counters across the nation "wiped out" and retailers needing to refill them quickly, Wright said business has been good for packers, and ranchers have seen the price of slaughter cattle climb 60%. The higher demand for ground beef, he said, is driven not just by increased retail sales but because many fast-food restaurant drive-throughs remain open to serve hamburgers.

Though cull cattle are bringing more money for ranchers, Yolo County rancher Casey Stone, who recently sold two cull bulls and a cow, noted the market for cattle that produce higher-end cuts continues to drop due to uncertainty created by COVID-19 restrictions.

With restaurants being closed and a slowdown in exports, which consume about 20% of U.S. cattle production, Butte County rancher Holly Foster, who works as an operations and marketing manager for Western Video Market, said impact of the coronavirus "just exacerbates that uncertainty in the futures market," which affects the price of light-weight cattle and calves.

Noting that her family ranch qualifies for several export programs, Foster lamented how the coronavirus has downgraded the outlook for the Phase 1 U.S.-China trade agreement, which reopened the Chinese market for U.S. beef, and the European Union's expanded quota for U.S. beef imports.

"No one knows how this will end up from an international or domestic standpoint, but we could certainly see some repercussions," she said. "We're still going to have to sell those calves at some point."

After Congress passed a package of coronavirus relief measures last week, the National Cattlemen's Beef Association urged U.S. Agriculture Secretary Sonny Perdue to act immediately "to provide much-needed relief to cattle producers who have been negatively impacted" during the pandemic.

Rodgers said he sees the rise in demand for ground beef as temporary and thinks "a new demand" for prime cuts will kick in and "come back like gangbusters" when restaurants reopen for normal business, though he acknowledged "nobody knows for sure when that'll be."

Wright said he expects market prices will be higher when many California ranchers sell their cattle later this spring, assuming people begin frequenting restaurants again by then.

"I suspect this cow market could stay like this and possibly get stronger all the way through to the middle of the summer," he said, noting that by then, producers in midwestern and northwestern states will start buying replacement cattle to put on grass, which will also stimulate demand for light cattle.

Stone said he expects high demand for beef at the wholesale and retail levels will continue through the summer, though market volatility leaves him unwilling to expand production.

"We're not seeing the forecast for good cattle prices," he said. "The incentives are not there."

Rather, Stone said he's looking to do more events and agritourism on his property to maximize income, though he also acknowledged "that market is dead in the water" for now.

"But it will come back and we want to be poised to take advantage of that and try to do more things to bring in additional revenue to the ranch besides relying on the commodity market," he said. "You have to get creative."

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)
Reprinted with permission: California Farm Bureau Federation