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Meat-ing The Challenge: Part 1

No Playbook for This One

There is no doubt that the third and fourth months of 2020 have been different than anything the beef industry has ever dealt with.

As Victor Davis Hanson pointed out recently, the Greatest Generation had been through the Great Depression and WWII, when 500,000 Americans were killed. This Covid-19 epidemic has been a little dose of reality for the average American, bringing home the existential facts that life depends on food, fuel, electricity, sewage disposal, energy, etc. Hanson is both a historian, commentator, and farmer.

Michael Bloomberg’s implication that farmers and ranchers have no grey matter, that there’s more to farming than dropping seeds in the ground, is obvious now. People have more respect for physical labor and the essential things, Hanson added. Less believable is the idea that if you couldn’t write software code, you were dumb.

In that vein, the “thank yous” that have been expressed for truck drivers, farmers and ranchers, and grocery store stockers and clerks apply also to our feedyard crews, livestock truckers, packing plant workers on the line, and the warehouse workers keeping beef moving. Plant managers have faced crazy challenges in getting things shifted from producing HRI cuts, pumping up retail cuts and orders, figuring out new ways of operating precision line processes to increase employee-to-employee distance, keeping crews filled out, and other challenges.

We have learned a bit about what inexperienced Americans cook when they’re forced into it. Hamburger, potatoes, pasta, and beans make up much of the menu. Fancy vegetables are more likely utilized by fancy chefs than folks who would rather be eating out.

One packer mentioned his concern that food service orders in the warehouse might never be delivered and paid for. Another mentioned trying to keep up with ground beef demand. Trying to keep the flow balanced was sometimes working, sometimes not. The beef industry has been able to do better than other food items. Dairymen have been forced to dump milk, as foodservice demand disappeared. Cheese processors set up to ship cheese in 10-lb. bags couldn’t suddenly shift to consumer zipper bags or output butter in sticks instead of tiny restaurant packets. While dairy cows were coming to the market big time in some areas, other places had too much 50/50 trim.

The biggest challenge, of course, was keeping a healthy crew on the line. Managers and workers have suffered infection with the Covid-19 virus in some plants, hampering the ability to keep the lines up. A couple of pork and poultry plants have had to shut down for some days to do extra cleaning and re-group crews. One major added in some premiums on cattle and paid bonuses to plant workers to reward them for staying on the job.

Hard for outsiders to understand, we imagine, but food service demand evaporating overnight wasn’t easy. After all, food service handles over 50 percent of our beef production. Suddenly, it’s down to carry-out only or fast-food drive-through.

Through most of March, harvest levels kept up a pace comparable to previous weeks. But some incidence of illness has hampered numbers later on into April. Child care issues because of unexpected school closings were another factor. Whether extra Saturday work will keep numbers up remains to be seen. Fresh beef in the groceries has been spotty but supplies have been much better than other items in the grocery, like potatoes, pasta, eggs, and, of course, toilet paper.

The biggest imbalances have been in the markets. Retailers eyed empty meat cases and went after everything they could get, fearing every week that next week would be worse. Boxed beef prices jumped to heights not seen since that unusual 2014. Meanwhile, live prices, with feeders unsure what demand there would be from plants that might not be open soon, moved cattle as soon as they could for what they could get. Packers went hand to mouth, uncertain how many heads they could process or sell. The supply lines changed from the normal pattern, with packers buying cattle on Monday, Tuesday, and Wednesday. Yet the harvest numbers stayed in the high 600s for several weeks, slowing up in April.

NCBA has applauded government investigations of the markets’ reactions but it is hard to reconcile such unexpected and unusual conditions.

Stephen Koontz, Colorado State economics professor and experience student of the markets and the packing industry, said the markets were very focused when the virus panic hit. He did an interview with Darryl Blakey, associate director with NCBA.

The markets were pricing one thing: they were concerned about a major plant or two going down creating supply problems overnight, Koontz said. Knowing the first quarter had big beef supplies, big protein supplies, and lots of cattle on feed, the chance of supply chain disruptions triggered lots of aggressive selling, lots of aggressive risk coverage. When retailers saw empty meat cases, they tried to quickly catch up.

Some of these empty cases told Koontz that people who don’t normally put lots of beef in the freezer were suddenly doing so.

We noticed chicken was the first section to go empty. We heard one commentator note that “well, you can freeze chicken,” like that was the only meat that could be frozen. Evidently, folks have caught on that other meat freezes, too.

Next time: Cash markets, formulas, and chaos.

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