High demand for beef in time of stress

High demand for beef in time of stressby Troy Bishopp

Three hundred to 500% increase in sales is a clear indication that beef is still “What’s for Dinner.”

“In times of stress, it’s encouraging to know our customers seek out nutritious, domestically raised beef to feed their families,” said Tommell Cattle Company’s Nick Tommell of Berne, NY. It’s a sentiment throughout the U.S. beef industry and at local farms since the COVID-19 pandemic began. Flattening the virus’s curve has meant a spike in overall meat purchasing.

“Domestic demand for beef will likely remain fairly steady. It gets complicated with so many restaurants, hotels and schools shuttering for an unspecified amount of time. This is triggering a supply chain shift from institutional to the grocery sector as consumers withdraw from public life and choose to eat the majority of meals from their homes. Experts say this will help prevent the spread of the virus, but it comes with its own challenges to the supply chain,” said the Kansas Cattlemen’s Association.

“It was another huge week in terms of meat sales as people went to retailers to get food and not restaurants. The evidence that those sales were tremendous everywhere was that these daily spot sales for the week totaled 1,175 loads, which is about twice of the normal weekly sales, especially at very high prices. The daily spot Choice box beef cutout ended the week on Friday, March 20 at $253.75, which was $45.61 higher compared to previous Friday and the highest weekly price jump ever recorded,” said Ed Czerwien, a market analyst based in Amarillo, Texas.

Sources say there are over 8 billion pounds of beef in the supply chain so why the empty shelves? “This is an issue of demand and allocation, not supply. If a store is normally ordering 100 cases per day and now they are ordering 500 cases per day, the warehouses cannot manage a 400% increase. Therefore, they have to allocate to each location what they feel are the most critical out of stocks and as a result, we see empty store shelves,” said Jason Jerome, NCBA’s senior director of retail and foodservice engagement.

“Then, we can look at the warehouses. This is all refrigerated product, which warehouses only have so much storage space. The product cannot come into a warehouse and right onto a delivery truck. It has to be scanned, received, slotted and then is able to be picked for orders. A warehouse that might normally pull 100,000 cases per day is now being asked to pull 500,000 cases per day… and this just can’t happen. They don’t have the manpower or the storage capacity. Since they can’t bring product in fast enough, truckers are experiencing extreme detention times before they can offload into the warehouse. This only helps to exacerbate the issue of being able to keep enough wheels under the product coming out of the packers,” said Jerome.

Blake Hitzfield from Seven Sons Farm in Roanoke, IN, said the grocery store’s situation is helping their online and farm sales and is up 450% with over 800 new customers. “People are panicking about food and are buying copious amounts of ground beef, roasts and whole chickens. What an opportunity to stay close to the consumer and tell our story! We love that there is high demand for domestic beef proactively and reactively and that we can be there for our communities around the country,” said Hitzfield. “It’s our regenerative food system and the American farmer that will carry us through the storm.”

“The New York Beef Council is emphasizing strategies and tactics like ‘crave appeal’ and the third Best Burger Contest to encourage this beef consumption at home rather than in restaurants as more areas mandate social distancing and quarantining,” said Jean O’Toole, executive director of the NYBC. “We encourage all beef and dairy farmers to continue to share beef’s story.”

Through the Beef Checkoff, NYBC is providing influencers, supply chain partners, educators and the media with recipes, videos and other educational materials to support these efforts. They continue to deliver positive messages about beef via social media, digital marketing, updated website content and other online tools as well as mobilizing beef advocates to address consumers concerns, providing farm and industry updates and maintaining confidence in the beef supply.

The “essential” farmers are feeling the frenzied buying.

Sunnybrook Farm in Deansboro, NY, is seeing a 300% increase in beef sales and has more animals scheduled for processing in two weeks. “Our inventory is low right now as we sold out of 50-pound family packs,” said Melissa Williams. “We look at this as an awesome opportunity as new customers want to know their local farmer. We are actively promoting customers getting their own freezer and get proactive in pre-ordering meat at the onset of this growing season. One positive has been that people like our grass-fed beef better than commodity beef at the store.”

With empty shelves at grocery stores there’s scrutiny down on the farm. The U.S. Cattlemen’s Association is concerned about anti-competitive behavior by packers who are buying cattle on a down market and selling beef into a market with significant demand. “Fat cattle have diminished in value upwards of $140-$200 per head, which equates to a devaluing of $5,000-$7,000 or more for each load of cattle sold. Many of the cattle headed to slaughter were already being fed at a loss,” said Wyoming economist and rancher Brett Crosby. Meanwhile, “packer margins remain strong,” said Dr. Stephen Koontz, CSU ag economics professor.

Carrie Stadheim, editor for the Tri-State Livestock News, wrote, “Through a late Friday announcement, cattlemen learned that Tyson will pay $5 per hundredweight more than the agreed-upon price for all cattle slaughtered during the week beginning March 23, 2020.” Stadheim interviewed U.S. Cattlemen’s Association Region X director, Justin Tupper of St. Onge, SD, who said the announcement, came “totally out of the blue” and that the week’s increase in boxed beef prices was unprecedented. “Boxed beef values increased by about $42 per hundredweight. On a 900-pound carcass that equates to almost $400 more that the packer is pocketing.”

USCA has been urging Congress to ask for Department of Justice investigations into possible misconduct on the part of the packers. “I’m sure they have been getting some pressure after the unprecedented rise in boxed beef prices,” he said.

In a March 18 media conference call, Ethan Lane, NCBA vice president of government affairs, discussed the situation: “We’re hearing from producers across the country that the spread between box prices and live cattle prices don’t reflect the reality on the ground. Obviously we’ve seen quite a bit of price fluctuation across all of the U.S. financial markets. This is not an issue that is exclusive to the U.S. cattle markets, but our producers have been hit extremely hard on the live cattle side in this equation.

“We’re seeing a lot of increase in price in the box, and seeing those pictures on the news that have cleaned out store shelves,” Lane said. “Beef is a commodity that is in high demand at the moment, and the prices on the boards on the live cattle side are not reflective of that.

“This is an issue that we’re continuing to monitor,” he continued. “There’s been an ongoing issue with adequate price discovery on the cash side to give us an accurate picture of what’s going on in the marketplace and certainly we’re seeing that play out.”

Lane said, “NCBA has engaged packers in conversations the past few days, talking about the disparity, and asking them to make sure they’re bidding aggressively in the cash market; and making sure that they’re putting those bids off of what we’re seeing on that cut out price.” He has requested that the Commodity Futures Trading Commission keep watch on the cattle markets to ensure the uncertainty of the live cattle market is not manipulated to take advantage of the situation.

There is stress and there is opportunity all rolled into one. American farmers are poised to be the resilient bright spot during this health crisis.

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