Consumer panic over food shortages and lack of demand for restaurant food sent prices rising, a U.S. Department of Agriculture report found.
The Department of Agriculture released a report July 22 summarizing the impact of a monthslong closure of a Tyson beef processing plant and the COVID-19 pandemic as part of an ongoing investigation into whether meatpacking companies took advantage of market disruptions to manipulate prices, collude and restrict competition.
After a state of emergency was declared in the U.S. on March 13, beef production, prices and spread were likely impacted by consumer stockpiling of meat and declining demand from restaurants as take-out and delivery became the only options, according to the report.
As the prices of partially butchered cattle rose 9% from mid-March to early April, cattle futures continued to decline, possibly due to the increased risk of buying futures contracts during a pandemic according to the report.
Fears of meat shortages that led to surging consumer demand for beef sparked an increase in beef value. Between early April and mid-May, the difference between the values of two different quality grades of beef increased by 323%. Meatpackers reacted to the increased demand for beef by increasing processing volumes — by late March, the number of slaughtered cattle was 10.7% higher than the same period in 2019.
By the end of April, rampant COVID-19 infections among workers idled 40% of the country’s beef processing capacity. The reduced demand for cattle following virus-related plant closures and slowdowns led to falling cattle prices. Plant closures and slowdowns abated throughout May after the president invoked the Defense Production Act that compelled meat processing plants to remain open.
As of July 17, there have been at least 33,500 reported positive cases tied to meatpacking facilities in at least 363 plants in 38 states, and at least 133 reported worker deaths at at least 43 plants in 24 states, according to tracking by the Midwest Center for Investigative Reporting.
A move back to normal consumer and retail demand for beef and abating plant closures and shutdowns led to a narrowing price spread, though the $119 per 100 pounds is still high by historical standards. It’s too soon to know if the spread will continue to narrow, according to the report.
Market conditions after a 2019 packing plant fire
Following a 2019 fire in a Tyson beef packing plant and the eruption of COVID-19 across the U.S., the difference between the gross value of a beef carcass and the price of partially butchered cattle exploded to record levels.
Tyson did not respond to a request for comment.
The USDA is investigating whetherTyson Foods, JBS SA, Cargill and National Beef violated the Packers and Stockyards Act, which prohibits meatpacking companies from engaging in anticompetitive and unfair trade practices, but the report doesn’t contain details on potential violations of the act.
“We assure producers that our work continues in order to determine if there are any violations of the Packers and Stockyards Act. If any unfair practices are detected, we will take quick enforcement action.” the press release said.”
The September fire seriously damaged the Tyson-owned beef packing plant in Holcomb, Kansas, shutting down the plant for four months. The closure of the Holcomb plant, which accounts for roughly 5% of the country’s beef processing capacity, caused a record difference between the gross value of a beef carcass and the price of partially butchered cattle. The spread between the negotiated dressed fed cattle price and the Choice boxed beef value widened to a peak of $67.17 per 100 pounds from $36.03 per 100 pounds before the fire.
Market conditions had been stable and followed seasonal trends prior to the fire. After the fire, futures prices for fed cattle plummeted, along with the number and percentage of negotiated cash sales. Cattle futures trading on the Chicago Mercantile Exchange dropped 9% by the end of the week after the fire, and cattle prices declined 6% the same week.
After the fire, rising boxed beef prices provided an incentive for meatpacking plants to increase production, and the number of cattle slaughtered in the weeks following the fire outpaced the cattle slaughtered before the fire.
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