With beef backlogged and the market in flux, Montana cattle ranchers face tough choices

The beef supply chain in the United States typically starts on a ranch like Marty Malone's, in Paradise Valley, with the birth of calves. After a summer of grazing, a cow reaches about 500 to 700 pounds. Then the cow is sold to a feedlot in the Midwest or Great Plains, where it eats feed like corn and barley to fatten up. At about 1,200 pounds and 18 months of age, it's slaughtered at a nearby packing plant. Then it's shipped to a wholesaler, who sells the meat to a restaurant or grocery store, where an end customer purchases it.

One month into nationwide stay-at-home orders related to COVID-19, that supply chain has been disrupted in the middle, with many of the nation's largest packing plants shutting down due to COVID-19 outbreaks at their facilities. That means fewer cattle are being slaughtered, which means fewer are being taken off feedlots, which means fewer are being purchased from ranchers like Malone. On Friday, April 24, the U.S. Department of Agriculture reported 23% fewer cattle were put on feed in March 2020 than in March 2019.

Regardless, Malone and other ranchers still have the same amount of cattle. And in what was anticipated to be a record year for beef producers, prices are now down about 30% since the beginning of the year.

"It depresses the market, and there's a backlog all the way back to the cow-calf guy," Malone said.

Though cow-calf production is a year-round business, most Montana ranchers calve their herds in the spring and sell in the fall. They will soon face a tough choice regarding their 2.5 million cattle: skip this year's paycheck and keep the cattle on their land and buy more feed for winter, or sell at about $111 less per head than pre-pandemic prices.

"There is so much uncertainty in where the market lies," said Jay Bodner, executive vice president of the Montana Stockgrowers Association. "That is the No. 1 thing on our mind right now: how can we try to fix what's going on?"

Montana ranchers aren't alone. Nationwide, cow-calf producers are expected to lose $8 billion in 2020 and beyond, according to a study from Oklahoma State University. In other parts of the country, with packing plants slowing down, hogs and chickens are being euthanized, having become essentially worthless. But cattle are worth more and take longer to grow to market weight, said David Anderson, a professor of agricultural economics at Texas A&M. Earlier this month, Congress passed a relief bill that includes $19 billion for the agriculture industry, but which producers get what share is still being determined, Anderson said.

In Montana, ranchers will likely breed less this coming fall.

"We are likely going to see reductions in herd sizes," said Anton Bekkerman, an associate professor of agricultural economics at Montana State University. "It stinks a lot, because those decisions can't be made right now because cows are already calving."

The majority of America's meat is slaughtered at a small number of plants, so shutdowns or slowdowns have a large impact on the amount of meat produced nationwide. With COVID-19 outbreaks at different plants, overall meat production is down about 20%. As a result, Tyson Foods, JBS and Smithfield, the nation's largest meat producers, have projected that grocery stores will see meat shortages in as little as two weeks due to the reduced amount of meat coming out of packing plants. With production down, wholesale beef prices reached record highs last week. That price increase will likely be passed on to consumers, Anderson said.

There are no large meat processing plants in Montana. When Montana cattle reach about 500 pounds, they're sold to feedlots closer to slaughterhouses in states including Iowa, Nebraska and Colorado, because it's cheaper to haul a 500-pound calf hundreds of miles than a 1,200 pound cow, Bodner said.

Four major meat processing companies - Tyson, Cargill, JBS and National Meat - slaughter about 80% of U.S. cattle. Even though these companies are facing outbreaks at their plants, they still stand to make record profits because they are paying about 30% less for live cattle and receiving record prices for processed beef, Anderson said.

Earlier this month, the Montana Stockgrowers Association joined with organizations in 21 other states to ask the U.S. Department of Justice to investigate whether those companies are manipulating prices. The USDA had already begun investigating the allegation after beef prices surged during the pandemic.

After Tyson said it was considering closing 80% of its meat processing facilities, President Donald Trump signed an executive order Tuesday, April 28, to keep the plants open under the Defense Production Act, a law used to compel industries critical to national well-being to continue operations regardless of lost profits. The law also prevents the companies from price gouging.

Editor's Note: This story was originally published by Montana Free Press. Please visit http://www.montanafreepress.org for more information.