Meat-processing disruptions in America are set to strip billions of pounds of production, snapping a run of growth in the industry, according to the U.S. Department of Agriculture.
In its monthly outlook report, the USDA slashed its annual forecasts for pork, beef and chicken as virus outbreaks among workers force plants to shut or slow. Annual pork and beef output will be lower for the first time since 2014 and 2015, respectively.
The unprecedented U.S. processing disruptions have brought down cattle and hog slaughter numbers by more than 30%, the report said. With supply chains upended, some hog farmers are culling herds, while poultry producers are destroying eggs and dairy producers are dumping milk. Across the top four proteins, the USDA reduced estimates by about 4.7 billion pounds from last month.
"Usually, we're talking about changes in production between 50 to 100 million pounds, so that's quite dramatic," said Rich Nelson, chief strategist at Allendale Inc. "USDA is being proactive and giving the market the ugly news it needs to see."
Total U.S. pork output is forecast at 27.45 million pounds for this year, down from 27.65 million in 2019, the agency said. Beef production is expected to come in at 25.83 million pounds, down from 27.221 million in 2019. The agency predicted that production of each would rebound in 2021.
"For 2020, the total red meat and poultry production forecast is reduced from last month as the sector adjusts to covid-19 and economic uncertainty," the agency said. "Beef production is reduced as lower expected cattle slaughter more than offsets heavier carcass weights. Pork production is forecast lower on a slower expected pace of slaughter."
Cattle for June delivery rose by the limit of 4.5 cents, to 97.175 cents a pound, on the Chicago Mercantile Exchange. The price has jumped 27% since touching a contract low of 76.6 cents on April 6. Hog futures for June settlement climbed as much as 2.4%, to 61.75 cents a pound. The contract fell to a record 41.5 cents on April 14.
Wholesale beef and pork prices have doubled in recent weeks, USDA data shows.
"There's such a wide spread in cash, so no one really knows where the cash market is. That's why we're getting so much volatility," said Dick Quiter, account executive at McFarland Commodities LLC. "Cattle are backing up. We'll have a lot of overweight cattle to wade through in the next months."
Business on 05/13/2020