The Iowa Cattlemen’s Association is concerned about the recently announced Coronavirus Food Assistance Plan, which will provide government payments to agricultural producers as part of the program. USDA is currently writing rules to carry out the program and facilitate payments.

The ICA executive committee and its feedlot council spoke with USDA Undersecretary Bill Northey on May 1 via teleconference. The former Iowa secretary of agriculture is now undersecretary for USDA’s Farm Production and Conservation. Northey’s department will oversee the CFAP program.

ICA’s chief concerns include the reported $125,000 payment limit per commodity. Brad Kooima, a cattle producer, broker and member of ICA’s feedlot council, says the financial losses associated with 400 head of fed cattle in today’s market exceed that payment limit. More than 20% of Iowa feedlots fall into that category.

Livestock losses loom large

The other primary concern with CFAP is the expected coverage of financial losses in the livestock business, Kooima says. Preliminary information states that 85% of losses between Jan. 1 and April 1 will be covered, and only 30% of losses will be covered after April 15. With feedlot cattle price decreases expected to cost producers $477.05 per head in May and June, compared to losses of less than $244 per head in February and March, it is clear that the most significant economic damages are yet to come.

In the teleconference with ICA leaders last week, Northey was unable to provide more detailed information about the payment program, but shared concerns regarding the limited funding available, which must be split between several commodities. ICA leaders reiterated the fact that there is no other financial safety net available for the cattle industry and that losses have been historic.

“It is too bad that we are forced to look to the federal government to help with the huge losses that our industry is now suffering. But that is where we are,” says Bob Butcher, a cattle feeder and banker from Holstein in northwest Iowa. “This would be the first time in my career that direct payments from USDA have been made to cattlemen for financial losses. We have no LDP or ARC program payments, no MFP payments or even production insurance such as Federal Crop Insurance to provide a financial safety net for cattle producers.”

Details on program coming

Northey says he expects more details about the CFAP program to be released in the coming weeks. In addition to the Iowa Cattlemen’s Association, other opponents of the proposed payment limitations for the program include the National Pork Producers Council, National Cattlemen’s Beef Association, National Milk Producers Federation, American Farm Bureau, and other state cattle and hog producer organizations.

The reduction of meat processing capacity caused by U.S. plant closures and slowdowns has created a massive bottleneck in the nation’s meat and livestock supply chain. Nearly two dozen plants that process beef and pork products closed in April due to the COVID-19 outbreak, while many others have had to slow their production as a result of the disease.

According to a new report from CoBank’s Knowledge Exchange division, even if the reduction of processing capacity is temporary, it will likely have a lasting impact on meat processors, livestock producers, retail stores and consumers. Meat supplies for retail grocery stores could shrink nearly 30% by Memorial Day, leading to retail pork and beef price increases as high as 20% relative to prices last year.

Livestock herds to shrink

“Margins for cattle and hog farmers have fallen to multiyear lows,” says Will Sawyer, animal protein economist with CoBank. “As meat processing plants have closed or reduced their workforce and processing capacity, farmers are left with few options for their livestock, requiring herds to be culled. Shrinkage in the U.S. livestock herd will likely make the food supply shortage more acute later in the year.”

Pork and beef production are down about 35% compared to this time last year, making retail shortages and price inflation nearly assured, Sawyer says.

While pork processing is expected to pick up in coming weeks, hog producers in the U.S. may still be forced to euthanize as many as 7 million pigs in the second quarter alone, worth nearly $700 million at historical average prices. This would further diminish meat supplies this fall and add to the billions of dollars of losses producers are experiencing due to lower livestock prices.

Declining meat production in April will likely lead to reduced grocery store supplies in May and June. Some stores are already rationing their current meat supplies. Supply chain and inventory from the meat plant to local grocery store meat cases is less than a few weeks.

“Significant contractions in meat supplies have often led to substantial inflation of retail beef and pork prices,” Sawyer says. “In the past 20 years, retail pork prices experienced inflation of more than 10% just twice. And neither of those times did we see inflation climb to 20%, which may be coming in the months ahead.”

Reopening meat plants could help

President Donald Trump’s executive order to reopen closed meat plants could help stem the tide of additional plant closures and pave the way for closed plants to reopen. Meat processors have instituted several measures to ensure employee safety, reduce the spread of COVID-19 and keep protein supplies moving. However, attracting enough workers to fill the thousands of vacant positions at meat plants across the U.S. may be challenging in the near term.

For consumers, closed meat plants mean less meat in the grocery store in the weeks ahead. Up to this point, U.S. consumers have been able to rely on grocery stores, as many restaurants across the country have closed in response to stay-at-home orders in many cities and states.

As communities reopen with only about one week of meat supply in cold storage, shortages in the meat case couldn’t come at a worse time. Food inflation and a weak U.S. economy is a combination that will leave many consumers in greater financial strain.

Check out the full report: Closed meat plants today mean empty meat cases this summer.

Source: ICA and CoBank, which are solely responsible for information provided and are wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content in this information asset.