Meatpacking backups cause rise in consumer prices

Jeff Swenson

Prepared and written by Jeff Swenson, DATCP Livestock and Meat Specialist. The Market Update draws information from several sources, including trade publications, radio broadcasts, agricultural news services, individuals involved in the industry as well as USDA NASS and AMS reports.

Jeff Swenson

Some challenges to the meat sector post COVID lockdowns look similar to the challenges during COVID-19. The larger packing facilities aren’t able to meet meat demand. 

This is causing higher meat prices to the consumer. The farmer, however, isn’t seeing their price keeping pace as packers can’t keep up with supply, causing a backlog of livestock and poultry. This is expected to continue for the next several weeks.

Local butcher shops rely heavily on the larger packers for trim and other products, so their input costs are going up. The smaller butcher shops in Wisconsin continue to harvest as much as they can, but their calendars are booked out for more than a year in most cases. 

The problem is one I wrote about almost weekly in 2020 is capacity. We used to talk about capacity in terms of shackle and rail space. In the present day, we talk about capacity in terms of workforce. The ability of our meat sector to meet demand centers around the number of employees at work any given day. 

With capacity an issue, a packing facility closing for two days to clean their coolers or staying out of a region’s auction markets for a week sends shockwaves through the entire country. These events impact prices at both the farm gate (lower) and retail level (higher).

Cattle prices mixed

Fed cattle prices were mixed this week, however. dairy steer prices stayed relatively steady. Harvest last week was estimated at 638,000 head with projections this week of 650,000. According to an analysis by The Cattle Report, a sustained harvest of 675,000 head is needed to spur a rally in cash cattle prices.

Carcass weights for beef breed steers is beginning to creep higher, at 863 pounds, three pounds heavier than the week before. This would indicate harvest isn’t on pace to keep feed yards current. The wholesale price, however, continues to increase with the carcass cutout ending Wednesday at $315.08.

Demand has exceeded what we would normally see seasonally. Export sales were disappointing according to the latest report with just 13,100 metric tons of US raised beef sold to foreign buyers during the week. Given the lackluster sales so far this month, it would be difficult to claim export demand is raising the domestic retail price of beef.

Live Cattle Futures were down sharply at the close of trading Wednesday as fears of inflation creep into the market.

Pork demand continues to grow

The national negotiated pork carcass price ranged from $104.44 - $123.00/cwt Thursday while the pork cutout value rose to $116.19/cwt. Last week’s estimated harvest of 2.408 million hogs, like cattle, isn’t enough to satisfy pork demand. 

Prices paid to farmers remain strong. Given that market hogs are staying current with weights decreasing recently, it’s unlikely we’ll see a backlog of hogs in the coming weeks unless harvest numbers decrease as pork packers wrestle with capacity (workforce) challenges of their own. Profits on the farm level are tempered due to the climbing costs of corn and soybean meal.

Weekly export sales were for 14,700 metric tons of pork. One could argue the current price of pork, and beef for that matter, is making US product less competitive on the global market. Corn around the $7.00 mark hasn’t hampered exports, though, with sales of 1.97 million metric tons according to the latest weekly report.

State beef prices mixed

Choice beef breed steers and heifers at Wisconsin and surrounding state auction markets were mixed. High-yielding, high-grading cattle brought 100.00 to 118.00/cwt. but with the better cattle selling higher than the past week, up to $124.00/cwt. Choice and Prime Holstein steers were steady to $1.00 higher this week bringing $90.00 to $103.00/cwt.

There were some packages of Holstein steers selling from $104.00/cwt to $106.00.  Silage fed, under finished or heavy dairy breed steers brought $70.00 to $92.00/cwt. Dairy x Beef steers were mostly $95.00 to $113.00/cwt.

Cows were $1.00 higher at $46.00 to $63.00/cwt. Blemish free cows in fleshier condition were selling to $70.00/cwt. Doubtful health and thin cows were bringing $45.00/cwt and down. Dairy breed bull calves were lower $50.00 to $150.00/cwt with heavier, well cared for calves up to $205.00/cwt. Beef and Beef Cross calves brought up to $345.00/cwt.