April 3, 2020

Pandemic produces beef shockwaves

Topic: Issues

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The COVID-19 pandemic and panic purchases of groceries ahead of lockdown orders created a wave of volatility in beef and cattle markets. American Farm Bureau Federation Economist Michael Nepveux says consumers rushed to stock up on beef and other grocery items, sending shockwaves through the markets.

"What we really saw was the beef cutout just skyrocket, hit historic levels, the highest increases we’ve seen in just seven days. And then, on top of that, you saw live and fed cattle futures decline substantially, and you even saw cash prices drop. So, it’s a lot of confusion in the beef markers and the cattle markets as well," Nepveux explained.

He said consumers' habits during the panic-purchasing is behind the volatility and it still remains to be seen how long this "stocking" phase is going to continue.

"You have all the consumers rush to fill up their freezers. Well, the freezers are full. We’re still not sure how long this panic buying is going to continue in different parts of the county, and once they go back to week-to-week purchases, the meat cases are going to be full, and you’ve seen many meat cases around the U.S. already kind of go back to normal."

Still, the outlook remains uncertain. Nepveux said the futures market has been incredibly volatile. "Looking forward, we’re looking at an economic recession hitting the United States. That doesn’t bode too well for beef in the future because beef is one of those luxury goods in terms of animal proteins, and as consumers lose paychecks, you might see a little bit of a tougher environment for beef."