Beef Producers Navigate COVID, Cattle Markets

Sale barns, feedlots, and beef processors work to keep supply chain moving while staying safe during COVID-19 pandemic..

Cattle producers adapt to move cattle through auction markets while remaining safe from the spread of the COVID-19 pandemic.

The beef supply chain is complex and a bottleneck in one part has unintended consequences across the entire supply chain. Cattle auctions are essential to a steady beef supply, said Erin Karney, Colorado Cattleman’s Association director of industry programs.

“There are a lot of things you don’t realize until you walk through the process,” Karney said. “Auction markets are a part of that. We are making sure there is no bottleneck and there are no unintended consequences.”

Ensuring auction markets and bull sales were designated critical infrastructure was one of the first actions CCA took, alongside the Colorado Department of Agriculture and the Livestock Marketing Association, Karney said. Despite auction markets operating and cattle circulating, COVID-19 hasn’t spread among rural areas as expected, Karney said.

“Ag producers are taking this serious,” Karney said. “The cases in our rural areas are lower than expected.”

Cattle prices reached historic lows in the past six weeks, causing unprecedented auction activity, said order buyer Harold Yoder.

“I’ve never seen anything like this,” said Yoder, who has operated an order-buying service since the late 1970s. “Normally, a drop like that would require an upside in the market and that didn’t happen. We are lower than we have been in years for fat cattle.”

Coronavirus-induced slowdowns in meat processing plants backed up the beef supply chain, Yoder said. As a result, live cattle prices plummeted, reducing the number of head moving through sale barns, Yoder said.

“We are probably selling less than 50% of what we should be selling this time of year,” Yoder said. “Auctions should be selling 4,000 to 6,000 head a day right now.”

Online auctions have been a key part of cattle buyers adapting, Karney said. Not only can buyers to practice social distancing, but online sales also allow sellers to follow their cattle through the ring.

“A lot of sales are already online, but we have to make sure they are functional so people can buy cattle online if needed,” Karney said.

One producer who capitalized on online marketplaces is Aaron Kravig, owner and operator of Kravig Red Angus.

“Online sales are becoming more and more prevalent all along, but this year especially,” Kravig said. “We did about 66% of our business over the internet this year, and only 32% on the phone or in the sale barn.”

Advertising and marketing must be adapted when selling online, Kravig said. He allowed people to appraise cattle on his ranch days before the sale and accepted proxy bids leading up to the auction. Educating potential buyers on the use of online auction sites was also important, Kravig said.

“The biggest piece is making yourself known and somehow making yourself stand out with your cattle,” Kravig said. “Find the key traits of your cattle, focus on those and emphasize them to your customers.”

Bull sale prices have been steady despite cattle markets trading at historic lows, said Kravig, who sits on the Red Angus Association of America board of directors.

“Red Angus bull sales were steady to $500 higher than they were the previous year,” said Kravig, who sold in mid-April. “I was probably $350 higher than last year.”

Bull prices remain high because ranchers see an opportunity to recover losses, Kravig said. Some producers are holding on to calves until next year, meaning they are willing to invest in better genetics to sell higher-value cattle in the future.

“You might as well make the investment and breed them to something that’s got genetic possibilities,” Kravig said.

Holding cattle until meat packing plants are fully operational may be the best option for ranchers, Karney said. Both large meat processing facilities in Colorado, JBS in Greeley and Cargill in Fort Morgan, are operating at 50% to 75% capacity, Karney said.

Cattle producers need to continue adapting, Yoder said. Market uncertainty will continue, Yoder said, and the resiliency of American ranchers will be tested.

“This has thrown the entire industry into a tailspin,” Yoder said. “This is not a short term deal. It is going to affect us for quite a while.”

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Article by Wade Yoder for OSU coursework on May 1, 2020.