Abattoir shutdown could mirror US closures
When US meat processing plants closed due to coronavirus, live cattle prices plummeted. See how it went down in our graphic. Could the same happen here in Australia?
DISRUPTIONS to Victoria’s meat processing sector could mirror price tremors as seen in the US after COVID-19 closures rocked the American livestock industry.
Meat and Livestock Australia data shows capacity cuts to meat packing facilities in the US effectively pulled the handbrake on cattle slaughter during COVID-19 closures, with weekly beef production in May dropping 37 per cent compared with the month prior.
Thomas Elders markets analyst Matt Dalgleish said similar to the US, Australia could see a dip in prices at the saleyards as the industry worked around mandated changes to abattoir operations.
“If you look at where the bulk of the spread is, meat works are over-represented,” Mr Dalgleish said.
“As we’ve seen, (coronavirus) is spreading from different types of meat works. It’s not just one category. Last week it was in a pork processor, this week it was in a chicken processor … it seems to be jumping reasonably easily across regions.”
Mr Dalgleish said there was scope for meat processing plants in neighbouring states to absorb some of the kill that would otherwise go through Victorian plants.
“It’s obviously going to be a difficult time,” Mr Dalgleish said.
“Thinking of the producer, you could possibly see some implications for prices within some of those Victorian saleyards, if there’s not much capacity for production in Victoria, you could see some of those sales impacted price-wise,” Mr Dalgleish said.
“It might not be as extreme as in the US, where they had about a 20 per cent decline in prices. But their issues were much more widespread across the country.”
According to Steiner Consulting, about one million cattle were kept on feed or on pasture that should have been slaughtered during processor shutdowns in the US.
At the beginning of June, data shows the number of cattle on feed in the US for more than 150 days was 943,000, a 41 per cent lift on the same time last year.
The US Department of Agriculture has forecast a 3.4 per cent lift in US beef production next year, with volumes expected to reach 12.5 million tonnes.
“From the US perspective, the impact was mainly on the pork and cattle industry. They don’t have a big market for sheep meat. It was more widespread, across the country instead of one locality,” Mr Dalgleish said.
“It was Trump that said they had to stay open, but the virus saw the workforce simply not coming in.”
“There was that price impact but it was more evenly spread. Cattle prices went down about 20 per cent. Wholesale prices went up 100 per cent over that month, and it lasted about two to three weeks before taking a month to get back to normal.”
Mr Dalgleish said there was capacity for saleyards to feel the effect of processor shutdowns in coming weeks, “but you may not see as big a price drop as we saw in the US”.
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