Animal agriculture markets resilient almost a year into COVID-19 pandemic

As vaccination efforts expand and the economy begins showing signs of recovery, Texas A&M AgriLife personnel are tabulating the impacts of COVID-19 on the U.S. animal agriculture product market. Leading the effort is Texas A&M University’s Cross-Border Threat Screening and Supply Chain Defense, CBTS, Department of Homeland Security, DHS, Center of Excellence.

The two recent contributions to that effort specifically examine the impacts on livestock, meat, poultry and dairy product markets, and what that means for producers and consumers, said Greg Pompelli, Ph.D., CBTS director.

“We want to gain a clearer picture of the pandemic’s short and longer-term impacts on the U.S. food and agriculture sectors in comparison to other critical sectors,” Pompelli said.

CBTS-funded researchers at the Food and Agricultural Policy Research Institute, FAPRI, at the University of Missouri are examining the impacts of the COVID-19 pandemic on agricultural commodities, food and related supply chains.

Additionally, CBTS joined forces with Arizona State University’s Center for Accelerating Operational Efficiency DHS Center of Excellence and researchers at the Victoria University in Australia to determine how COVID-19 mitigation costs in the meatpacking plants might have affected retail meat prices and the prices received by livestock producers.

Surprising, expected results in animal agriculture market

These two efforts have identified impacts consistent with prior expectations, as well as some surprises. The assessments indicate that COVID-19 presented circumstances that could not have been predicted prior to experiencing the pandemic, Pompelli said.

When meat packing plants suspended or slowed operations due to COVID-19 outbreaks among workers, these disruptions contributed to sharp increases in the processing cost of consumer-ready meat products. The expectation was that these costs would be borne both by livestock producers and meat consumers.

Pen full of cattle that will feed into the animal agriculture market

While the contracting U.S. economy was expected to reduce disposable income and cause consumers to buy less meat and other high-value food products, that didn’t end up being the case, according to FAPRI’s assessment of USDA data.

Farm prices for livestock and animal agriculture products did decline sharply in the spring, but apparently, supply chain issues were the primary cause, not macroeconomic effects.

“Consumer meat prices increased by more than 6% in 2020, while domestic per-capita meat consumption also increased slightly,” Pompelli said. “This is one of the surprising outcomes for a year in which the pandemic’s disruptions and negative impact on the domestic economy signaled a weak outlook for livestock producers.”

Watching the market

The USDA data show that the average price paid to livestock, poultry and dairy producers at the farm level dropped by almost 20% in April. At the same time, consumer prices for meat, poultry, fish and eggs began a sharp increase in April, and by June, consumer prices were more than 10% above the March level.

But, according to the USDA data, when the packing plant disruptions subsided and other supply chain problems were resolved, the trends reversed.

“We would have expected to see reduced domestic consumption of meat and/or lower retail prices,” Pompelli said.

The data also show consumer prices for meat and other animal products actually declined by more than 5% between June and November, while farm-level prices for animal products increased by 20% between April and November.

And while real GDP contracted sharply in 2020 in the U.S. and many other countries, real disposable income actually increased significantly because of various government stimulus programs.

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Increased spending on the Supplemental Nutrition Assistance Program and the new Food Box program from USDA directly subsidized food consumption. Also, restrictions on restaurant indoor dining resulted in major changes to where consumers purchased their food and what food they purchased.

“While things are not back to their pre-COVID stages in the sector—consumers are still paying slightly higher prices—we can say the situation has improved dramatically since the depths of the crisis last spring,” Pompelli said.