Beef sector survived COVID shocks

Canada’s beef cattle industry moves into the second year of the pandemic in pretty good shape, says a leading agricultural economist.

“After a year of adjusting to the shocks associated with COVID-19, the Canadian cattle and beef sector faces a relatively optimistic future,” writes James Rude of the University of Alberta in the Canadian Journal of Agricultural Economics.

Those shocks included packer shutdowns and wild divergences between wholesale and live cattle prices, as well as major fed cattle backlogs.

“Despite these dramatic shocks, the sector has returned to near normal conditions.”

However, Rude says the long-term situation of the industry remains an open question, with a number of issues clouding its future.

“The Canadian cattle industry entered 2020 and the COVID-19 disruption with a breeding herd that had been declining for 15 years, a concentrated and aging processing sector, concerns about the rise of meat substitutes, and pressures for the industry to reduce its carbon footprint,” says Rude in COVID-19 and the Canadian Cattle/Beef Sector: A Second Look.

“Yet the prospects for Canadian beef exports remain as rosy today as they were at the beginning of 2020. However, to remain competitive the Canadian industry must overcome serious challenges.”

Those challenges include possible new health and safety requirements for packing plant workers following the pandemic, protectionism in foreign markets, pressure for more slack capacity in the industry to provide resilience in future shocks, and the long-term decline in the Canadian beef cow herd.

Rude provided an outlook for Canada’s beef industry in March 2020, as the pandemic broke out, and his new piece is a look back at what happened, and where the industry is today.

The packing plant shutdowns were the biggest shock to the industry, with Canada’s two big plants both badly hit by infections and Cargill’s High River plant closed for two weeks.

That led to a temporary 60 percent decline in Canadian cattle slaughter, which was bigger than experienced in the United States.

Wholesale beef prices more than doubled, while steer prices fell by one-third. That caused a backlog of about 133,000 cattle, creating problems at feedlots and further back in the chain.

The federal-provincial set-aside programs helped with that situation, while the packing and retail sectors sorted out the new COVID-19 reality.

The export market was roiled by the pandemic, with exports down nine percent in volume between January and June 2020. But by the end of the year, they were down only 3.1 percent.

Over the course of the year, after the initial shocks, the beef industry returned to mostly normal functioning. Domestic and international demand kept beef flowing, and health and safety measures at packing plants allowed them to return to close-to-normal operations.

For the long run, packers must address the need to engineer plants to avoid major shutdowns when faced with a similar crisis in the future.

“The way forward involves difficult trade-offs to make sure that the beef supply chain does not face future disruptions of a similar magnitude,” says Rude.

That may include increased use of automation and robotics to reduce tight working conditions and deal with challenges spacing staff.

“There is no one-size-fits-all solution to improve resilience. Rather, it depends on a learning process from the COVID-19 experience and adherence to risk management best practices.”

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