USA, Denver. Covid-19 has brought the US economy to a screeching halt, ushering in a recession in the process. For most businesses, the sudden stop to the economy is more jolting than the financial crisis of 2008 and has forced hard, immediate decisions about employees and finances.
According to a new Quarterly report from CoBank’s Knowledge Exchange, Covid-19 has also underscored the critically important nature of agriculture and other industries essential to rural America. “This quarter will largely define the next year in terms of the economy and how severe the damage caused by the coronavirus will be,” said Dan Kowalski, vice president, Knowledge Exchange, CoBank.
The US chicken industry entered 2020 with optimism largely driven by expectations for renewed exports to China. That focus swiftly changed to the domestic market in early March when the spread of the coronavirus dramatically shifted the US market to at-home eating, boosting chicken demand. Chicken production grew 7.7% in the first two months of 2020.
The US cattle complex has seen a swift and sharp decline in the last month following the drop in global equities and oil prices. Since mid-January, April live cattle futures have fallen by approximately 25%. The beef complex profit pool is shifting in favor of packers at the cost of lower feeding margins. The loss of restaurant and foodservice customers due to COVID-19 will test beef prices this spring.
China’s demand for US pork has set export records, but it hasn’t led to strong prices or profit margins. While international demand has been significantly higher than last year, so has US pork supply. Hog producers are expected to realize negative margins through April, before margins turn to positive territory this summer. To realize strong margins, producers will need strong export growth to continue.