Many Texas ranchers won’t survive multibillion-dollar financial hit from coronavirus
The spring pastures perfect for grazing cattle on Marisue Potts’ ranch have begun to dry. That means it’s time to sell.
Potts owns a ranch near Matador, Texas, where she keeps a herd of about 35 cattle. In a few weeks she’ll take her yearlings and full-grown steers to the nearest auction in Floydada. She expects to make less per head than she’s made in at least a decade.
“I’m going to take whatever hit I’m going to take financially,” Potts said. “There are ranchers who can hold on until this bottleneck is fixed and the markets stabilize but I can’t do that. I have to sell them or they might not make it to next season.”
The United States is facing a serious bottleneck in the beef supply chain as processing plants continue to close over COVID-19 outbreaks. Almost 5,000 workers have been infected.
This decrease in meat processing capacity has already caused shortages and price increases at grocery stores. It could also cost ranchers billions unless these plants come back to speed soon. But experts say it’s unlikely meatpacking plants will recover full capacity in the near future, even with President Donald Trump’s help, unless workers are protected.
Industry leaders warn that if meatpacking plant workers continue to get sick, cattle ranchers and consumers could be paying the price for years.
Cattle Prices Drop
For Missy Bonds, manager at Bonds Ranch outside of Fort Worth, life during the pandemic has been business as usual.
“We’re still feeding, we’re still rotating our pastures, we’re still making sure that our fences are up and we’re still riding our horses,” Bonds said. “What keeps me up at night is this state of uncertainty in the market.”
Bonds’ cattle business is diverse, including cow-calf, stocker and beef-feeding operations also known as feed yards. The business started in 1933 when Bonds’ grandfather, P.R. “Bob” Bonds, purchased 5,000 acres in Saginaw, 11 miles north of downtown Fort Worth. Today they run cattle in 26 counties across Texas and 12 other states.
In early May, cattle at Bonds’ ranch are coming off pasture and being sent to feed yards in New Mexico and Colorado where they’ll be fed grass until they are at their prime weight for slaughter.
“Cattle today are like Olympic athletes,” said Justin Benavides assistant professor and extension management economist for the Texas A&M AgriLife Extension Service in Amarillo.
“We’ve built a system for on-time delivery because you want to go to the grocery store and get the freshest product that you can that is safe for you to eat,” Benavides said. “Unfortunately that system is kind of like an escalator, once you get going it’s really hard to stop.”
Feedlots can modify cattles’ diet to slow their growth, but it is more costly and, after a certain time, the animals begin to have health problems and suffer from excessive growth, Benavides said.
On average, feedlots are losing about $200 per cattle head because of the slowdown in production capacity at the meat processing plants, according to a Star-Telegram survey of a half-dozen Texas feedlots. In January there were more than 2.9 million cattle in feed yards nationwide, according to the latest survey by the United States Department of Agriculture.
In Texas, prices for livestock, row crops, and dairy have dropped 20% to 30% since the beginning of the pandemic and could lead to $6 billion to $8 billion in losses for producers if the market does not recover soon, according to a report by Texas A&M University.
Outbreaks and closures
Texas leads the nation in the number of farms and ranches, with 248,416 farms and ranches covering 127 million acres. Cattle is one of the state’s top commodities valued at $12.3 billion and accounts for more than half of the state’s agricultural market, according to 2017 data from the Texas Department of Agriculture.
But this year, ranchers and farmers could lose up to $8 billion due to the coronavirus, according to a report released Thursday by Texas A&M University.
U.S. meat and poultry processing plants have been among the hardest hit by the coronavirus. At least 20 workers have died and 4,913 employees in 115 plants have tested positive in 19 states, according to the latest Center for Disease Control and Prevention numbers.
Operations have ceased in dozens of meatpacking plants for at least a day but some have stayed closed for weeks. All major U.S. meat processors, including Tyson, Cargill, Smithfield and JBS, have reported outbreaks in plants.
These closures have caused a 30% decrease in production and a glut of livestock, according to Joe Harris, president of the Southwest Meat Association based in Bryan. Harris sees the meat industry as a big hourglass with retailers and consumers at the bottom, ranchers and their cattle on top and meatpacking plants in the center.
“When you have a slowdown in the narrowest part, livestock is going to pile up and we’re going to get a smaller stream of meat coming out the other side,” Harris said. “It’s inevitable.”
President Trump issued an executive order on April 28, invoking the Defense Production Act to keep meat processing plants open during the coronavirus pandemic. But the order failed to include strict safety standards for workers, which puts the employer before the employee, said Rep. Filemon Vela, a Democrat from Brownsville who sits on the House Committee on Agriculture and the Subcommittee on Livestock and Foreign Agriculture.
“He’s using it to put workers in a situation that is very dangerous,” Vela said earlier this week during a virtual town hall hosted by the League of United Latin American Citizens.
“It’s impossible to work on the kill floor, the packing floor, the loading docks given the situation we are in with COVID,” said Vela who worked on a meat plant during college. “Some very serious and thoughtful measures have to be put in place to make sure people are safe ... or we are going to continue in a very difficult situation.”
On March 31, LULAC, the nation’s largest and oldest Hispanic civil rights organization, sent a letter to the Occupational Safety and Health Administration expressing its concerns about the safety of essential food industry workers, such as meatpackers. It asked OSHA to provide clear and uniform guidelines — including appropriate safety equipment, paid sick days and regular health checks— for the companies under the agency’s purview.
As of Tuesday, that letter has still not been addressed. In the five weeks since the letter was sent, at least a dozen workers have died, including one at a west Dallas plant, according to a lawsuit filed last week by the worker’s common law spouse against Quality Sausage Company.
Since Trump signed the order, seven more plants have shut down, according to media reports.
An Uncertain Future
Between February and April, the price of cattle dropped from about $144 to $103 per hundred pounds in the Chicago Mercantile Exchange, used by ranchers to speculate future prices for feeder cattle.
“I’ve never seen the price drop like that,” said Joe Leathers, a rancher for 62 years and general manager of 6666 Ranch near Guthrie.
“Right now we have to decide to take a loss now or gamble and take a bigger loss later if the market doesn’t come back up,” he said.
Cattle industry losses related to the coronavirus are estimated at $13.6 billion nationwide, according to a recent study by Oklahoma State University, paid for by the National Cattlemen’s Beef Association.
“This study confirms that cattle producers have suffered massive economic damage as a result of the COVID-19 outbreak and those losses will continue to mount for years to come, driving many producers to the brink of collapse and beyond if relief funds aren’t made available soon,” association CEO Colin Woodall said in an April 14 press release.
The $23 billion allocated to farmers and ranchers by Congress through the coronavirus relief act in March was a good first step, but there’s still a massive need for more funding as soon as possible, the association said.
Three days after Woodall’s statement, the USDA announced a new food assistance program prompted by Trump that allocates an additional $19 billion in immediate relief for farmers and ranchers.
When Congress resumes Monday, lawmakers including Vela will ask for an emergency hearing to address the needs of workers and ranchers in the meat industry. Congress will also be deciding if companies can be held legally responsible if someone gets sick.
But despite what happens in Washington, D.C., or even if “the world stops,” the Texas cattle industry will continue, said Leathers, who manages three ranches in the western part of the state with more than 7,000 head of cattle.
“We’re strong individuals,” Leathers said. “We’ve survived droughts, fires, the mad cow disease ... and we will live through this one. But the truth is many others out there will not.”
This story was originally published May 10, 2020 at 8:00 AM.
