Beef producers struggling amid plant shutdowns

In the 20 or so years that Kevin Nysse has been operating a beef feeding operation in northeast Wisconsin, he has never taken a government subsidy. Despite the market reaction to the closing of a Kansas beef processing plant last year, beef producers managed to survive. 

But the havoc wrought by the coronavirus on the food supply chain is taking a swift toll on the industry. Already this week, officials in South Dakota announced the temporary closing of the Smithfield Foods plant due to workers being sickened by the virus. Other processing plants across the country have either temporarily shuttered or have slowed down production due to worker shortages.

The closure of these massive plants is being immediately felt up and down the supply chain. Beef prices have fallen 32 percent since January and last week, cash cattle sales were virtually non-existent.

Nysse was luckier than most, in that most of his cattle were contracted for sale. But with the closure of a Tyson plant down in Illinois, his latest group of steers will have to stay put on his Denmark farm.

"This week we were supposed to ship out 320 head of 1400-1500 lb. steers," he said. "But two of the plants we ship to were shut down temporarily due to labor shortages from the virus."

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While dairy farms dumping milk have grabbed headlines across the country, Nysse says many cattle farmers are suffering just as much or even more so.

"Many beef farmers in the state aren't contracted and are finding there's no market for their cattle. Even if they could find a buyer, you're talking about sub-par prices," he said. "These guys are losing $300-$400 a head on animals that they've raised for six months to a year."

According to National Cattlemen's Beef Association, losses to the cattle industry as a result of the pandemic are estimated to reach $13.6 billion. 

The NCBA study shows cow-calf producers will see the largest impact, with COVID-19-related losses totaling an estimated $3.7 billion, or $111.91 per head for each mature breeding animal in the United States. Without offsetting relief payments, those losses could increase by $135.24 per mature breeding animal, for an additional impact totaling $4.45 billion in the coming years.

Stocker/backgrounder segment losses were estimated at $159.98 per head, for a total economic impact of $2.5 billion in 2020, while feeding sector losses were estimated at $3.0 billion or $205.96 per head.

These losses to cattle growers is the 'same thing as dumping milk, but in different terms', Nysse said.

Wisconsin has held the distinction of America's Dairyland since the 1940s. What isn't as well known is that Wisconsin ranks in the top five for increasing cattle numbers and cattle harvested. In fact, the state has over 500 more beef than dairy farms with over 14,800 beef farms, according to UW Extension.

Unofficial news that the U.S. Department of Agriculture is planning to spend up to $15.5 billion in an effort to bolster the nation's food supply against the effects of the coronavirus pandemic, was reported earlier this week by Reuters news agency as a way to avert consumer food shortages.

This is in addition to the $9.5 billion bipartisan CARES Act intended to help farmers who are experiencing financial losses from the coronavirus crisis, including targeted support for fruit and vegetable growers, dairy and livestock farmers, and local food producers, who have been shorted from receiving emergency assistance in the past.

"There's really never been any (financial) fall back program for the those in the cattle feeding business," Nysse said. "We know we're going to need some help from the government but we don't want bailout money to come in and swallow the market so it becomes subsidized or have any long-term influence on the market as far as inflating production. We just need to get cattle moving again."

Nysse, who farms with his retired 70 year old father and two employees, purchases feeder steers weighing between 700-900 pounds from across the country, and likens his cattle feeding operation to a hotel. 

"We like to stay at around 90 percent capacity, bringing them in and then turning them out. Now we've got pens sitting empty since February because we're afraid to put feeder cattle in them knowing we're going to lose more money," Nysse said. "So our 'hotel' is only running at half capacity which isn't efficient as we're still paying the employees and paying all the same bills."

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Nysse says beef producers have also been hit with higher feed costs due several ethanol plants being forced to shut down or scale back on production due to significant reductions in fuel ethanol demand as a result of the pandemic.

"We lost two ethanol plants in eastern Wisconsin that supplied our dried distiller's grain contracts. That was a great source of protein and energy, and one of the easiest and cheapest supplements in our rations," Nysse said. "This will definitely increase the cost of our production significantly along with the loss of our corn market."

While Nysse says he survived the first turn in the cattle market, he doesn't have any prospects of cattle moving out for over four months.

"Some people are telling me, 'Hey, that's great! You're not going to lose any money.' But theoretically, I'm not going to have any income for four months either," he said.

At the moment, Nysse hopes that there will be some bailout funds available for fellow cattle producers.

"I don't think any beef processor, producer or feeder wants something that will be market distorting in the long run," he said. "We just want to get everyone back on an even keel and get beef moving back through the supply chain on a regular basis."