Banks and research institutes in the United States anticipate that revenues in the American meat industry could be about ten percent lower this year.
Cattle and pig farmers are suffering significant sales losses due to the halt in slaughter capacity. Additionally, processing capacity at meat processors partly stopped, and the consumption patterns of many Americans also changed.
The Federal Reserve Bank of Kansas, an important agro-financier, warns in a quarterly report that the ‘limited processing capacity’ of many meat processors could persist for the rest of this year because the government will impose new (stricter) requirements on working conditions in large slaughterhouses.
Nearly two-thirds of meat processing plants experienced coronavirus outbreaks, and 20 percent temporarily closed, said the Kansas City Fed. The delays and shutdowns led to an estimated backlog of 500,000 head of cattle and 3 million pigs.
Meat processors in the US are indeed operating again at high volume, but the effects of the pandemic may be felt for the rest of the year, said the Kansas City Federal Reserve Bank. “Farm business revenues may still decline in 2020 due to disruptions in meat processing plants, forcing some producers to depopulate herds,” according to the regional Fed bank’s report.
“Moreover, higher retail prices, especially amid an economic downturn, could temporarily reduce total meat consumption, further depressing prospects for producers and consumers of meat.”
The FAPRI think tank forecasts an 8 percent decline this year in revenues from livestock, with lower average prices for pigs, cattle, and poultry. Per capita meat consumption is expected to decrease this year and it will take years to recover, said the University of Missouri think tank. Overall, the agricultural and livestock study center expected a 3 percent drop in agricultural income, mainly thanks to the very large government subsidies that would largely compensate for significant corona losses.
Livestock farms generate more than half of US agricultural income; cattle and pigs represent nearly half of livestock revenues. When the livestock sector in the United States suffers, the impact is broadly felt in the US economy.
“Greater financial difficulties for livestock farmers could further strain the credit portfolios of farm businesses already under pressure before the pandemic,” said the Kansas City Fed, pointing to expectations of farm bankers who are already requesting lower loan repayment rates.