In today’s Beef Buzz, senior farm and ranch broadcaster Ron Hays features comments from K-State livestock market economist Dr. Glynn Tonsor on the ongoing labor disruptions at meatpacking facilities in southwestern Kansas and what they could mean for cattle and beef markets.
Labor Disruptions Could Pressure Cattle Prices
Tonsor says the beef packing industry depends on a substantial workforce to keep cattle moving from live animals to beef products. “The conversion of live animals into meat is a pretty laborious effort.”
He says disruptions at large packing plants can create problems throughout the cattle market because fewer cattle are being processed. “Anything that disrupts the labor in converting live animals into beef products for U.S. consumers…is going to have the effect of depressing cattle prices compared to what they would have been, and increasing beef prices compared to what they would have been.”
Tonsor says the short-term disruption creates a backup of cattle that reduces demand for fed cattle while also limiting the amount of beef moving through wholesale, retail and export channels. “You have at least in the short term disruptions in the flow.”
Comparing the Situation to the Pandemic
Tonsor says the market mechanisms at work are similar to what happened during the COVID-19 pandemic, when labor disruptions affected meatpacking operations. “The mechanisms of that are very similar to what the pandemic did because during the pandemic we had labor disruptions there.”
However, Tonsor cautions against treating the current situation as an exact repeat of the pandemic. “The scale and scope of this is not the same, so that’s not like a perfect analogy.” Instead, he says the comparison provides an indication of what could happen if disruptions continue for an extended period.
Larger Plants Could Have Nationwide Effects
Tonsor says the size of the affected facilities is important when considering the potential market impact. “It particularly can if it’s impacting larger facilities, which is the case here.”
He says a small local facility would not have the same effect on the national market as a large plant processing thousands of cattle each day. “If you’re disrupting a 5000 head a day plant for multiple days, it starts becoming relevant.”
Tonsor says cattle could eventually be rerouted to other facilities if disruptions continue, but doing so would create additional costs for producers. “Is there a way to do it, yes. Is it free? Heck, no.”
He says producers could face higher transportation expenses, new business relationships and other transaction costs, all of which could continue to put pressure on cattle prices.
Tonsor Encourages Patience as Producers Watch the Market
Beyond the immediate packing disruptions, Tonsor says cattle producers are also watching several other developments, including plant closures, cattle numbers and beef demand.
He says there has been some slippage in beef demand over the past couple of months, making it something the industry needs to continue monitoring.
When asked about the cattle market outlook, Tonsor says there has been plenty of discussion about whether producers should retain more heifers and whether government policy should encourage herd expansion. His recommendation is to be patient and allow market signals to work. “I’m encouraging some patience and more of a hands-off mentality.”
Tonsor says strong beef demand has already provided producers with a signal through higher calf prices. “Stronger beef demand has sent the signal of higher calf prices, which has sent the signal that if Mother Nature and allows it, and you have the risk appetite for it to expand the herd.”
He says his goal is to remain data-driven and apolitical when discussing a market that can quickly become political. “Let markets work.”
That phrase, Tonsor says, has become the message he uses to close many of his presentations. “I think the market’s been attempting to work, and we need to let it continue attempting to work.”
Dr. Tonsor’s comments came from his most recent appearance with Shelby Varner on K-State’s Agriculture Today.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR above for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
