USDA releases initial probe findings

Last fall, USDA announced it would begin investigating the economic fallout of a fire at a Tyson Fresh Meats processing facility in Holcomb, KS. The plant processes around 6 percent of slaughter cattle in the U.S., so the impacts and damages were substantial. After the fire, processing capacity was severely disrupted and cash market fed cattle prices dropped, while the price of wholesale beef rose. Just as things began getting back on track earlier this year, the COVID-19 pandemic occurred and similarly impacted the cattle and beef markets on a larger scale. USDA expanded their market investigation in April to include the impact of the pandemic on plant shutdowns...

The report made several key findings about the Tyson fire:

• The largest spread between dressed fed cattle price and the Choice boxed beef cutout value was recorded at $67.17/cwt after the plant fire;

• Packers increased their processing volume by increasing Saturday slaughter shifts;

• The timing of the Holcomb fire coincided with the seasonal increase of beef demand leading up to Labor Day;

• Futures prices for fed cattle and fed cattle market prices decreased significantly after the fire; and

• The number and percentage of negotiated cash sales of fed cattle dropped after the fire.

Key impacts from the COVID-19 pandemic:

• The largest spread between dressed fed cattle price and the Choice boxed beef cutout was over $279/cwt the second week of May, the highest ever recorded;

• Market reactions during March were a result of sudden increased consumer demand for beef;

• Large numbers of plant workers contracted COVID-19 in April and May, which led to significant beef supply disruptions. USDA notes this caused a reduced demand in cattle, which could have contributed to lower fed cattle prices; and

• The economy gradually began to open in May and plant shutdowns eased. Boxed beef prices began to decrease and fed cattle prices started to increase.

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