Amidst the doom and gloom of commodity prices in the wake of COVID-19, the red meat sector is still seeing record meat sales growth, even as retail prices rise and consumers slow some of their grocery spending said economists from CoBank on a recent market update webinar. Many indicators show that most of the economic pain for the red meat sector may be behind us.
Massive changes in consumer purchasing habits have forced the supply chain to keep up with an ever-changing environment. From restaurant sales plummeting to bulk, food stockpiling by consumers, keeping grocery stores stocked through disruptions in the food system has been difficult. Restaurant purchases are improving, but still down 43% from their pre-COVID levels. Even still, this has helped buoy prices in the first two weeks of May giving the industry some much needed good news.
An increase in wholesale red meat cutout prices are a result of shrinking supply, not increased demand said Will Sawyer, Lead Economist with CoBank. But he said it looks like prices have put in a top for now. This is because meat supply contraction has found a bottom. He reported that meat plant capacity utilization is up to 72 percent in the first two weeks of May, from a bottom of 50 % in mid-April as plants come back online across the country–an encouraging statistic.
Meat exports showed strong growth in early 2020 and are still trending in the right direction. But, that growth has been dented recently by a strong dollar and economic weakness abroad. As more countries deal with the economic fallout from COVID-19, the U.S. dollar has strengthened as traders and investors see it as a safe harbor asset.
The meat sector is an encouraging example in an otherwise volatile market. Even as unemployment and inflation continue to grow adding more uncertainty to the future, Americans are beginning to warm to the idea of re-opening economies and the positive outlook in the meat market is some much needed good news for the agriculture industry.