Many different industries are dealing with some extreme impacts from the coronavirus pandemic. That includes South Dakota’s largest industry, agriculture. The state’s livestock producers are facing a ripple effect of volatility and down markets due to the pandemic.
“Prior to COVID-19 we were already in a negative return on our investments and this just accelerated that process,” Glenn Muller the Executive Director of the South Dakota Pork Producers Council said.
Muller said after three months of down prices, this week pork dropped even further.
“The severe impact is now and expect it to continue because of the fact that we lost this harvesting capacity,” Muller said.
Muller says the closure of Smithfield is a big financial hit for local pork producers.
“It’s estimated that our producers are losing 35 to 40 dollars per head, the Smithfield plant usually processes about 20,000 head per day,” Muller said.
Cattle prices have also dropped, costing beef producers about 10% of the value of their market-ready cattle.
“Those feedlot guys work on a very small margin, so if you’re talking 90 to 100 dollars a head less, that’s absolutely the difference between making a little bit of money and losing a little bit of money. That’s money right out of their pockets at that point,” South Dakota Cattlemen’s Association President Eric Jennings said.
Both beef and pork industries fear this is just the start of a long downfall in the market due to the continued change in business during this pandemic.
“We’ve had a shift from bacon now in surplus because the bacon product we produce is 70% used in foodservice which has also been extremely impacted,” Muller said.
Muller said the shift in focus from restaurants and foodservice to retail only has a major impact on the demand for pork products. Jennings said that change in demand combined with the overall economic climate will continue to impact the beef industry.
“The difficult thing about beef is, it’s one of the more expensive protein sources. Chicken and pork are quite a little cheaper, so if people are suffering financially with their own personal finances, they’re not going to look to beef, they’re going to have to buy something else,” Jennings said.
Producers fear it could take a long time for these down livestock markets to recover.
“Probably in for a tough couple of years here, if not more, so if you’re a young producer that doesn’t have a lot of equity in the operation, its going to be tough to get through,” Jennings said. “You can only lose money for so long before you need to do something different.”
“There are producers that are going to make major decisions, they may have to exit the swine industry, they may have to exit production agriculture, there may be producers that lose their entire operations based on this situation if we can’t find some way to compensate them for their losses,” Muller said.
Right now Muller said it’s unclear whether any of the federal aid packages already passed will help livestock producers. President Trump and Agriculture Secretary Sonny Perdue are working on a relief package that could provide $16 billion for America’s farmers and ranchers.