Kay’s Cuts: Coronavirus impact already being seen in US meat market


Steve Kay, BEEF Central (Australia) 

February 6, 2020


A monthly column written for Beef Central by US market commentator Steve Kay, publisher of US Cattle Buyers Weekly


LIKE many around the world, I have watched with horror and sadness how Australia’s devastating bushfires have taken lives, killed wildlife and livestock and inflicted terrible damage on large swathes of beautiful countryside.


My heart goes out to all those impacted and especially those who have lost loved ones...


JBS deal to grow trade


Despite all this, JBS SA, the world’s largest protein company and biggest exporter to China, says it does not expect the coronavirus outbreak to negatively impact China’s meat imports.


Chief executive Gilberto Tomazoni told Reuters last week that during China’s SARS outbreak in the 2000s, which could be a comparable situation, meat imports actually rose. His comments came after JBS moved to cement its status at the single largest protein supplier to China by announcing a partnership with China’s WH Group…


US meat and livestock industries feeling impact


The US meat and livestock industry has so far felt the impact of China’s disease event in several ways. It is too early to say by how much US pork and poultry exports to China have slowed. But the boom in pork exports from the middle of last year is likely to slow, at least temporarily.


US beef exports will not be affected as they have been at such a small level until now. But the solid increase that was expected to begin after the signing of the Phase One trade deal last month between the US and China has likely been put on hold for the time being.


The more direct impact for the US beef industry has been in the futures market. As the impact of the spread of the virus became more known last week, all live (grainfed) cattle contracts sold off heavily. The February contract lost 310 points Monday through Wednesday to close at US $121.75 per cwt, the April contract lost 407 points, the June contract lost 402 points and the August contract, 384 points.


This pushed cash live cattle prices lower last week. Most cattle sold US $2 per cwt live lower and US $3-4 lower dressed than the averages of the prior week.


Prices will go lower again in February for two reasons. The month is the weakest of the year for domestic US beef demand, as Americans turn to cheaper proteins as they pay off holiday bills.


The second is that there are ample supplies of US cattle that need to be moved aggressively…