… The details of the Fed Cattle Set-Aside Program are numerous, and to some degree fluid. The plan comes from the Beef Alliance, developed using USDA and CattleFax data. Its foundation is a Canadian plan, implemented during the BSE crisis in 2004…
Cattle Set-Aside Program
US Feeders Have to Increase Efficiency to Avoid Collapse
By Victoria G Myers, DTN/Progressive Farmer
BIRMINGHAM, Ala. (DTN) -- Just as people were asked to "flatten the curve" on COVID-19 infections by staying home and keeping a safe social distance, some in the cattle industry have a proposal they believe will flatten the curve on fed cattle numbers. The idea is to help feeders market cattle, factoring in backlogs, with less of an economic setback than would occur otherwise.
That "flatten the curve" comparison comes from Don Close, senior animal protein analyst with Rabo AgriFinance. The cattle industry veteran spoke to DTN/Progressive Farmer about the set-aside proposal currently being debated. While he said there may be challenges with the program, he is hopeful it will help with the number of backlogged cattle on a week-to-week basis.
"If this program can pull fed cattle off the market, buy some time through this period of reduced slaughter and extend them out to when we assume slaughter will be back to normal, or close, we might be able to balance the fed cattle inventory by the end of the year," he said. "We still will have a challenge when it comes to this backlog of feeder calves, and that could carry into the first or second quarter of 2021. But this set-aside proposal is something to look at. I think the devil will be in the details."
The details of the Fed Cattle Set-Aside Program are numerous, and to some degree fluid. The plan comes from the Beef Alliance, developed using USDA and CattleFax data. Its foundation is a Canadian plan, implemented during the BSE crisis in 2004. Some producers there blame use of the program for a decline in the Canadian cow herd. Close notes that, even if the plans are similar, sheer numbers make it hard to compare the two.
"Where it was implemented in Canada, they have about 10 million cattle," he pointed out. "We are trying to implement a mirrored program with 94 million cattle. That is going to take some serious ramping up."
The program's objective, according to the Alliance proposal, "is to alleviate the risk of massive economic collapse in the beef cattle industry." The steps are built around what has become a limited harvest capacity (down 36%) to process market-ready fed cattle weekly. The tool would be voluntary, with a goal of reducing immediate pressure to harvest fed cattle until processors are at sufficient capacities to handle them.
Mary Soukup, managing director of the Beef Alliance, told DTN/Progressive Farmer that reaction to the set-aside proposal has included a lot of questions.
"We in the cattle industry have a reputation of preferring the government to be out of our business. But I think we have to consider that the situation with COVID-19 is absolutely unprecedented. We asked CattleFax to look back 20 to 30 years and see if there was ever a time when this sort of set-aside program was necessary, and the answer we got was that this is unprecedented."
What has been proposed is a voluntary tool a feeder could use in an emergency situation. Soukup said there are intentional triggers in the program that would, based on processing capacity thresholds, allow the program to be shut off when the industry returns to more normal capacity levels. Asked what those thresholds would be, Soukup said the details are still being established.
"We are working with state trade association and the NCBA to make sure we get that right," she said. "As drafted now, it would become active after two consecutive, non-holiday weeks of 85% packer capacity. What we don't know is what the new normal looks like. Are there going to be new requirements on lines and in plants, so that even once we are all back to work the capacity is different? We don't know yet what the triggering percentage will be."
Here's how the program could work: