Fed’s Announcement Not Showing Much Impact to Livestock Markets

Fears of the coronavirus continue to haunt the stock market despite the Federal Reserve’s efforts to calm it.

The Federal Reserve’s emergency announcement to cut rates to near zero Sunday didn’t have much impact to stocks Monday. Stocks shot downward Monday and suffered their worst day since 1987. According to Politico, the Dow Jones Industrial Average fell nearly 3,000 points, the biggest one-day drop ever and the largest tumble of the month-long downturn.

Some financiers say the announcement is “two-fold.”

“We will see how [the impact of the Federal Reserve’s announcement] plays out, but I think there are two fears,” says Chris Narayanan, managing director of capital markets for INTL FCStone. “The fact [the Federal Reserve] did this, does that mean that a recession or a slowdown is coming? Even if that doesn’t happen, are the banks going to actually be able to go out and lend without straining themselves?”

President Trump spoke about a possible recession to the public Monday afternoon during a press briefing with the Coronavirus Taskforce. He says the U.S. may be headed towards a recession.

“I don’t, No. 1, determine recessions,” says President Trump. “I just say this. We have an invisible enemy. We have a problem that a month ago nobody ever thought about.”

Narayanan says the fear of a market drop isn’t gone, even though the interest rate cut may create a good situation for operating loans and machinery loans.

“You’re still worried about slowdowns and recessions,” says Narayanan. “You’re still worried about the liquidity in the markets. What are banks actually able to do? It may be a little bit easier [to go to the bank], but if you’re in a tough spot and this makes it a bit easier, you’re still in a tough spot.”

This comes during a time when markets are feeling an impact from coronavirus, too.

Live cattle prices have dropped to numbers producers and traders haven’t seen in nearly a decade, due to coronavirus fears.

“This is the lowest level that we've seen on the weekly continuation chart for live cattle futures since July of 2010,” says Brian Grete, editor of Pro Farmer.

Sale barns in farm country are seeing reduced numbers at its livestock auctions, too. Representatives at Sioux Falls Regional Livestock in Worthing, S.D., told AgDay it held its weekly auction as usual Monday morning. Producers brought in 500 head, compared to 3,000 head on a normal Monday.

Auctions were held Monday at the Oklahoma National Stockyards in Oklahoma City, Okla. Producers brought in 1,200 head. The number fluctuates, but representatives told AgDay that’s compared to the more typical 6,100 to 7,800 head.

“This is the time of the year that those cattle are coming off wheat pastures,” says Hal Smith, a buyer at the Oklahoma National Stockyards auction, on Monday. “It’s a big and busy time of the year. It’s a pretty big shock, we only had 1,200 at the sale today.”

However, retail boxed beef is showing better numbers. USDA said Monday morning how retail beef cutouts were $12 higher. According to Pro Farmer, Choice beef prices rose $12.37 and Select jumped $12.01 on heavy sales at midday. Industry leaders say it’s because of empty meat cases at grocery stores, as consumers buy up for fear they will need to quarantine.

“If it was up $3, we’d call that a good number,” says Smith. “It’s up $12. That’s as big as the Tyson fire, the way beef started getting higher.”

“It’s just because of the demand we are seeing. I’m seeing photographs from around the country, and the same message time and time again is an empty meat case,” says Colin Woodall, CEO of the National Cattlemen’s Beef Association (NCBA).

Yet, some cattle groups are calling on the USDA for help. This is especially as worries of a price drop and disruption to the supply chain continue.

NCBA says in a statement how it is in daily communications with all sectors of the beef supply chain. The association says it is working with Congress, USDA and other governmental agencies. Woodall says the conversation NCBA is having with USDA is making sure packing plants stay open and there is enough staff.

“That really has been the conversation we’ve had with USDA, in particular, is making sure they have a commitment to keep the inspectors on the job and that they have contingencies if they do have inspectors who do come down with the coronavirus,” says Woodall.

The United States Cattlemen’s Association (USCA) is asking USDA to take immediate steps for more market oversight to make sure the production chain isn’t impacted by the coronavirus.

“We would like USDA to look at issuing a statement that insures us there are contingency plans at the processing facilities in the U.S. should an employee be tested positive for this coronavirus,” says Lia Biondo, the director of policy and outreach at USCA. “We want to make sure those plants are in operation.”

USCA is even asking USDA to consider implementing a type of Market Facilitation Program payment-type method to help livestock producers, if coronavirus concerns impact the cattle market and potentially the supply chain.

“What this comes down to is making sure there are no anti-competitive buying practices here at play,” says Biondo. “[We hope Agriculture Secretary Sonny Perdue] utilizes authority under the Commodity Credit Corporation (CCC) to develop and implement a program that will help producers through this time.”

When asked if NCBA will follow suit and ask if the association will also ask for an “MFP type payment” for producers, Woodall said, “We are looking at all of the options on the table as far as overall support and help from USDA.” Yet, Woodall also echoed, “Right now, that focus is making sure product is moving.”

Biondo and Woodall both say they haven’t heard of shutdowns or slowdowns yet on the packing side.