March 13, 2020

Officially reaching pandemic levels, the social and economic consequences of COVID-19 is piling up including a possible drop in beef prices.

One silver lining—or another dark cloud—would be cheaper beef. Already, US cattle prices have plunged 20% in 2020, driven down by the China situation and by short-term fear that "quarantines will keep meat eaters at home and steer consumption toward non-perishable foods," The Wall Street Journal reported Monday. If the COVID-19 pandemic further intensifies and tanks the economy, the beef industry's troubles have only just begun.

Two factors tie the COVID-19 crisis to a likely fall in beef prices. The first has to do with China and yet another highly contagious viral disease, African swine fever, which kills hogs but does not infect people. ASF was first detected in China in 2018; by the end of last year, it had wiped out half of China's—and a quarter of the world's—pigs. (By 2019, African swine fever had spread to other parts of Asia; so far, the US industry has avoided it.) Pork prices in China spiked, consumers turned to beef as an alternative, and the country ramped up imports to satisfy rising demand.

That, in turn, led to a global rally in cattle prices, as traders anticipated surging Chinese demand for beef. Then coronavirus hit China late last year. In late January, the government had moved to slow its spread by imposing mass quarantines in Wuhan and nearby cities in Hubei province, keeping around 50 million people under a mandatory quarantine. The shock hit China's economy hard: beef demand dropped, and commodity traders punished the cattle market, sending prices even lower.

The second factor is domestic. US beef demand rises and falls with the economy. When consumers feel richer, they buy more beef; when they're feeling squeezed, they seek cheaper alternatives. That's the conclusion of a 2018 analysis by agricultural economists Glynn Tonsor and Ted C. Schroeder of Kansas State University and Jayson Lusk of Purdue. When the Great Recession hit last decade, per capita US beef consumption dropped 10% between 2007 and 2011. As the recovery set in, our appetite for beef revived, and by 2015, beef consumption had returned to pre-crisis levels, where it has remained since.