ADVERTISEMENT

Farmers Are Panic-Buying to Keep America’s 95 Million Cows Fed

Farmers Are Panic-Buying to Keep America’s 95 Million Cows Fed

(Bloomberg Businessweek) -- Days after President Trump extended America’s quarantine guidelines, Tyler Beaver, the 31-year-old founder of brokerage Beaf Cattle Co., couldn’t get hold of the rations that feed his clients’ cows. He’d already tried sellers in the traditional producing areas of the U.S. such as Kansas, Missouri, and Oklahoma, only to find they were mostly sold out. Soon, in a bid to connect his customers with a feed mill still willing to sell, he changed strategy and tried to pull feed from the Delta region, hundreds of miles away—again without luck.

Just as virus-spooked consumers have rushed to grocery stores to stockpile everything from toilet paper to pasta, farmers raising America’s cattle, hogs, and chickens have filled their bins with feed, fearing the spread of the coronavirus would disrupt their supply chains. “I’ve had some calls from customers of mine looking for feed because the mills are out,” says the Fayetteville, Ark.-based Beaver. “There’s a rush to buy just because of the uncertainty in the market. They just don’t want to be caught without.”

Keeping America’s 95 million cows, 77 million pigs, and 9 billion chickens fed isn’t as simple as it may seem. Farmers are worried their feed mills could close as employees get sick or that their slaughterhouses could slow production, forcing them to keep animals for longer. They’re also concerned that a shortage of trucks, which are being waylaid to supply supermarkets, could make it harder for farm supplies to reach them.

Even the plunge in gasoline demand affects the feed supply. As ethanol plants shut down—because the fuel additive isn’t needed when gas isn’t selling—the animal feed market is being starved of an important ingredient called dried distillers grains (DDGs) that are a byproduct of ethanol production. Distillers grain is a key ingredient in rations for beef cattle and dairy cows.

Farmers Are Panic-Buying to Keep America’s 95 Million Cows Fed

The rush to fill bins hasn’t happened only in the U.S. French feedmakers stepped up ingredient purchases at the start of the lockdown, and demand jumped as plants that produce biofuels started to slow down. A similar trend occurred in Germany last month. “This is a new phenomenon,” says David Webster, head of animal nutrition and health at Cargill Inc., adding that the agribusiness giant has seen its global feed sales volume climb 10% or more in the past month. “We saw a bit of this in China in February, but now we are seeing globally, in every geography that we operate in, so it’s testing the system, so to speak.”

France’s Avril Group also experienced strong demand in the past few weeks as customers rushed to finalize purchases over concerns that production could be suspended as biodiesel demand plummeted. And German farm cooperative Agravis Raiffeisen AG said there was some panic meal buying from feedmakers, while Munich-based grain trader BayWa AG saw hoarding in northwest Europe. “If you have a huge cattle herd, you want to make sure you have enough feedstuffs available on your farm,” says Thorsten Tiedemann, chief operating officer at Getreide AG, a Hamburg-based trader that sells rapeseed meal, a feed ingredient.

That’s why James Holz, a farmer in Jefferson, Iowa, recently bought three weeks’ worth of ration for his 3,000 cattle, triple the norm. Because he’s in the U.S.’s top ethanol-producing state, he typically doesn’t need to stockpile. Some cattle producers there get multiple deliveries of distillers grains a day. “A lot of guys use their last scoop at 9 a.m., and then the truck comes at 10 a.m.,” says the 34-year-old farmer. But even he was taking no chances.

Farmers Are Panic-Buying to Keep America’s 95 Million Cows Fed

Still, because farmers’ bin space is limited, they can’t really hoard the same way that consumers are doing, says David Hoogmoed, president of the Purina Animal Nutrition unit of Land O’ Lakes Inc. (The Purina that makes the dog and cat food is owned by Nestlé SA.) “What we are seeing isn’t a run on feed, but a keep-everything-full scenario,” he says. “While the producer [in the past] may have run things down to the last minute and ordered feed for tomorrow, they are building in, in their inventory management, more of a safety stock.”

While sales at Purina’s livestock business increased only by single digits, there probably was a boost of more than 20% in the companion animal segment, which includes horses and rabbits. Even with social distancing in place, Hoogmoed says the company has kept its more than 60 mills operating, adding overtime and some weekend shifts and running “a very strong throughput.” “When you have a pet, even if it’s a horse—not a dog and a cat—they have a name and you want to take care of them,” he says. “We had a very large runup in retail feeds in all of our outlets and most of our customers.”

It’s still unclear if all the talk of hoarding will eventually result in more demand for feed. The number of animals isn’t necessarily growing at a pace that’s faster than usual, and farmers can only fill up their bins once before they go back to the normal rate of consumption, says Tiedemann of Getreide. “We will see how it plays out over the next 90 days, but our view today would be that this is demand being pulled forward,” says Cargill’s Webster.

Back in Arkansas, Beaver, who also raises cattle, is worried about the present. “If all the farmers go out and fill up all the storage bins they did have just because they are unsure what the future is going to hold, that does absorb a lot,” he says. “And if all the feedlots throughout the U.S. do the same thing and keep everything maxed out as far as their storage bins, storage capacity, and hedge for the future as well, you will start seeing shortages.” —With Michael Hirtzer, Millie Munshi, and Niu Shuping

©2020 Bloomberg L.P.