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“ The COVID-19 pandemic continues to have devastating impacts on public health and the economies of the U . S . and many other countries . There is much uncertainty about the future impacts of COVID-19 , but even in the best of circumstances , the economic impacts are enormous ,” Peel explained in his July 10 market comments .
U . S . real gross domestic product ( GDP ) decreased at an historic annual rate of 32.9 % in the second quarter of this year , according to the advance estimate from the U . S . Bureau of Economic Analysis . Real GDP decreased 5.0 % in the first quarter .
“ Beef supply conditions have stabilized , albeit at higher levels of production year over year in the second half of 2020 ,” Peel explains . “ Beef demand will be critical in determining overall beef prices and , subsequently , cattle prices going forward . Beef demand , as for any product , is generally a function of consumers ’ willingness and ability to purchase specific quantities of the product at various prices of the product .”
Here at home , the all-fresh Beef Demand Index plunged 24.26 % from March to April to 67.23 , which was 17.57 % less year over year . It rebounded to 75.86 in May , which was 9.96 % less year over year .
That was with unemployed workers receiving an extra $ 600 per week in pandemic aid from the federal government . It was a way for the government to not only help sidelined workers , but to encourage social distancing . That benefit ended at the end of July .
“ In the first half of the year , the dramatic drop in GDP and increase in unemployment did not correspond directly to similar beef demand impacts because federal stimulus and unemployment benefits partially offset direct negative economic impacts on consumers . Macroeconomic conditions as well as the status of economic support will play a key role in overall beef demand going forward ,” Peel says .
So , the level and length of added federal aid to the massive number of unemployed U . S . workers will likely influence beef demand . Peel points out U . S . unemployment peaked at 14.7 % in April before declining to 11.1 in June .
Ironically , extra federal unemployment benefits make it more difficult to ease folks back into the workforce .
“ To further aid in a gentle transition back toward economic normality , federal economic policy will have to shift from sending families money to maintain social distancing to helping businesses maintain employment ,” said Jeffrey Dorfman , professor of agricultural and applied economics at the University of Georgia . That ’ s part of a recent publication from the Council for Agricultural Science and Technology ( CAST ): Macroeconomic Impacts and Policies in the Face of COVID-19 .
“ Workers were making more from unemployment than from working , particularly in the retail , hospitality , and personal services sectors that are home to so many small businesses ,” Dorfman explained . “ With the unemployment bonus , not working can pay the equivalent of about $ 50,000 per year . Few small businesses can compete with that when roughly half of all workers made less than that just a few months ago .”
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