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Closed Meat Plants Today Mean Empty Meat Cases this Summer

04 June 2020

The spread of COVID-19 among people who work in many beef and pork plants across the country has led to plant slowdowns and shut downs, creating a bottleneck in the U.S. meat and livestock supply chain. This bottleneck will not only have a lasting impact on meat processors but also producers and consumers, writes Will Sawyer, Cobank Lead Economist.

Report Key Messages:

  • The spread of COVID-19 among people who work in many beef and pork plants across the country has led to plant slowdowns and shut downs, creating a bottleneck in the U.S. meat and livestock supply chain.
  • Meat supplies for retail grocery stores could shrink by nearly 30% this Memorial Day, leading to retail pork and beef price inflation as high as 20% relative to prices last year.
  • As livestock prices have been collapsing, industry associations predict 2020 losses at $13.6 billion for U.S. cattle producers (NCBA) and nearly $5 billion for U.S. hog producers (NPPC).
  • While we expect pork processing to pick up in the coming weeks, U.S. hog producers may still be forced to euthanize as many as 7 million pigs in the second quarter alone, worth nearly $700 million at historical average prices. This would further diminish meat supplies this fall and add to the billions of dollars of losses from lower livestock prices.
  • President Trump’s executive order to reopen closed meat plants, announced April 28, could help stem the tide of additional plant closures and pave the way for closed plants to reopen. However, attracting workers to fill the thousands of vacant positions at meat plants across the U.S. is still an issue.

Introduction

Margins for cattle and hog farmers have fallen to multi-year lows. Nearly two dozen meat plants closed in April due to the outbreak of COVID-19 and many others have slowed their production. This has shrunk U.S. pork and beef capacity by 40% at the end of April. The meat plant closures have pushed down livestock prices to a level not seen since the Great Recession just over a decade ago.

As meat plants have closed, farmers are left with few options for their livestock, requiring herds to be culled. The U.S. Congress has proposed giving USDA authority to pay indemnities for producers who have to euthanize livestock, which may help producers offset some of the losses caused by the decline in meat plant capacity. Shrinkage in the U.S. livestock herd will likely make the food supply
shortage more acute later in the year.

For consumers, closed meat plants means they will find less meat in the grocery store in the weeks ahead. U.S. consumers have been able to rely on grocery stores this spring as many restaurants across the country have closed in response to “stay-at-home” orders in many cities and states. As communities reopen with only about one week of meat supply in cold storage, shortages and stock outs in the meat case couldn’t come at a worse time. Food inflation and a weak U.S. economy is a combination that will leave many consumers in greater financial strain.

Meat Plant Shut Downs

Reflect the Spread of COVID-19 in Rural America The rural nature of livestock farming and processing has meant the impact of COVID-19 had lagged urban areas of the U.S. At the end of March, the counties surrounding U.S. meat plants had about one-fifth of the COVID-19 cases on a per capita basis relative to the national average. Now, per capita COVID-19 cases around U.S. meat plants, which have thousands of employees on site at any given time, have climbed sharply, raising the risk of further plant closures. Without labor available and willing to work in the plants, the plant shut downs and slowdowns will continue.

Meat processors have instituted a number of measures to ensure employee safety, reduce the spread of COVID-19 and keep protein supplies moving. These measures include increased employee distancing, installation of metal partitions, mandatory use of personal protective equipment, mandatory temperature checks prior to starting work, paid sick leave for ill employees, increased wages and attendance bonuses, increased frequency of cleaning and sanitation, on-site health screening and others.

Further Reading

You can view the full Cobank report by clicking here.

 

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