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You’ve started to see the headlines, which now come with alarming frequency: Workers in meatpacking plants have begun to contract Covid-19 in large numbers. Last week, Sanderson Farms sent home 415 employees for a two-week quarantine after 15 of their coworkers tested positive. Other meatpackers announced reduced operating capacities. Some plants began shuttering altogether. On Monday, The Denver Post reported that the JBS slaughterhouse in Greeley, Colorado—one of America’s largest beef plants—would close, after 43 employees tested positive.
This week, a large Smithfield plant in Sioux Falls, South Dakota, closed indefinitely, at the urging of the state’s governor, after nearly 300 workers fell sick—a number that has since surged to more than 500, with some news outlets reporting that the plant is now the top coronavirus hotspot in the U.S. In a statement published Sunday, the company suggested the fallout may extend far beyond South Dakota: “The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply,” Smithfield Foods CEO Kenneth Sullivan said in the release.
The statement set off a flurry of media coverage portending meat shortages to come. The Sioux Falls plant, after all, processes about 5 percent of the country’s pork supply. The JBS plant in Greeley slaughters 4.5 percent of the beef we eat. With more than a dozen U.S. meat processing plants shuttered or stymied in recent weeks, according to Reuters, it seems inevitable others will be forced to follow. What will be the impact of this unprecedented shock to the system?
“Hogs are backing up on farms with nowhere to go, leaving farmers with tragic choices to make.”
The good news is that we aren’t likely to see widespread meat shortages in the near term. After all, the U.S. has almost a billion pounds of chicken in cold storage, according to the most recent estimates. (That number includes 50 million pounds of chicken wings alone.) But processors face dire operational challenges, while livestock farmers are likely to bear the brunt of the financial burden. Here’s what we know about how Covid-19 is impacting the meat supply, retail prices, and agricultural communities—and what’s likely to come next.
In the short term, yes. Representatives from the pork, beef, and chicken industries we spoke to say there is no shortage of meat destined for the grocery store shelf. It might take stores a little longer than usual to restock certain products, due to pandemic-related disruptions in the supply chain, like trucker shortages. But there’s a whole lot of meat hanging out in freezers and warehouses across the nation. For example, the number of pork loins in cold storage reached an all-time high this year—nearly 50 million pounds, the most since records started to be kept in 1960.
These frozen stockpiles will make up for any lost processing capacity in the short term, said Glynn Tonsor, a professor of agricultural economics at Kansas State University.
“We have large [cold storage] supplies in January and February, and lots of volume that was targeting the food service channel is now being redirected toward retail,” he said. “There is a lot of meat in the system. It’s mainly a logistical challenge to get it repositioned. I am not concerned about April shortages.”
It’s meat availability in May that appears uncertain at the moment, Tonsor said. In the longer term, as plant closures pile up and warehoused meats are shipped to grocery stores and food banks, the picture may look less rosy. But for now, there’s not any lack of meat.
Most likely, yes—though it’s hard to estimate just how much. At the retail level, grocery shoppers typically see an uptick in meat prices whenever supply falls short of demand. Additionally, as plants either close or shut down, the cost of production will rise—an increase that will eventually get passed onto the public in the form of higher prices.
“The cost of labor per pound of meat produced is going up because availability of labor is a challenge,” Tonsor said. “And we have efforts to slow down the operation within plants to protect the workforce—so we’re producing less per hour than we were before.”
Economists can only speculate as to how much prices will rise, since they depend on many unknowns, including which plants will get shut down and for how long.
For processors, however, a different scenario is playing out: Meat has quickly become cheaper.
Poultry, pork, and beef producers have all reported gluts in animals ready for slaughter. That’s in part because restaurant-level demand for meat has mostly evaporated. Now, as plants shutter because of local Covid-19 outbreaks, farmers are reporting backlogs of chicken, hogs, and cattle—all ready for market but with nowhere to go. That means that big meatpackers are experiencing a huge increase in supply—even as shortages continue on the consumer side.
“With limited harvest capacity, a surplus of pigs exists, causing hog values to plunge,” said Rachel Gantz, communications director of the National Pork Producers Council, in an emailed statement. As plant closures jam up the beef supply chain, prices for cattle are dropping, too. “We’ve got feeders who have not received a bid for the cattle for three weeks,” said Bill Bullard, CEO of R-CALF USA, a nonprofit that represents cattle ranchers.
“An animal ready for slaughter must be marketed within a two- to three-week window, otherwise the animal becomes overweight, and it begins to degrade in quality.”
Just how much animal prices have dropped depends on the sector, but Tonsor estimates that producers have seen losses ranging between 20 to 40 percent.
Pre-pandemic, the Department of Agriculture (USDA) had launched an investigation into alleged antitrust activity among the country’s biggest meatpackers. That’s due to allegations of price-fixing by farmers and their advocates: When demand goes up, prices should theoretically rise across the supply chain. But prices paid to cattle ranchers have long trended downward, even as retail-level prices have increased, prompting lawmakers and advocates to probe pricing practices. Recently, USDA extended its oversight to encompass price fluctuations during the Covid-19 crisis, as well.
As processing capacity drops, one chicken processor has already asked farmers to kill chickens on-farm. Some pork producers have also had to cull their herds, Gantz confirmed: “The pork industry is based on a just-in-time inventory system. Hogs are backing up on farms with nowhere to go, leaving farmers with tragic choices to make.”
Bullard said that while ranchers haven’t reported having to kill cattle yet, backlogged cattle are rapidly becoming overweight: “Where you would typically sell an animal at 1,300 pounds, these animals may grow to 1,600 pounds.”
Cows that grow too large lose value and eventually turn into economic liabilities.
“Even those plants that have the capacity to expand to second weekday shifts and/or Saturday shifts can’t do so because of the shortage of workers.”
“An animal ready for slaughter must be marketed within a two- to three-week window, otherwise the animal becomes overweight, and it begins to degrade in quality,” Bullard said. “The value of the animals declines significantly.”
The same goes for chickens. “Once broilers exceed 60 days of age, their heavy weight begins to compromise their marketability and meat quality,” said Peter Ferket, a poultry extension specialist at North Carolina State University.
We’ve bred farm animals to grow really, really fast. Eight or ten years ago, a 300-pound pig was a big pig—big enough that it was hard to slaughter, said Chad Franke, vice president of the Rocky Mountain Chapter of the National Farmers Union. Now, 300 pounds is a normal pig size, but if a pig that size is left on a farm for a month, it’ll swell to 400 pounds. At that point, it may be too heavy for the slaughterhouse lines. To make matters worse, most of the added weight is back fat, which is not a marketable cut of meat, and typically gets thrown out. Keeping an animal around is a costly proposition for a farmer, and the extra time does not equate to extra profit.
Chickens run into similar problems, adds Tyler Whitley, Contract Ag Program Manager at RAFI USA. Barns are built to house a certain number of chickens up to a certain weight, and once they start to outgrow the barn, overcrowding becomes a problem.
Processing plants across the country have had to shutter or limit their capacity as Covid-19 impacts their workforces. Worker absenteeism has slowed line speeds down. (The experts we spoke to said implementing social distancing at processing plants is virtually impossible—these facilities are designed to function with workers standing elbow to elbow.) Even plants that have managed to stay open are operating at reduced capacity, as workers fall sick or stay home.
At the same time as plants deal with new workforce challenges, they’re also facing an operational predicament: It’s not a simple process to convert plants that typically process meat for restaurants into ready-for-retail operations. A facility designed to churn out 50-pound boxes of chicken thighs bound for college campuses can’t exactly pivot to single-serving styrofoam at the drop of a hat. (A similar problem has hampered other food sectors, including the flour and dairy industries.)
A farmer today might have an empty barn for 30 days between flocks whereas in the past he received chicks after 10 or 12.
The result, said Whitley, is that chicken plants that typically process food for restaurants are slowing down, while plants that serve the retail supply chain are going “gangbusters.” Yet even plants that are processing as much as they can are limited by their labor forces. “Even those plants that have the capacity to expand to second weekday shifts and/or Saturday shifts can’t do so because of the shortage of workers,” Gantz wrote in an email.
The closure of a mega-facility like Smithfield’s plant in Sioux Falls, South Dakota, is a very big deal, said Franke, largely because of the extent to which the industry has consolidated in recent years. “It used to be, you had a lot of mid-sized plants spread throughout the country,” he said. “In that situation, if one went down, that’s half a percent of processing capacity. It wouldn’t be as big a shock to the system.”
The disruptions in meatpacking have already rippled down the supply chain to farmers.
In the chicken industry, farmers contract with big integrators like Tyson and Perdue to grow animals. That means the integrators—who often hatch the chickens and later slaughter them—maintain a large degree of control over how many chickens farmers receive, and when. Whitley said he’s been hearing from farmers who are receiving their flocks further and further apart, and who are receiving fewer chickens per batch. A farmer today might have an empty barn for 30 days between flocks whereas in the past he received chicks after 10 or 12. Fewer chickens to grow means a smaller paycheck, but the mortgage is still due.
Barns are built to house a certain number of chickens up to a certain weight, and once they start to outgrow the barn, overcrowding becomes a problem.
That uncertainty can be a serious problem. Reid Phifer, a contract poultry grower for Pilgrim’s Pride in North Carolina, is in the middle of a chicken-raising cycle, but he’s in the dark about how many chickens he’ll be asked to produce next.
“After the chickens go to market, [Pilgrim’s Pride] may come tell me, ‘We can’t put chickens back on your farm for six weeks or two months,’” Phifer said. “I don’t know what’s going to happen.”
In at least one instance, integrators are paying for animals that have to be culled as a result of decreased slaughterhouse capacity. Allen Harim, a chicken processor headquartered in Delaware, promised to compensate farmers for herds that are depopulated before they make it to the plate.
Others won’t be so lucky. “Farmers have very very little power in negotiating—virtually none,” said Whitley, referring to contract chicken farmers. “There’s not a lot of possibility for vastly reinventing your operation.”
Worse, Whitley adds that a lot of chicken growers are not eligible for loans made available under the federal CARES act. Many operate using personal checking accounts, rather than business accounts, and therefore do not qualify for many of the available funds. “A lot of farmers don’t put themselves on a formal payroll system—they just withdraw from the business,” he added.
“Much of the pork and profits of this system are extracted from rural communities by these highly profitable global companies.”
As for the $9.5 billion allocated to USDA, it’s not clear how it’ll be spent. Industry advocates like the National Pork Producers Council are asking the agency to purchase large amounts of pork to clear some of the backed up supply, but that money may benefit the meat processors more than the growers who need it.
In a press release on Thursday afternoon, the Campaign for Family Farms and the Environment called for the direct distribution of government aid to farmers and workers—not big companies like Smithfield. “Much of the pork and profits of this system are extracted from rural communities by these highly profitable global companies,” said Ben Lilliston of the Minnesota-based Institute for Agriculture and Trade Policy, in the release. “Public aid needs to get to those who need it most—workers off the job and independent farmers who have lost their markets.”
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