Plant closures could impact meat supply chain this summer

Temporary closures of meat processing plants due to COVID-19 could shrink retail and foodservice inventory nearly 30% by Memorial Day, driving up prices of pork and beef by 20%, says a new report from CoBank’s Knowledge Exchange division.

travelarium | Bigstock.com
travelarium | Bigstock.com

Temporary closures of meat processing plants due to COVID-19 could shrink retail and foodservice inventory nearly 30% by Memorial Day, driving up prices of pork and beef by 20%, says a new report from CoBank’s Knowledge Exchange division.

Inventory is down

More than 20 meat processing plants halted operations in April to help mitigate and slow the spread of the virus, creating a bottleneck and leading Tyson Foods to warn that “the food supply chain is breaking.”

In response, President Donald Trump signed an executive order designating processing plants as “critical infrastructure.” The order could help stop future plant closures, however, processing facilities could still have difficulties finding workers to fill vacant positions, the CoBank report warned.

“Margins for cattle and hog farmers have fallen to multi-year lows,” said Will Sawyer, lead animal protein economist with CoBank. “As meat plants have closed, farmers are left with few options for their livestock, requiring herds to be culled. Shrinkage in the U.S. livestock herd will likely make the food supply shortage more acute later in the year.”

Pork and beef production is down approximately 35% compared to last year. Pork processing is predicted to rise in the next few weeks, but producers may still need to euthanize up to 7 million hogs this quarter – a value of nearly $700 million at historical average prices. This could lead to additional meat shortages this fall.

Closures could have long-term implications

Producers, retailers and consumers should expect to feel the effects of meat shortages through at least June – even if processing capacity reductions are temporary.

Some consumer outlets are already impacted. Several retail stores, including H-E-B, Kroger, Albertsons and Costco, have set strict limits on the amount of meat shoppers may purchase. On the foodservice side, consumers are asking “Where’s the Beef?” after meat shortages at nearly 20% of U.S. Wendy’s.

“Some of our menu items may be in short supply from time to time in this current environment, Todd Penegor, the chain’s CEO said in an earnings call on Wednesday. “We’re working diligently to minimize the temporary impact to our customers and restaurants and continue to work with our supplier partners to monitor this closely.”

In the meantime, the quick service chain has shifted its marketing to focus on chicken products.

View our continuing coverage of the coronavirus/COVID-19 pandemic.

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