North America’s meat supply chain endangered as coronavirus shuts processors

Meat plants in the U.S. and Canada are reeling from the impact of the deadly coronavirus. Employees are staying away from work that is usually performed close to other workers in near “elbow-to-elbow” conditions. They are required to debone chickens, chop beef or slice hams, often without virus-protective gear which has become scarce since the outbreak. Rising infection cases are forcing plants to shut down. As a result, plentiful meat supplies are unable to reach starved supermarket shelves.

Meat plants in domino effect from the virus

Smithfield Foods, the largest pork processor in the world, on Sunday shut down its Sioux Falls plant in South Dakota, as 238 of its employees fell victim to COVID-19. The facility accounts for 4% to 5% of U.S pork production.

JBS USA suspended operations at its beef plant in Greeley, Colorado, until at least April 24. According to media reports, at least 50 workers at the plant had tested positive for COVID-19 and two workers had died. The facility can process approximately 5,400 cattle a day and is one of the largest beef processors in the U.S.

Cargill Ltd, the Canadian arm of U.S. agribusiness Cargill, has cut production at its High River, Alberta plant after coronavirus infections at the plant. One of Canada’s biggest beef-packing plants, it produces patties for McDonald's Corp (NYSE: MCD) and is now slaughtering 1,500 head of cattle per day, down from around 4,500.

Delaware chicken company Allen Harim is facing a 50% decline in attendance at its poultry plants due to the virus fears. Unable to run plants at capacity, the company will now begin killing chickens in the field (“depopulating”) to reduce the pressure on its remaining workers.

Restaurants shutter; ominous for beef suppliers

Restaurant closures due to the pandemic resulted in the loss of 417,000 foodservice jobs as of March 12, according to the National Restaurant Association. The previous record for job losses in the industry was 67,000 in October 2000.

This has dire implications for meat, especially beef because the highest proportion of domestic beef sales is to foodservice.

"Right now, we see that beef sales to foodservice are down about 50%, compared to pre-COVID-19 levels," says Will Sawyer, lead economist for animal proteins at CoBank.

Industry participants warn of supply disruptions

"Every member of the beef supply chain relies on processing plants operating daily to keep product moving,” said Colin Woodall, CEO of the National Cattlemen's Beef Association, to Progressive Farmer. "Plant closures or slow-downs have significant regional and national implications that will ripple through the marketplace at a time when cattle producers are already suffering from market uncertainty and economic hardship.”

Woodall warned that plant closures will have an impact on cattle and beef prices.

"These facility closures will also have severe, perhaps disastrous, repercussions for many in the supply chain, first and foremost our nation's livestock farmers,” said Kenneth Sullivan, president and CEO at Smithfield Foods. “These farmers have nowhere to send their animals."

According to USDA market reports, red meat production last week fell to 964.6 million pounds, down 10.3% from the previous week.

Food chain: hard-hitting irony

With thousands of Americans finding themselves recently unemployed, there is a spike in demand at food banks. Shoppers at groceries and supermarkets are confronted by empty shelves.

Meanwhile, farmers are unable to transport their produce to processors and are forced to let food rot in the fields, and companies like Allen Harim are culling chickens.

The outlook is not good. The retail grocery will see continuing shortages of meat due to offline meat processing plants and lower supplies of meat.

“Wholesale and retail meat prices may be pushed higher as a result of limited supply,” says Drovers.  “At the same time, limited processing capacity may limit demand for slaughter animals and push farm-level prices lower.”