Disastrous turn in US meat industry shows how Covid-19 could break the food chain

Last week, about a third of US pork processing capacity and 14% of beef capacity was closed.
Disastrous turn in US meat industry shows how Covid-19 could break the food chain

The disruptive effect of Covid-19 became clear Tuesday when US President Donald Trump ordered meat-processing plants to stay open to protect the country’s food supply.

It followed Tyson, the largest US meat company, warning that the food supply chain is breaking down.

Last week, about a third of US pork processing capacity and 14% of beef capacity was closed.

The White House decided to make the move amid estimates that as much as 80% of US meat production capacity could shut.

With one fifth of global meat exports coming from the EU, and no big EU plant shutdowns yet (although there are difficulties, including in Ireland), some in North America are looking towards Europe for supplies.

McDonald’s Canada has said it will start importing beef.

The US food supply shock will strengthen the case for better aid for the EU meat industry, following disappointment at the beef private storage aid scheme for only about 4% of a single month’s production in the EU.

With less meat available, US grocery stores and consumers are bidding up the price of the available supplies.

Wholesale beef prices have jumped to levels not seen in at least a decade.

As Covid-19 made its way across rural America, it forced meatpackers to close their plants due to employees falling ill.

Supply chain disruptions followed, until large amounts of meat in cold storage can be accessed (sufficient only for two weeks), and bulk products converted into portion sizes for retail.

Meanwhile, Brazil, the world’s No 1 exporter of chicken and beef, saw its first major closure, a poultry plant owned by JBS SA, the world’s biggest meat company.

Meat businesses are also affected in Canada.

Some pig farmers in the US midwest and eastern Canada have started to euthanise pigs because the slaughterhouses are closed — or lose $30 to $50 per pig they manage to sell.

The US Department of Agriculture is setting up advice to help farmers with “depopulation and disposal methods” for animals.

The US, Brazil, and Canada together account for about 65% of the global meat trade.

“During this pandemic, our entire industry is faced with an impossible choice, continue to operate to sustain our nation’s food supply, or shutter in an attempt to entirely insulate our employees from risk,” said the Smithfield Foods meat company.

The United Food and Commercial Workers union said at least 20 workers in US meat and food processing have died, and 5,000 meatpacking workers have either tested positive for the virus or were forced to self-quarantine.

John Tyson, chairman of Tyson Foods, in full-page advertisements in three national US newspapers, said: “Millions of animals — chickens, pigs and cattle — will be depopulated because of the closure of our processing facilities. The food supply chain is breaking.”

Meanwhile, the EU beef industry waits for implementation of the €25m Aids to Private Storage (APS) for 25,000 tonnes to be stored for three to five months. This is less than 4% of a single month’s production in the EU, and its usefulness to stabilise the market will be further diluted by the reduced value of frozen cuts, in particular of steak meat, and potential detrimental supply impact on the trade when stored meat returns to the market.

In a statement yesterday, Meat Industry Ireland said the level of APS aid “goes nowhere near” what is required to cover the costs associated with freezing, storage, financing and also the collapsed market value of the cuts.

“Also, all of the cuts from the hindquarter must go into storage. There is no flexibility to sell those cuts that can find an acceptable market price at present and to only store unsaleable cuts.

“A €25m market support measure, even if availed of, for the entire EU beef sector will have negligible impact. It falls well short of the support needed to address the scale of market disruption that has been caused by the loss of the food service sector across the EU. This market channel accounts for over 30% of overall Irish beef exports and 60% of our high value steak sales. The scale of carcase imbalance is unprecedented.

“As long as the food service sector remains shut down across the EU, the carcase imbalance will continue. More significant sector supports will therefore be needed.”

The more positive news for the beef industry, in Ireland at least, is that the co-op marts may be allowed return to a limited marts auction process, while ensuring compliance with all necessary measures against the spread of the Covid-19 virus.

If the initiative proceeds, only buyers and sellers could attend, by appointment, and social distancing would be rigorously adhered to during the process.

The proposals are intended to ensure animal welfare, to maintain the supply chain, to ensure continuity in the national herd and to avoid any glut in the trade of animals while allowing for essential economic activity to take place, said the co-op marts.

There are also some signs of big foodservice users of beef returning, such as Supermac’s which has reopened about a dozen restaurants where social distancing can be safely observed.

Prices paid to Irish beef farmers for cattle were unchanged this week (see report on page 4), not surprising in view of the recent near 40% fall in processing throughput.

Farmers looking to the live export markets for relief have welcomed recent consignments of 2,900 young bulls shipped to Turkey, and finished cattle exported to Algeria. There have also been 5,600 animals exported to Libya to-date this year.

But total live exports so far in 2020, are about 15% lower than for the same period in 2019. There was a significant slowdown in calf shipments, severely disrupted due to Covid-19. All markets reported reduced calf demand.

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