As the COVID-19 pandemic forces more and more packing plants to cut shifts or even close down temporarily, the impact on meat supplies is likely to be severe.
“These are extremely difficult times for the meat industry in general, but especially cattle, hog and poultry producers,” economist Len Steiner and associates said in their Daily Livestock Report. “Difficult as the situation is for packers, they are generally well capitalized and can handle being down for a period of time.
“Similarly, retailers can handle getting shorted product by either raising prices to ration out demand or mixing and matching products that are available. Producers, on the other hand, cannot tell their cattle, hogs or chickens to stop growing for a while until plants opens up.”
Smithfield Foods announced April 12 it would indefinitely close its plant in Sioux Falls, South Dakota, due to a large number of employees contracting the virus. This is the ninth largest hog processing plant in the U.S., with a two-shift daily capacity of 19,500 hogs per day, according to Steiner.
“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 president and CEO Kenneth Sullivan said in a news release April 12.
“These facility closures will also have severe, perhaps disastrous, repercussions for many in the supply chain, first and foremost our nation’s livestock farmers. ”
Steiner and associates said current packing capacity is sufficient to absorb these hogs. The major issue could be labor availability, along with the need for more frequent cleaning and health checks in the plants.
“Rising rates of absenteeism have been noted by many that we talk to,” Steiner said. “Ramping up to address this capacity hole is now more difficult. The collapse in pork cutout values has also removed the profit incentive as pork packer margins have all but disappeared. More importantly, there is no guarantee that other plants will not be affected.”
Steiner added the impact from COVID-19 will likely continue as the U.S. moves to minimize spread of the virus. It will take a “concerted effort” from the livestock industry and government to help overcome the struggles producers are currently facing.