U.S. meatpacking industry supply chain strained by COVID-19

14 May 2020

The coronavirus has spread rapidly within U.S. meatpacking facilities affecting both workers as well as United States Department of Agriculture (USDA) inspectors. The result of the proliferation of infections is that over 20 major meatpacking plants have been closed within the country, including Tyson Foods, JBS USA, Smithfield Foods and Cargill facilities​.

With prolonged facility closures curtailing production, companies are warning of meat shortages and prices are started to skyrocket.

U.S. meatpacking industry supply chain strained by COVID-19

This tightrope that companies are having to walk between continuing to process meat and ensuring the safety of the workforce has caused friction with many advocates and unions criticizing the industry’s response to the pandemic saying they waited too long to implement safety precautions. At the same time, there is mounting pressure for the plants to reopen.

In response to the concerns about the meat supply in the United States, President Donald Trump declared meat processing plants “critical infrastructure.” On April 29 he signed an order employing the Defense Production Act to keep plants open.

Even with this order, some plants remain closed, and this continued reduced capacity could have far-reaching effects for the county. A report from CoBank said that the supermarket meat supply may drop 30% by May 25 and result in 20% price hikes for beef and pork. Already, the pork supply has dropped 40% since mid-Mark, according to USDA data.

Major meat companies are worried. Tyson Foods’ chairman John Tyson took out a full-page advertisement in major American newspapers where he said, “The food supply chain is breaking." He said that the supply of meat will be reduced by "millions of pounds" and that unprocessed animals will become food waste.

Already, the effects can be seen as far down the supply chain as the farmers. Chicken and hog farmers have been forced to euthanize animals due to a lack of processing capacity. This waste translates to an estimated $5 billion in losses for the industry, according to economists from Iowa State University.

For consumers, the most immediate effect is on meat prices, which has shot up in the last several weeks. According to USDA data reported in the Wall Street Journal, wholesale prices of ground beef have tripled since early March.

Companies are also afflicted financially. While the meat processing industry continues to work toward a solution, earnings statements for meatpackers and protein companies will continue to suffer.

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