Closed meat plants = empty meat cases in coming months

Recent estimates show 22 meatpacking plants across the U.S. have been closed at some point in March and April because of COVID-19, and several others have slowed production. These closures and slowdowns are creating a major bottleneck for the meat and livestock supply chain.

Even if temporary, the reduction in processing capacity will likely have a lasting impact on meat processors, livestock producers, retail stores, and consumers, according to a new report from CoBank's Knowledge Exchange division.

"Margins for cattle and hog farmers have fallen to multiyear lows," says 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," adding that pork and beef production is down approximately 35% compared with this time last year, which makes retail shortages and price inflation nearly a guarantee.

Although pork processing is projected to increase in the coming weeks, the report notes that hog producers may still be faced with euthanizing as many as 7 million pigs (worth $700 million at historical average prices) in the second quarter of 2020.

The report says declining meat production in April will likely lead to reduced grocery store supplies in May and June. In fact, the report predicts that by Memorial Day, nearly 30% of meat supplies could disappear in grocery stores, which could lead to increases as high as 20% (relative to last year) in pork and beef prices. Costco, Kroger, and a few others have already begun rationing their meat supplies.

"Significant contractions in meat supplies have often led to substantial inflation of retail beef and pork prices," Sawyer says. "In the past 20 years, retail pork prices experienced inflation of more than 10% just twice. And neither of those times did we see inflation climb to 20%, which may be coming in the months ahead."

The full report, "Closed Meat Plants Today Mean Empty Meat Cases this Summer," can be found at cobank.com.