By Chuck Abbott
U.S. meatpackers ran at roughly three-fourths capacity during April as outbreaks of the coronavirus forced some of the country’s largest meat plants to close temporarily, said the USDA on Thursday. Production is rebounding in May, but the risk of a resurgence of the virus hangs over the industry, said analysts.
Hormel Foods said it had absorbed $20 million in “incremental supply chain costs primarily related to lower production volumes, employee bonuses, and enhanced safety measures” at its plants in the past three months. It said it could chalk up an additional $60 million to $80 million for the second half of the year.
The coronavirus pandemic has punctured expectations of record-high red meat and poultry production this year. Last week, the USDA lowered its 2020 meat forecast by nearly 5 billion pounds, mostly in beef and pork, “as the sector adjusts to Covid-19 and economic uncertainty.”
Packing plants produced 3.86 billion pounds of beef, pork, veal, and mutton during April, 1.1 billion pounds less than in March, a drop of 23 percent, said the monthly Livestock Slaughter report. The USDA was scheduled to release April poultry data on Friday.
“We’ve shown significant improvement in processing numbers over the past several days,” said Jayson Lusk, a Purdue University meat expert. “In early May, we were running about 40 percent below 2019, and now we are ‘only’ about 15 percent below last year’s numbers in beef and pork.” Wholesale meat prices, which spiked as retail supplies of meat tightened, “are coming off some all-time highs. In short, we’re seeing significant progress,” said Lusk.
Cattle slaughter is relatively steady throughout the year, while hog slaughter is highest in fall and winter. “If we have a Covid resurgence for some reason, that could again stress the system’s ability to push through the number of animals,” said Seth Meyer, associate director of the FAPRI think tank. “But this is all unknown risk — and why the packers and everyone else remain concerned about worker health.”
According to data compiled by FERN, at least 64 meatpacking workers had died and more than 16,500 employees had tested positive for Covid-19 as of midday Thursday. Cases have been reported at 217 U.S. packing and processing plants.
“The Covid-19 pandemic has created industry uncertainty as to whether we will experience further interruptions,” said Hormel’s chief executive, Jim Snee, in releasing a company earnings report. “Additionally, the food service industry is in the very early stages of a recovery, and we are actively monitoring the pace and magnitude of this recovery.” Snee said it was impossible to accurately predict company income because of the disruptions.
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