Coronavirus closes major pork processor, creates worries for US meat supply
Smithfield Foods closes its South Dakota plant after several employees tested positive for coronavirus. FOX Business’ Jackie DeAngelis with more.
U.S. grocers are struggling to secure meat, looking for new suppliers and selling different cuts, as the coronavirus pandemic cuts into domestic production and raises fears of shortages.
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Covid-19 outbreaks among employees have closed about a dozen U.S. meatpacking facilities this month, including three Tyson Foods Inc. plants this week. Other plants have slowed production as workers stay home for various reasons.
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Grocery executives at retailers including Walmart Inc. and Costco Wholesale Corp. worry supplies of some products could run short just as demand is surging.
"I have not seen beef sales and all protein behave this way since the Atkins Diet days," when shoppers bought up meat as part of the low-carb diet, said Jeff Lyons, senior vice president of fresh food for Costco. The warehouse chain is considering new suppliers to shore up its meat supplies, he said.
Tyson, the biggest U.S. meat company by sales, on Thursday temporarily closed a Washington state beef plant, after closing two Midwestern pork plants on Wednesday that produce millions of pounds of meat, together slaughtering nearly 35,000 hogs daily. Smithfield Foods Inc., Cargill Inc., JBS USA Holdings Inc. and Hormel Foods Corp. have closed plants over the past month, leading to significant declines in overall U.S. meat production.
Last week U.S. beef production fell 24% compared with a month earlier, with pork off 20% and poultry down 10%, according to estimates from CoBank, an agricultural lender.
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Some meat orders are arriving incomplete as suppliers pull back on variety and major plants remain closed, grocery executives said. Ground-beef supplies are declining, a regional grocery executive said, and wholesale prices are creeping up after a fall that occurred when closed dining rooms clipped restaurant demand.
Meat inventories are likely to become tight within two weeks because of the recent processing-plant closures, and temporary shortages are possible, said Pat LaFrieda, chief executive of his namesake meat wholesaler, based in New Jersey. The company typically supplies food to Shake Shack Inc. and other restaurants, but now is selling most of its inventory to grocers, he said.
The spread of Covid-19, the disease caused by the new coronavirus, among U.S. meat-plant workers has thrown the $213 billion industry into disarray. Meat companies are trucking poultry and livestock to be processed at other plants, and bringing in welders to install shields between processing-line work stations. On farms, some pigs now are being euthanized because slaughterhouses have closed, farmers said. In Iowa, Gov. Kim Reynolds this week dispatched as many as 1,000 National Guard members to help deliver Covid-19 tests to meat plants.
"We haven't seen a situation in our lifetime where the industry has contracted as quickly as we have seen in the last month," said Will Sawyer, a CoBank economist who researches meat production.
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At Costco, Mr. Lyons is focused on supplies of pork and chicken, which the chain requires to be raised and processed to certain specifications. Those industries have less room for closures or surges in sales inherent in their supply chains because animals are bred in precise quantities to meet expected demand, he said. Costco is meeting demand now, he said, but is considering working with new suppliers to fill orders if needed, with some of its U.S. suppliers' plants expected to be down for about two weeks, Mr. Lyons said.
For chicken, where Costco specializes in boneless, skinless breasts that are 99% fat-free, the company is working with plants to temporarily supply those products for additional days each week, Mr. Lyons said.
Walmart is buying more products ordinarily destined for restaurants, working to help convert plants used for food service to retail, as well as narrowing meat assortment to focus on the fastest-selling items such as basic steak cuts to simplify the supply chain, said a person familiar with the situation. Sales of vacuum-seal bags are also rising at Walmart, a sign shoppers are buying food they intend to preserve, this person said.
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Todd Allen, director of meat and seafood at the Raley's grocery chain in West Sacramento, Calif., said the company is receiving about 80% of its chicken orders while its meat sales have increased about 67% since March. It recently removed purchase limits on chicken items and has been able to keep more inventory in its warehouses to meet the demand, but it is paying higher wholesale prices for some products, including 30% more for beef shoulders and around 80% higher for inside leg parts.
"If we have to lose money to be competitive, we do," he said.
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A few closed plants reopened this week. Cargill's Hazleton, Pa., plant closed on April 7 after nearby Covid-19 cases spiked. Over the past two weeks the company installed plastic PVC sheeting between stations on the processing line, set up plans to check employees' temperatures in the middle of shifts, and laid out one-way entrances and exits for cars and workers.
Early this week, about 60% of day-shift employees had returned to work and 70% for the night shift had done so, above expectations, Cargill said.
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