Meat shortages are not production problem but supply chain breakdown

Consumers in some parts of the country have been experiencing empty meat cases or meat rationing during the COVID-19 pandemic. However, it is not a supply problem according to Collette Kaster, CEO of the American Meat Science Association.

Kaster says it is a food supply chain breakdown that resulted from a domino of unprecedented events.

“So the first stages when everything became shut down we suddenly realized that the metrics that we always see about the number of meals that we eat outside the home went to zero and so that entire supply chain that’s really dedicated to food service didn’t have a home,” she says.

At that point, some bulk packages of food intended for restaurants and schools, depending on their shelf life and how they were packaged, were able to be repurposed. The U.S. Department of Agriculture worked with industry to find homes for food that didn’t meet all the labeling requirements for individual retail sale.

That created pinch point No. 1 in the supply chain, which was a bottleneck at processing plants.

“Plants are set up with lines that are dedicated to producing food service products verses retail products," Kaster says. "There’s different kinds of packaging, food service products are often frozen and packaged in bulk compared to retail products which are packaged in obviously smaller consumer-ready packages.”

Once the food supply chain worked through that issue, meat prices fell as a result of lower demand, particularly on the pork side. Kaster says just a few weeks ago, belly and ham prices were trading for less than 40 cents.

The marketplace dramatically changed shortly after when the meat processing industry started to confirm positive cases of COVID-19 in plant workers.

“That started leading to plant closures, plant slow-downs. So, an existing challenge became the much bigger problem or pinch point that we find ourselves in today,” she says.

The problem turned into a crisis when pork plants in the region, including Smithfield Foods in Sioux Falls, S.D., JBS in Worthington, Minn., and Tyson in Waterloo, Iowa, suspended operations. Slaughter capacity dropped by more than 40% and put the pork industry into crisis and continues to cause thousands of hogs to have to be euthanized.

In response, President Donald Trump signed an executive order to force packing plants to continue to operate and others to reopen even if they had COVID-19 cases in workers. The order also waived the liability for packers so they could not be sued by workers that contracted the illness. However, those plants are struggling to ramp up production and it will take some time for them to get back to full capacity.

“Almost every company and almost every facility has unique circumstances based on its population of employees, based on the approach that it’s taking as it relates to testing and employment practices,” she says.

So, Kaster thinks what the pesident’s order is trying to do is to make things more consistent and to provide more direct guidance for plants to help them understand what steps from a Centers for Disease Control and Prevention perspective and an Occupational Safety and Health Administration perspective are needed to protect worker health and get plants back up and running. This includes deep cleaning, taking temperatures, implementation of personal protective equipment, reconfiguring lines and reconfiguring breakrooms.

“Everybody has tried to do that as soon a possible,” she says.

The problem, according to Kaster, is these things take time, especially when the new guidelines require workers to be spaced 6 feet apart on the line.

“Independent of being able to implement the structural changes, employers have to deal with the very real possibility of people having issues with childcare, having issues with their family, making sure that they feel safe coming back to work,” Kaster says.

She says it is a tremendous balancing act for all the packing companies to try to figure out the right strategy to do the right thing by people.

“Despite what you read on social media, there’s not a single one of these companies that has a desire or a motivation to put their employees at risk. There’s too much at stake. There’s brands at stake,” she says.

She says there’s regulatory agencies that are heavily involved in helping companies make sure that this doesn’t happen again.

Meanwhile, the shortage of meat in the pipeline has pushed wholesale negotiated boxed beef values and pork cutout values to record highs. Kaster says that will eventually trickle down into the grocery store and the consumer will pay for that. There are two different market signals currently taking place in the supply chain. She says one is from the live animal to the processor, which is being constrained by the limited slaughter capacity. Then there’s the marketplace signal happening from the consumer to the retailer back to the supplier.

“So, you have demand on one side, supply on the other, but the broken ability to link the two together. So, you see this bizarre discrepancy in the prices now,” Kaster explains.

That discrepancy was already occurring in the marketplace before the COVID-19 disruption, but the pandemic just amplified it.

“Wendy’s, Costco, the regional chains putting in limits on meat purchases, and you can see what’s already happening to pricing at retail, “ she says.

However, the idea that the United States is going to run out of meat, as suggested by John Tyson, is not going to happen. Kaster says she has a hard time believing that would occur because of the effort and the emphasis that’s being put into place to get these plants back running at capacity. However, she says there wasn’t a big buffer of workers in the packing industry anyway, and this event is illustrating that problem.