Impacts of COVID-19 Expected to Hinder Meat Supply
Beef access issues from all across Canada continue to trickle in as the COVID-19 pandemic continues to persist. Due to the general public security measures by the authorities, slaughter plants in Canada and the US are decreasing line speeds, shifts, and short-term closures in other cases. These measures are due to Covid-19 worries, and analysts are suggesting that meat supplies are most likely to be struck hard.
Kevin Grier, a market analyst, says that Canadian slaughter activities are most likely to drop by at least 5% in the second quarter of the year and that he says “is if we are lucky.” He further told those on a webinar organized by marketing intelligence firm J.S. Ferrero that “Production is much, much slower than normal.” The slow production rate generates a major problem for cattle keepers.
The persistence of Covid-19 has caused a temporary closure of the Cargill plant at High River in Alta. The meat packer is one of the main meat packers on the Prairies. Several workers at other main meat packing plants in JBS in Brooks in Alta have tested positive to Covid-19, resulting in a lot of problems in operations due to employee shortage. The plant, as of last week was running only on a single shift, and this has drastically diminished its daily slaughter operations.
On the other hand, more than a few American packaging plants that deal with Canadian livestock have also announced reductions in their slaughter activities, and others have briefly stopped operating because of their staff being infected with the virus. Tyson meat plant in Pasco, Washington, has momentarily closed while the JBS plant in Greeley, Colorado, was poised to open last week after its short term closure at the start of the month.
According to Grier, beef has become a lot of more expensive at the counter in comparison to pork and chicken. He says that “Beef costing has become uncompetitive relative to the other two main types of meat.”
According to Statistics Canada, Canadians prefer to eat out more frequently as compared to eating at home. The pandemic has changed this as many full service diners have undergone a forced closing as the fight to control the growth of the virus continues. The effects of the pandemic continue to be felt drastically in the third quarter of this year as people focus more on paying the christmas charges during the first quarter. Grier further forecasts that in the 2nd and 3rd quarters, food sales will be an estimated 20% of what they are right now, while fast food restaurants like McDonald’s might hold onto 40% of their current sales.
During the same webinar, an American agricultural economist, Rob Murphy, claimed that restricted packaging capacity had resulted in a disconnect between meat prices and live animal prices. He stressed that panic buying due to Covid-19 contributed to strong margins among the packers.
Many slaughter plants in the US could be facing a decrease of as much as 9% due to a drop in processing speeds and short-term closure of packing plants as a result of the Coronavirus pandemic. Murphy reports that “We think that’s going to persist, that you’re going to continue to see those types of problems that will lead to year over year declines in steer and heifer slaughter, at least for the next couple of months and maybe beyond.”
Murphy also claimed that price levels for cash cattle are most likely to continue declining because the cattle suppliers need to move the cattle, and there is not much leverage with the packer. The feed yard placements are also probably going to fall in the upcoming months, thus lowering inventory, and this implies a drop in beef supply.