Impacts of COVID-19 Very Likely to Hinder Meat Supply
Beef accessibility concerns from all around Canada continue to trickle in as the new Coronavirus pandemic remains. Because of the public safety measures by the authorities, slaughter plants in Canada and the US are reducing line speeds, shifts, and short-term closures in other cases. These decisions are due to Covid-19 worries, and analysts are saying that meat supplies are most likely to be struck hard.
Kevin Grier, a market analyst, says that Canadian slaughter activities are most likely to slide 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 an online presentation organized by marketing intelligence firm J.S. Ferrero that “Production is much, much slower than normal.” The slow production rate creates a unexpected problem for cattle keepers.
The persistence of Covid-19 has led to a short term closure of the Cargill plant at High River in Alta. The meat packer is one of the major packers on the Prairies. Several workers at other primary meat packing plants in JBS in Brooks in Alta have tested positive to Covid-19, causing a lot of struggles in operations due to employee shortage. The plant, as of last week was operating only on a single shift, and this has dramatically lowered its daily slaughter operations.
On the other hand, plenty of American packaging plants that deal with Canadian animals have also announced reductions in their slaughter activities, and others have temporarily stopped running because of staff being infected with the virus. Tyson meat plant in Pasco, Washington, has momentarily shut down while the JBS plant in Greeley, Colorado, was poised to open last week after its short term closure at the beginning of the month.
According to Grier, beef has become much more expensive at the counter as compared 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 often as compared to eating at home. The pandemic has modified this as most full service restaurants have underwent a forced shutdown as the struggle to control the spread of the virus continues. The effects of the pandemic will be felt severely in the third quarter of this year as people focus more on paying the festive season bills during the first quarter. Grier further forecasts that in the 2nd and 3rd quarters, food sales will be close 20% of what they are at this point, while fast food restaurants like McDonald’s could hold onto 40% of their sales.
In the same webinar, an American agricultural economist, Rob Murphy, stated that limited packaging capacity had resulted in a disconnect between meat prices and live animal prices. He pointed out that panic buying because of Covid-19 contributed to strong margins among the packers.
Many slaughter plants in the US could be facing a slip of as much as 9% due to slower processing speeds and temporary closure of packing plants as a result of the COVID-19 pandemic. Murphy reported 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 reported that price levels for cash cattle are most likely to continue declining because the cattle sellers need to move the cattle, and there is not much leverage with the packer. The feed yard placements are also most likely to fall in the upcoming months, thus reducing inventory, and this signifies a drop in beef supply.