Effects of Coronavirus Very Likely to Hinder Meat Producers
Beef supply issues from all over Canada continue to trickle in as the new Coronavirus pandemic continues to persist. As a result of the public safety measures by the authorities, slaughter plants in Canada and the US are lowering line speeds, shifts, and momentary closures in other cases. These measures are due to Covid-19 issues, and analysts are saying that meat supplies are 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 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 big 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 leading meat packers on the Prairies. Several employees at other major meat plants in JBS in Brooks in Alta have tested positive to Covid-19, causing a lot of challenges in operations due to staff shortage. The plant, as of last week was working only on a single shift, and this has considerably reduced its daily slaughter operations.
On the other hand, many American packaging plants that deal with Canadian livestock have also announced decreases in their slaughter activities, and others have momentarily stopped running because of the staff being infected with the virus. Tyson meat plant in Pasco, Washington, has briefly closed while the JBS plant in Greeley, Colorado, was poised to open last week after its temporary closure at the beginning of the month.
According to Grier, beef has become a lot of 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 like to eat out more often as compared to eating at home. The pandemic has altered this as most full service restaurants have undergone a forced closing as the struggle to control the spread of the virus continues. The consequences 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 about 20% of what they are at this point, while fast food service restaurants like McDonald’s may hold onto 40% of their current sales.
In the same webinar, an American agricultural economist, Rob Murphy, said that reduced packaging capacity had resulted in a disconnect between meat prices and live animal prices. He stressed that panic buying as a result of Covid-19 contributed to strong margins among the packers.
Many slaughter plants in the US might be facing a slip of as much as 9% due to slower processing speeds and temporary closure of meat packing plants as a result of the COVID-19 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 further claimed that price levels for cash cattle are most likely to continue decreasing because the cattle suppliers need to move the cattle, and there is not much leverage with the packer. The feed yard placements are also likely to fall in the upcoming months, thus bringing down inventory, and this suggests a drop in beef supply.