Impact of Coronavirus Most Likely to Upset Meat Supplies
Beef supply concerns from all over Canada continue to trickle in as the COVID-19 pandemic continues to persist. Due to the general public safety steps by the government, slaughter plants located in Canada and the US are minimizing line speeds, shifts, and momentary closures in a few other cases. These kinds of measures result from Covid-19 issues, and experts are suggesting that meat supplies are likely to end up struck hard.
Kevin Grier, a market analyst, says that Canadian slaughter activities are probably to slide by at least 5% in the second quarter of the year and that he says “is if we are lucky.” He also informed those on an online presentation organized by marketing intelligence firm J.S. Ferrero that “Production is much, much slower than normal.” The slower production rate generates a big problem for cattle owners.
The persistence of Covid-19 has caused a short term closure of the Cargill plant at High River in Alta. The packer is one of the primary meat packers on the Prairies. Several employees at other leading meat plants in JBS in Brooks in Alta have tested positive to Covid-19, resulting in 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 significantly reduced its daily slaughter operations.
Still, several US meat packing plants that deal with Canadian livestock have also announced decreases in their slaughter activities, while others have temporarily stopped running because of the workforce being infected with the virus. Tyson meat plant in Pasco, Washington, has temporarily shut down although the JBS plant in Greeley, Colorado, was set to open last week after its temporary closure at the beginning of the month.
According to Grier, beef has become much more costly at the counter compared to pork and chicken. He says “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 a good number of full service eateries have undergone a forced closure as the battle to control the growth of the virus continues. The impacts of the pandemic will be felt seriously in the third quarter of this year as people focus more on paying the festive season bills during the first quarter. Grier further predicts that in the 2nd and 3rd quarters, food sales will be an estimated 20% of what they are at this point, while fast food restaurants like McDonald’s may maintain 40% of their current sales.
Within the same webinar, an American agricultural economist, Rob Murphy, said that limited packaging capacity had brought about 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 might be facing a decrease of as much as 9% due to limited processing speeds and temporary closure of packing plants as a result of the COVID-19 pandemic. Murphy states 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 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 a great deal of leverage with the packer. The feed yard placements are also most likely to fall in the coming months, thus reducing inventory, and this indicates a drop in beef supply.