Impacts of Coronavirus Very Likely to Hinder Meat Packers
Beef access issues from all across Canada continue to trickle in as the COVID-19 pandemic persists. As a result of the general public safety steps by the government, butcher houses throughout Canada and also the United States continue to be reducing line speeds, shifts, and short-term closures in other cases. These types of steps result from Covid-19 worries, and analysts are suggesting that meat supplies are likely to be struck hard.
Kevin Grier, a market analyst, says that Canadian slaughter activities are most likely to decline by at least 5% in the second quarter of the year and that he says “is if we are lucky.” He also advised those on a webinar arranged by marketing intelligence firm J.S. Ferrero that “Production is much, much slower than normal.” The sluggish production rate generates a unexpected problem for cattle keepers.
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 leading packers on the Prairies. Several workers at other leading meat packing plants in JBS in Brooks in Alta have tested positive to Covid-19, resulting in a lot of struggles in operations due to personnel shortage. The plant, as of last week was running only on a single shift, and this has considerably diminished its daily slaughter operations.
On the other hand, many US meat packing plants that deal with Canadian animals have also announced decreases in their slaughter activities, while others have momentarily stopped operating as a result of workforce contracting the virus. Tyson meat plant in Pasco, Washington, has temporarily closed while the JBS plant in Greeley, Colorado, was planning to open recently after its short term shutdown at the beginning of the month.
As reported by Grier, beef has become far more expensive at the counter 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 dine out more frequently compared to eating at home. The pandemic has modified this as a large number of full service diners have underwent a forced closure as the struggle to control the spread of the virus continues. The impacts of the pandemic continue to be felt severely in the third quarter of this year as people concentrate more on paying the new years bills during the first quarter. Grier further predicts that in the 2nd and 3rd quarters, food sales will be near 20% of what they are now, while fast food service restaurants like McDonald’s may maintain 40% of their sales.
In the same webinar, an American agricultural economist, Rob Murphy, reported that restricted 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 may be facing a slip of as much as 9% due to limited processing speeds and temporary closure of packing plants as a result of the new 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 further stated that price levels for cash cattle are most likely to continue decreasing because the cattle providers 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 coming months, thus bringing down inventory, and this suggests a drop in beef supply.