Outbreaks of COVID-19 at meatpacking facilities across the United States have shaken the livestocks markets, harming both producers and consumers.
As of May 4, there have been at least 9,300 reported positive cases tied to meatpacking facilities at at least 164 plants in 27 states, and at least 40 reported worker deaths at 21 plants in 15 states, according to the Midwest Center for Investigative Reporting’s database.
In response, facilities have closed or scaled down production, leaving farmers without a market to sell their livestock. Hog commodity prices have dropped, and at least 2 million animals have been euthanized.
Lee Schulz, associate professor of agricultural economics at Iowa State University, shared his expertise on the pork industry with the FarmDoc Daily Webinar at the University of Illinois.
Here are three takeaways from his presentation Friday morning:
Problems are happening because of set infrastructure
Fifteen meat processing plants slaughter 62 % of the hogs each year, and 27 plants slaughter 86.5 % of the hogs each year. The vast majority are in the Midwest, Schulz said.
“We have the fixed infrastructure both on the farm and at the packing plant level,” Schulz said. “Now working through this backlog of hogs is a tremendous challenge.”
Prior to the crisis, closures at those plants, even for maintenance or a fire, could cause significant disruptions. With many slowing down or closing altogether, it’s impossible to ramp up to meet normal production levels.
“The situation here is much different because it’s focused on the labor force,” Schulz said.
Accordingly, there has been a sharp decrease in hogs slaughtered. The number of hogs slaughtered is down about 40 % from this week last year and 20 % from last week.
The number of cattle slaughtered in the week ending May 2 is estimated to be 38 % less than this time last year and down 11 % from last week.
Producers are taking the brunt of the decrease
"This has shaken the livestock markets tremendously and when we're looking at who is suffering right now, it's the producers," Schulz said.
Hog prices are down 37.4 % since the beginning of the year. Cattle prices are down about 29.0 % since the beginning of the year.
For every 1 % drop in capacity, hog prices drop 1.8 %, Schulz said. For a 20 % drop in capacity, hog prices would drop 36.4 %, he said.
But those are just estimates based on historical data.
“We’re working outside the bounds of historical data,” Schulz said.
For feeder pigs, which are bought at 10-12 pounds and then fed to be sold at higher weight, the prices have approached zero, Schulz said. That’s because with fewer hogs being sold to slaughter, there aren’t farms looking to replace those hogs with new ones.
There is not a pork shortage, but an availability issue
With less production at meatpacking plants, less pork is being shipped to stores, Schulz said. But so far, it seems that there is still plenty of pork to meet demands.
“It’s much more an availability issue,” Schulz said. “We’re finding product in the grocery store, but it may not be in the form or product that we’re necessarily used to buying.”
Because of that, pork retail prices are up, especially for premium cuts.
Pork loin retail prices are up 15 %, he said. Deli ham prices are also up.
Fewer stores are featuring pork in ads as well, Schulz said.
Pork cutout value, the average price of an entire pig at wholesale, is $100.72, up from $82.22 at this time last year, and much higher than what we’ve seen at a historical level, Schulz said.