While mainstream media talks about America running out of meat as a result of packing plant closures and slowdowns, the story is much more complex, says John Nalivka of Sterling Marketing in Vale, Ore.
“The real issue is we have producers who are in a hell of a bind right now,” Nalivka says. “These plants are not closing down permanently, and we aren’t running out of meat. The bad deal is these feedlot and farrow-to-finish operations need to sell cattle or hogs today or this week. To me, that's really the big story.”
He says he’s not worried about consumers having enough food in this country, but he is worried about a place for all these animals to go.
“The whole situation is very dynamic and changing constantly,” Nalivka says. “If I was marketing hogs to Tyson's plant in Waterloo, the bottom line is that they can’t process my hogs today. Tyson’s problem in the plant is now my problem as well and I totally understand that. We are both part of the supply chain and we are in this together.”
Tyson’s Waterloo plant, which harvests 19,000 head a day, is the latest plant to suspend operations in a string of temporary closures impacting harvest capabilities.
Slaughter numbers drop
About 25% of U.S. pork production is now either idled or working slowly, analysts say. For the week ending Saturday April 18, hog slaughter was estimated at 2.236 million head, says Lee Schulz, agricultural economist at Iowa State University. This was down 171,000 head or 7.1% from the previous week and down 148,000 head or 6.2% from the same week last year.
For the week to date through Wednesday, April 22, hog slaughter is estimated at 1.082 million head. This is down 90,000 head or 7.7% from the same period last week and down 202,000 head or 15.7% from the same period last year.
“That leaves some hog farmers with no place to ship their market-ready animals… and no price for their hogs,” Schulz says.
For the week ending April 17, USDA’s Agricultural Marketing Service reported the Iowa/Minnesota producer sold, weighted average of all purchase arrangements, barrow & gilt price at $46.09/cwt. This was down $33.59/cwt or 42% from last year. Negotiated prices were down the most at $44.43/cwt or 56% lower compared to the same week last year.
These prices, if you can find a quote, are at levels the industry hasn’t seen for quite some time, Nalivka adds. The question looms ahead: How will the industry end up down the road?
“In a farrow-to-finish system, it needs to clip along and be maintained in pretty good order and not have any problems. And now we've created the biggest problem – there's no place to take hogs that are finished. We’ve backed the entire system up,” Nalivka says.
It’s a challenge to figure out how to slow an efficient system down, he adds.
“We have to be careful because we are so good in U.S. agriculture and production,” Nalivka says. “When these situations come along, we can’t always anticipate what the crisis mode will be. I think there’s a lesson to be learned here.”
What’s next for the plants
The plants will be coming back online, Nalivka says. But how that will look is anyone’s guess at this time.
“The packers are working very hard to get these issues addressed for their employees and addressing the issue of COVID-19 in the plants. As each day goes on, they're getting better and better at it,” Nalivka adds.
He expects plants will come back slowly, maybe even with one shift.
“We're not going to go back to where we were on January 1 real suddenly,” he says. “We've slowed things down and it's probably going to be a while until we get back to some semblance of normalcy again and have COVID-19 behind us.”
He believes some of the changes that plants are implementing will stick around beyond the COVID-19 pandemic like temperature monitors.
“This has forced the issue of looking at a problem that had to be addressed. And you don't just let that go away when you're on the other side of the problem because the problem can appear again,” Nalivka says.
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