Packing plants either slowing or shuttering production are proving to be a painful bottleneck for the protein sector. Pork producers are now going to extreme measures as market-ready hogs have nowhere to go.
“It’s an incredible strain and it’s really unprecedented,” says Nick Giordano, National Pork Producers Council (NPPC) VP and counsel, global government affairs. “This week we’ve had about 40 percent of our pork packing plant capacity out, it’s been backing up hogs and prices have dropped to virtually nothing. Hogs are being euthanized.”
Congressman Colin Peterson (D-Minn.) spoke about the dire situation earlier this week. The House Agriculture Committee Chairman said 160,000 hogs need to be euthanized per day at this point, as declined packing plant capacity causes massive backups.
The issue even grabbed the attention of President Donald Trump. He announced earlier this week an executive order for meat packing plants to stay open. NPPC called the move a step in the right direction.
It’s absolutely a step in the right direction because job number one has been to cease to stop the plants from going down,” says Giordano. “You also need to have an orderly process with more coordination between the federal government, the state and local governments.”
Giordano says the executive order still requires packing plants to follow CDC and OSHA guidelines when keeping plants operations, but he says it also make sure state and local officials realize the food supply is critical infrastructure.
However, the President’s order doesn’t mean all shuttered packing plants will immediately come back online.
“Ordering a state packing plant to stay open and for that packing plant to operate are two very different things,” says Lee Schulz, an economist with Iowa State University. “It is very reliant on the labor force to operate that packing plant, and we can’t necessarily make those workers work. But if they are available to do work, I think the more attention [and] the more resources that we can get to help resolve the situation in the form of safety measures, in the form of testing, will allow us to potentially move to getting these packing plants either back on line or getting up to capacity level that allows us to move more hogs through this.”
Dan Basse with AgResource Company says the executive order isn’t the magic ticket in getting packing plants back to 100% operational. He thinks the packing industry could see lingering production strains.
“If you look at the processors, they’re having to space out workers,” says Basse. “We used to be shoulder to shoulder, elbow to elbow. Now we’ve got Plexiglass. We’ve got six feet spacing, the chain speeds will not be up to snuff. I’ll be happy if we make it back to 80% to 85%.”
He says getting back to at least 80% of normal processing capacity will be an improvement from today. Basse says with the current plant closures and slowdowns, the U.S. pork processing capacity is currently 60 to 65% of normal, and in cattle, it’s 70% to 74%.
“I’m not anticipating we’re going to get back to where we were, and then the question becomes, will there be shortages even going forward, and how did the workers respond to all of this,” says Basse. “Those are questions that are open-ended, but the packing industry is not structurally set up to get back to 100%.”
Smithfield Foods posted pictures on Twitter this week, saying they were they are protecting their people and showing how. The company added plexiglass and other safety measures that follow CDC and OSHA guidelines.
Even with the increased effort in stopping the spread of COVID-19 at plants, NPPC acknowledges that getting packing capacity back to 100% will be a challenge in the foreseeable future.
“I think that the plants have made it clear that health and safety comes first,” says Giordano. “We’re not going to see all these plants just come back on stream. They’re going to come back on stream when people are confident that they’re ready to come back on stream.”
If plants don’t come back online soon, pork producers will be facing a similar predicament in searching for solutions on places to take their animals. However, any relief in the processing portion of the food chain would be a welcome change, could help relieve the growing pressure put on producers today.
“That is the critical bottleneck that right now,” says Schulz. “We have a monumental challenge of getting hogs off the farm and into the packing plants at the moment. Now, it’s not the only bottleneck, but it’s really the bottleneck that is having ramifications up and down the supply chain.”
NPPC says it knows the President’s Executive Order this week won’t be the only solution to help pork producers right now.
“This is an unmitigated disaster,” says Giordano. “Producers need cash. So, we’re working to get them payments without limitation.”
Giordano says the pork industry learned some key lessons in the late 1990s, which includes why payment limitations, and restrictions based on size, will hurt many operations.
“What happened after 1998 was the government didn’t provide very much relief in the industry to consolidate it,” he says. “One of the great ironies here is you hear about payment limitations and ‘let’s not take care of the big guys’, but my recollection is some of the largest producers didn’t survive the late 1990’s. The way the industry is structured - that there’s a lot of big players that utilize contract growers, but the big players are the ones that own the hogs and take the risk.”
He says NPPC and other organizations have been striving to help Congress understand that the pork industry isn’t structured like it was in the 1990s, and any financial help needs to cover all of the pork industry, without payment or size limitations.
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