Expensive Meat While Supplies Last

Get Used to Expensive Meat With Supply Woes Lasting All Year – Bloomberg

  • U.S. shoppers are paying 13% more for T-bone steaks than last year, at $7.47 a pound. Ground chuck is up 28%. Prices for pork-sausage breakfast links and patties climbed 13%.This is the new reality for American meat eaters in the coronavirus pandemic.Donald Trump’s executive order will reopen meat plants struck down by outbreaks, but social-distancing measures will keep slaughterhouses limping along at reduced production rates. The shortfall in output could run as high as 15% even after plants are back in business, Agriculture Secretary Sonny Perdue said, without specifying how long that could continue.
  • Consumers should probably prepare for more sticker shock.“You’ll see an impact now, but you’ll also see blips in the future. We could see this go into 2021,” said Ryan Bernstein, senior vice president of McGuire Woods Consulting who also operates a family farm in North Dakota.
  • Shutdowns at major slaughter plants started in early April. Even though it was just about a dozen closures, producers have such a stranglehold on output that it leaves few remedies when even a handful of facilities are down. Grocery-store shelves have run empty, and farmers were forced to destroy tens of thousands of animals.
  • Wholesale beef has jumped to a record high, and pork surged 55% in April to the highest since 2017. That’s beginning to translate to higher grocery bills, according to protein producers. Pilgrim’s Pride Corp. estimates retail costs are up by about 20% or more for red meats like hamburger and pork chops.
  • The longer-term implications for prices will come from the knock-on effect that ranchers feel. When slaughterhouses slow their run rates, it means fewer animals can go to market. That forces livestock farmers to rein in their own production. Ranchers are slowing expansion and holding back cattle on pastures. Some hog producers are resorting to culling.It’s usually younger animals that are destroyed, since farmers haven’t spent money to feed and raise them yet. If a producer euthanizes piglets, it means fewer hogs available for slaughter down the road. That series of dominoes means prices can stay elevated for longer because it takes a while for hog and cattle herds to rebuild.
  • What’s more, the whole cycle could repeat itself if workers continue to fall sick and plants have to further reduce capacity because of a labor crunch.
  • Slaughterhouses are being retrofitted with physical barriers to keep workers safely away from each other. Employees will need to be tested, and companies are waiting on deliveries of essential protective gear. Plants will also likely continue to run at reduced capacity because of social-distancing measures.
  • On the farmer side, the lag time is much longer. Now that mass culling is taking place, it disrupts the normal flow of animals, especially to make pork and beef. While poultry producers can take a fertilized egg and have a market-ready chicken in about six to nine weeks, red meat is a protracted process.Hogs have a gestation period of roughly four months, and then it’s another six before pigs are ready for market. Calf gestation is nine months, with about 15 to 24 months before the animals are big enough to slaughter.
  • ample chicken supplies can help make up for pricey red meat.While there have been cuts to production at poultry plants and reports of sick workers, the industry hasn’t seen major closures. Chicken production in the nation is down about 5% from a year ago, Pilgrim’s Pride Chief Executive Officer Jayson Penn said.
  • The other thing that can help ease supply tightness: most restaurants are still closed for dining in, and take-out menus are often more limited. That means less demand from chefs, which gives some wiggle room for plants not running at full capacity, said Bartashus of Bloomberg Intelligence.
  • For meat processors like Tyson Foods Inc., higher prices for consumers usually translate into higher profit margins. While the company’s shares are down about 30% in 2020, they’re expected to “generate an excellent return in coming months” for investors willing to look past near-term volatility in protein markets, Heather Jones of Heather Jones Research said in a note, leaving 2021 estimates unchanged.
  • For beef, that means “ridiculously tight supplies in September through December,” he said.

Where’s The Beef?

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U.S. beef output is down way more than shutdowns suggest

  • Cattle slaughter dropped 37% this week from a year ago, U.S. Department of Agriculture data show.
  • That far outstrips the 10% to 15% in capacity that’s been halted with meat plants closed after coronavirus outbreaks among employees.
  • While many plants have stayed open, they’ve still been forced to slow output as producers combat a loss of labor. Social-distancing measures will also likely keep output trailing normal levels even as facilities reopen under President Donald Trump’s executive order.
  • Already, some grocers are beginning to ration supplies as the virus forces unprecedented disruptions in meat processing. Kroger Co., the nation’s biggest traditional supermarket chain, on Friday said it was limiting purchases of ground beef and fresh pork “at select stores.” Wholesale prices for both the meats have surged, and it’s starting to translate into higher bills at the retail level.
  • Top pork producer Smithfield Foods Inc. is reopening a hog-processing plant in South Dakota on Monday that had been closed since April 12, according to Kooper Caraway, president of Sioux Falls AFL-CIO, which represents workers at the facility.The company was asking 250 employees to return, according to the union. That’s down from 3,700 workers normally, with some 1,000 workers either sick with the virus or in quarantine. Smithfield didn’t reply to requests for comment on the reopening.