Nearly every day for two weeks, at least one sizable pork-processing plant shut down after the new coronavirus ripped through its workforce.
By the end of last week, plants that process about 25% of U.S. pork were closed.
Hog farmers raise pigs for nine to 10 months before sending them to market. Most schedule the growth of their hogs so they can send some at least weekly, sometimes more often.
From leaving a farm to arriving at a grocery store, the processing of a pig and distribution of resulting products takes two to three weeks. That means consumers in early May should see effects of the mid-April plant closings. Prices could rise and varieties and quantities of pork products could fall.
Steve Meyer, an economist at Kerns & Associates in Ames, Iowa, and a pork-industry specialist, said farm economics have never been so distorted.
In an interview, he explained why the situation is worse in hogs than other livestock, and why hog farmers may be forced to kill animals rather than send them to market.
Some interview excerpts:
Q: How quickly do the plant closings affect the rest of the pork industry?
A: This is a well-oiled machine that had pigs lined up for the next 10 months. They’re on a track and they’ve got to go somewhere. ... If you block the chain somewhere, you can’t just block the flow. When you do that, you’ll eventually short the market product that people thought was coming. That’s going to happen probably as soon as next week.
You’ll also back those pigs up on farms, and farmers don’t have anything they can do with them. They’ve got buildings that are sized to fit and flow the pigs that come through. More pigs come every week to take the place of some that are in the barn now. You’ve either got to make space in the barn for those new pigs, or you’ve got to get rid of the new pigs. There’s no way around it.
Q: This is an emergency for farmers. Will it be one for consumers?
A: On the downstream side [from the processing plant], there will be some emergency about pork. But people don’t have to eat pork. There’s other food so there’s flexibility on the consumer side.
Q: What happens if there are similar problems at chicken- and beef-processing plants?
A: The other plants may have the same difficulty. But for chicken farmers, the solution is not nearly as bad. They can break eggs and, eight weeks later, the processors will have fewer birds. Beef is not as bad because they’ve got more storage capacity out on feedlots and they can always leave cattle out on grass. For hog farmers, it’s an intractable situation. Their livelihood is raising pigs, not killing them.
Q: Have you ever seen a bottleneck like this?
A: The only thing to compare it to was the fall of 1998 when we had a major packing plant close in July of that year and we had 10% more pigs than we had a year before. We got into a bind that fall where we didn’t have enough capacity to get them killed in an efficient manner. But we got them processed. It wasn’t anywhere near the mismatch we have now.
Q: Back to consumers. Is there inventory with distributors, or a reserve, that could make up for the reduced production?
A: The industry keeps about a week’s worth of production in the freezer. That is a working inventory. It is not some excess or some surplus. It was pulled down a bit in March. I think it’s been pulled down more in April, but we won’t know that until the next report comes out the third week of May. I think we would be pulling those down very quickly to bolster the flow of products to retail stores given that we’re slaughtering 25% fewer hogs than we should be.
Q: Could the reduced demand from restaurants help make up the prospect of less product in grocery stores?
A: It’s somewhat different product and it’s packaged differently. If you have a bacon line for food-service customers, you’re putting 20 pounds in a box on wax paper that you can take out at a restaurant and flip onto the grill. You’re not going to sell that 20-pound box in a grocery store.
Q: Will retail pork prices rise?
A: I don’t think we’re going to see prices rise much. ... Unless retailers get in a margin squeeze, I don’t think they want to risk the bad press and attention of raising prices on people at this time.
Q: For farmers, what are the alternatives?
A: The last thing that a pig producer wants to do is kill healthy pigs and not use them for the purpose that we brought them into this world. It’s a horrible thing to have to do. And yet, the situation has them in a position where they’re probably not going to have much choice. Farmers are unwilling participants in this health crisis.