Closure of Minnesota pork plants to have impact on farmers, oil prices drop below zero

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A small Minnesota community has become a hotspot for COVID-19. At least 76 people have been infected with COVID-19 in Nobles County, according to state health officials.

State health investigators have interviewed 41 of those individuals, including 33 employees at the JBS pork production facility in Worthington. Six family members of employees also have the disease, said Jan Malcolm with the Minnesota Department of Health.

“The state of Minnesota did not shut down JBS, the company did not shut down JBS, the virus shut down JBS,” Gov. Tim Walz said during his Monday briefing.

The decision to close the Worthington plant comes less than two weeks after Smithfield Foods shut down its meat production plant in Sioux Falls.

With both closed, Minnesota farmers are now in a difficult position.

“It’s a big portion of where our producers are sending their animals to market,” said Gov. Walz.

State leaders said they are working to help smaller packing plants ramp up their operations statewide.

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“Before we even had COVID-19, we’d faced five years of bad prices," Department of Agriculture Commissioner Thom Peterson said. "So to have this on top of that is very difficult, especially right now for our pork industry."

He said while they look for other markets for Minnesota pigs, they are also working with farmers to slow the growth of some of the animals in an effort to buy time.

“Unfortunately some farms may have to de-populate some pigs at a certain time as well,” said Peterson.

He told reporters that the state is working with management at the Worthington Plant to resume operations as soon as possible. According to Peterson, Minnesota produces the second-largest amount of pork in the nation.

“We have enough pigs to meet demand right now but with closures of packing plants and processing facilities, it’s going to make things very challenging," said Peterson.

He said pig farmers in the United States are expected to lose $5 billion dollars during the remainder of the year.

“Farmers are losing money on every animal, every day,” he said “It’s not just hogs, it’s lambs, cattle, dairy, eggs. It’s across the sector.”

The oil industry also took a big hit on Monday. Oil prices plunged to negative $3.70 per barrel.

“This is definitely a bizarre situation,” said Allison Mac, a petroleum analyst for GasBuddy.

She said the price of crude oil has been declining since mid-February. Now with more people staying at home nationwide, supply is outpacing demand.

“People are not filling up, therefore the gas station owners do not need to buy as much gasoline from the refineries," Mac said. "And then at the refineries, they’re also cutting back production."

The industry is getting ready for June deliveries, but there are concerns over the excess of inventory. According to Mac, that was a factor the drop in prices on Monday.

“We’re going to be switching over to June contracts come Wednesday, so we’re going to see oil prices go back up to about $21 a barrel come Wednesday,” Mac said. “But they’re trying to get rid of this last inventory they have and they simply don’t have storage for it, so they’re like please just take the oil because we just don’t know where else to put it.”

The drastic drop on Monday isn’t expected to have a large effect on drivers.

“Are we going to wake up tomorrow morning and see gas prices drop 25 cents per gallon overnight because of this? No,” said Mac. “Are we going to see prices cheaper tomorrow than they are today? Yes.”

She anticipates the price at the pump won’t rebound until supply levels off and there is a supply-and-demand balance.