Meatpacking rebounds but high prices and backlogs to persist

Meat production has rebounded from its low point during the coronavirus pandemic when dozens of plants were closed, but experts say consumer prices are likely to remain high and it will take months to work through a backlog of millions of pigs and cattle, creating headaches for producers.

Earlier this week, beef, pork and poultry plants were operating at more than 95% of last year's levels, which was up from about 60% in April at the height of plant closures and slowdowns, according to the U.S. Agriculture Department. That increased production came as companies took steps to protect workers, such as adding plastic partitions between work stations and staggering shifts, that are essential but could slow down the work. The safety measures and bonuses to incentivize workers have increased costs.

And while worker advocates stress that companies must be vigilant to avoid more coronavirus infections, those steps will likely mean higher prices at grocery stores. Even if plants became more efficient, there is a lag of several weeks between when wholesale prices drop and when consumers start to see the change.

Grocery stores, which absorbed some of the meat price increases this spring, also may not pass along all the price cuts as they try to restore their profit margins.

"Don't expect prices to fall in half just because wholesale prices have declined dramatically," said Lee Schulz, a livestock economist at Iowa State University.

Besides adopting measures to keep workers healthy, Kansas State University agricultural economist Glynn Tonsor said meat processors have also boosted production by operating plants more on Saturdays, rather than just weekdays, and by saving time by producing larger cuts of meat. That means grocery stores or consumers may have to cut a pork loin down into pork chops instead of that work being done at meat plants, for example.

But to work through the beef and pork backlogs quickly, meat processors may have to find ways to boost production higher than last year's levels, said Will Sawyer, a protein economist at Cobank, an agribusiness bank. Before the pandemic, meatpacking plants had been expected to produce more than they did last year.

Even as production levels climb, it will likely take all summer and maybe into the fall to work through the backlog of more than 1 million cattle and more than 2 million pigs that was created this spring when dozens of plants were closed. That will continue to create problems for farmers and ranchers who are struggling to find space for all those animals and face low prices because of the supply glut.

Mike Drinnin, who owns feedlots in Nebraska, said everyone involved in raising and feeding cattle felt the squeeze when so many beef and pork processing plants were idled, because fewer cattle were being bought by processors. More cattle are remaining in pastures and feedlots longer than normal while ranchers try to slow their growth rate to give themselves more flexibility.

"It's been a long, long, hard haul here since March and all this kind of started," said Drinnin, who serves on the board of the Nebraska Cattlemen trade group. "It's just been quite the struggle for everybody."

Pig farmers have been hit especially hard by the backlog because of the tight capacity on their farms. It has led some to euthanize pigs to create space in their barns.

"As farmers we're always trying to plan for the future, and it's just impossible right now," said Mike Paustian, the president of the Iowa Pork Producers Association. "The only thing that's certain is that this problem is not going to go away anytime soon."

Largely because poultry plants are more automated, they didn't see as many virus outbreaks and closures, with production only falling about 5%, Sawyer said. The plants that did close temporarily were also smaller than some of the beef and pork plants that closed.

As meat plants scale up to full capacity, companies still must ensure that plants don't again become hotbeds of infections, said Mark Lauritsen, director of the food processing and meatpacking division for the United Food and Commercial Workers International union. The union represents roughly 80% of the country's beef and pork workers and 33% of its poultry workers.

"We're still seeing outbreaks," Lauritsen said. "It's a strange virus because it's hard to say where it will pop up next."

Lauritsen said many plants where hundreds of employees became infected have reopened since implementing safety measures. But other plants, like a JBS beef plant in Hyrum, Utah, are just now seeing outbreaks. The plant, where mass testing revealed that 287 employees had COVID-19 this week, has had to slow some of its operations, but it remains open.

The union estimates that 13,150 U.S. meatpacking plant workers been infected or exposed to the coronavirus and 57 have died of COVID-19, the disease caused by the virus.

As plants scale up to full capacity, Lauritsen said he's concerned they will ease up on safety measures.

Worker shortages also still seem be a problem at some plants, with many employees cautiously returning to work. One labor staffing company in Arkansas, TEC Staffing Services, has held "drive thru hiring events" for poultry plants, seeking to fill hundreds of open positions.

Marisol Avelar, who works at a JBS pork plant in Worthington, Minnesota, said dozens of people are missing every day from her shift on the production line. When she was called back to work last month after the plant temporarily closed, her fears were somewhat assuaged by the safety measures the company had taken. She's still nervous, though, because of talk about infected workers.

"The company has done a lot of work trying to keep everyone safe, but people have continued getting infected," she said.