“We solved their problems”, Donald Trump declared this week, after chatting with executives at meatpacking companies. “We unblocked some of the bottlenecks”.
The president was, of course, referring to his executive order declaring meat processing facilities critical infrastructure. The plants are to remain open for the duration of the coronavirus crisis, according to the decree.
Suffice to say solving this particular “problem” isn’t as simple as ordering plants to keep production lines moving. According to a new CDC report covering 130,000 workers at 115 meat and poultry processing facilities across 19 states, there have been 4,913 virus cases and 20 deaths.
In percentage terms, those figures aren’t particularly large, but that’s not the issue. The issue is fear – fear of going to work and also fear of infecting family members at home. As the CDC notes, “factors potentially affecting risk for infection include difficulties with workplace physical distancing and hygiene and crowded living and transportation conditions”.
The infamous Smithfield plant in Sioux Falls, South Dakota, is gearing up for a partial reopening next week. Some 850 workers have tested positive. “I think it could be in a matter of days”, South Dakota Gov. Kristi Noem said this week, referencing an imminent restart to plant activity. It was at Noem’s urging that the facility was temporarily closed down. She suggested on Tuesday that Trump’s executive order won’t deter her from calling on the plant to be shuttered anew should the situation warrant. “These are critical infrastructure businesses, they are imperative to our food supply in this country, so I think we need to keep them running but we also need to protect people”, she remarked.
Amanda Little, a professor of journalism and science writing at Vanderbilt and the author of a Bloomberg Opinion series on the fate of food after the pandemic, suggests Noem hasn’t been what one might call “heroic” in this situation, despite her having orchestrated the plant shutdown.
“Noem blamed the spread of the disease not on what was happening inside the plant, but rather on employees’ close-knit lifestyles, a notion [a longtime line-worker for Smithfield who represents the plant’s employees at the local labor union] found disrespectful and discriminatory”, Little writes, in a great Op-Ed. She quotes the line-worker. “Blaming employees who are essential to your organization is ungrateful”, the person said. “We invest our lives, our time, our energy, our everything [and] the governor of our state and the company we work for have insulted our dignity”.
Little adds that Noem is clearly concerned about the economic fallout for the state. The Smithfield plant is, after all, a crucial cog in the local economy.
“Though meatpackers have been moving to shift operations to make employees less vulnerable to infection, they still have a workforce depleted by illness”, AP’s Stephen Groves wrote Friday, in a piece previewing plant reopenings in the wake of Trump’s order. Those who aren’t already sick “may be unwilling to risk entering plants that have been rife with infections”, he pointed out.
“Can you force worried, or sick workers to turn up to their shift?”, Rabobank wondered, in a global outlook note dated Thursday.
Crucially, the AP’s Groves reminds you that even plants that are operating “will have to do so more slowly, renewing concerns about whether Americans can count on seeing as much meat as they’re used to”.
That latter bit is key. Companies have generally agreed that taking measures to protect workers is paramount, but some of those measures will almost by definition slow production. And that’s on top of depleted workforces.
Simply citing the figures for offline capacity isn’t sufficient to get a real read on the true scope of output declines. “Cattle slaughter dropped 37% this week from a year ago… far outstrip[ping] the 10% to 15% in capacity that’s been halted with meat plants closed”, Bloomberg’s Michael Hirtzer wrote Friday afternoon. “Hog slaughter was down 35%, also topping the shutdown figure of 25% to 30%”.
The USDA underscored the point. “Since its peak in late March, federally inspected beef production fell almost 32% through the week ending April 25 as the rate of cattle slaughter declined at several beef packing facilities”, the government said Thursday.
That sharp deceleration in cattle slaughter rates obviously choked beef production. After flagging the impact of labor force absences caused by the proliferation of the virus, the USDA notes that this is “a time when cattle slaughter numbers increase seasonally”, but the “rates for the week ending April 25 were down 28% year-over-year”.
Naturally, this will mean shortages and higher prices – executive order or no.
“There is plenty of protein in the supply chain; however, some processors are experiencing challenges”, Kroger said, in an e-mail to Bloomberg on Friday afternoon, after CNN reported the chain is set to impose limits in an effort to avoid the disconcerting spectacle of bare refrigerator displays.
“We feel good about our ability to maintain a broad assortment of meat and seafood for our customers because we purchase protein from a diverse network of suppliers”, the company went on to assess.
That may be true, but that “broad assortment of meat” is likely to be “broadly” more expensive. After all, wholesale prices keeping hitting records and retailers will either have to accept crimped margins or pass along the higher costs to shoppers. Which do you think is more likely?
“There’s thin margins in the food industry anyways”, Notre Dame professor Katie Wowak, a researcher who studies food supply chains told AP, for the linked article above. “When you add something like this, it can really cripple entities”.
It sure can. Of course, rising costs can also cripple consumers, especially those who have recently lost their jobs.
It’s worth taking a moment to consider what this means over the longer-term. If you’re a farmer, and you’re forced to destroy animals because you have nowhere to send them for processing, you can’t resurrect those beasts once processing capacity comes back online. That presages scarcity later, which suggests elevated prices may become a fixture – at least for the medium-term.
“Long before COVID emerged I was muttering darkly to colleagues that in a future more mercantilist, more militarized world, I could imagine food security meaning something far less benign than it does today: not so much ‘can I get food?’ demand side, but ‘we have the food but aren’t sure we want you to have it’, supply side”, the same Rabobank analyst who penned the note cited above mused. He went on to say that “recent developments on wheat in Russia and rice in Vietnam may not have a deliberately Machiavellian bent to them, but they still take us closer to that kind of backdrop”.
Prices for both beef and pork surged double-digits in the days following Trump’s order this week, clearly demonstrating that the “problems” (as the president put it) have not been solved.
Mark Lauritsen, the director of the meatpackers division at the United Food & Commercial Workers union, called the notion that Sonny Perdue “can all of a sudden… wave a magic wand” and have plants operating at capacity “ridiculous”.
As far as implementing necessary safety protocols, Smithfield says it’s totally committed to the push. “Demands for things like 100% compliance with all CDC and OSHA guidance… are totally and completely reasonable”, a statement released on Friday reads. “The company agrees!”
We’ll see. We’ll see.