‘I Exhort You To Do This’: It’s Desperation Time As America’s Beef Crisis Goes DEFCON Wendy’s

Agriculture Secretary Sonny Perdue threatened states and major meat processing companies in a foreboding letter on Wednesday, according to the USDA. 

“Plants should resume operations as soon as they are able”, Perdue said. “I exhort you to do this”, he added. “Further action under the Executive Order and the Defense Production Act is under consideration and will be taken if necessary”.

A week on from issuing a decree designating meatpacking plants critical infrastructure, Trump’s patience for disruptions in America’s food supply chain is apparently wearing thin. A wave of closures threatens to leave supermarket shelves bare and has pushed wholesale beef and pork prices sharply higher.

A report that nearly a fifth of Wendy’s locations across the country are out of beef was likely disconcerting news to a president whose love of American fast food is the stuff of legend.

Wendy’s, you’ll recall, was on the menu when Trump served up a buffet of junk food to the Clemson Tigers last year during the team’s visit to the White House.

“Beef suppliers across North America are currently facing production challenges”, the company told the press, in an email. “Because of this, some of our menu items may be in short supply from time to time at some restaurants in this current environment”.

Read more: America’s Meat Crisis Isn’t ‘Solved.’ It’s Just Getting Started.

Part of the problem is industry consolidation. In short, it’s an oligopoly, which means that when something goes wrong (in this case a deadly virus begins to spread virtually unchecked at processing facilities), the entire supply chain effectively breaks apart overnight.

“Tyson Foods and its top two rivals — JBS SA and Cargill Inc. — control about two-thirds of America’s beef, and the large bulk of it gets processed in a few dozen giant plants”, Bloomberg reminds you. “Pork and chicken are similarly dominated”.

Now, in the wake of the crisis, lawmakers and state attorneys generals are pressing for investigations. Suffice to say the scope of a problem often doesn’t occur to officials until it’s too late.

In the meantime, plants are rushing to reopen, both for the purposes of preserving profits, and satisfying an impatient president who isn’t shy about lambasting corporate officers in public. Tyson is resuming operations at a critical Washington facility closed last month and Smithfield still plans to get the South Dakota pork processing plant (one of the first high profile closures to grab national headlines) up and running in some capacity this week.

This comes as health concerns continue to mount. Iowa’s Deputy Public Health Department Director Sarah Reisetter told a press briefing on Tuesday that more than 1,600 workers at four of the state’s meatpacking plants have COVID-19. Tyson’s pork processing plant in Perry has 730 positives, the Department said. That is an infection rate of 58%. The company’s plant at Waterloo has 444 confirmed cases, meaning nearly a fifth of those tested were positive. More than a quarter of those tested at Columbus Junction were positive, and the Iowa Premium Beef plant in Tama has 258 cases, for a rate of 39%.

Incredibly, Tyson said Tuesday it plans to reopen the Waterloo facility on a limited basis starting Thursday. The company notes the facility was “deep cleaned” and that any employee who tested positive will remain on sick leave until medically cleared to return.

Not everyone who’s healthy wants to go back to work, though. In fact, some have just decided to quit. Absenteeism is as high as 30% at some key US plants, and JBS is paying around 10% of its workers to just stay home. “There’s a number of folks who have quit”, Sioux Falls AFL-CIO president Kooper Caraway told Bloomberg this week. He represents nearly 4,000 workers from Smithfield’s star-crossed pork operation. “There may be others who decide not to go back”, Caraway warned.

In a new report, CoBank’s Will Sawyer says “meat supplies for retail grocery stores could shrink by nearly 30% this Memorial Day, leading to retail pork and beef price inflation as high as 20% relative to prices last year”. That’s not as high as China’s stratospheric pork inflation rate, but it’ll put a dent in consumers’ wallets, that’s for sure.

(CoBank)

Here are some additional highlights from Sawyer:

• The spread of COVID-19 among people who work in many beef and pork plants across the country has led to plant slowdowns and shut downs, creating a bottleneck in the U.S. meat and livestock supply chain.
• As livestock prices have been collapsing, industry associations predict 2020 losses at $13.6 billion for U.S. cattle producers (NCBA) and nearly $5 billion for U.S. hog producers (NPPC).
• While we expect pork processing to pick up in the coming weeks, U.S. hog producers may still be forced to euthanize as many as 7 million pigs in the second quarter alone, worth nearly $700 million at historical average prices. This would further diminish meat supplies this fall and add to the billions of dollars of losses from lower livestock prices.
• President Trump’s executive order to reopen closed meat plants, announced April 28, could help stem the tide of additional plant closures and pave the way for closed plants to reopen. However, attracting workers to fill the thousands of vacant positions at meat plants across the U.S. is still an issue.

That pretty much says it all. Everything you need to know is in that handful of summary bullet points, all of which underscore why Sonny Perdue is desperate to compel major meat processing companies to get the lines moving, come hell or high pandemic.

It’s not all bad news, though. Wendy’s shares surged on Wednesday, after the company somehow managed to engineer what one analyst described as a “stunning pace” of recovery in sales during the three weeks through Sunday.

Apparently, comps were off just 2% for the week ended May 3 and are “poised to make a return to low single-digit positive territory in just weeks”, Gordon Haskett analyst Jeff Farmer wrote in a note. That’s compared to a drop of nearly 26% for the week ended April 5.

Maybe it’s not all that surprising. Everyone knows people go to Wendy’s for the Frostys, not the burgers.