Meat Plants Reopen, but Burgers Stay Pricey

Discussion in 'Truckers News' started by autopaint, Jun 1, 2020.

  1. autopaint

    autopaint Bobtail Member

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    Jul 26, 2019
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    A national meat-supply crunch driven by the coronavirus pandemic is beginning to ease, though meat and grocery suppliers expect the effects to linger for months.

    Even as meatpacking plants reopen and some supermarkets reduce limits on meat purchases, consumers are paying more for ground beef and other staples across the country as meat production remains hampered by Covid-19, and grocery distributors struggle to get some orders filled.

    The U.S. food industry heads into the summer months with beef and pork production last week about 7% lower than the same time last year, according to the U.S. Department of Agriculture. Production is up from steeper declines in late April. While grocers say consumers’ panic buying has tailed off, restaurants across the country have resumed food purchasing as they begin to reopen, keeping supplies of meat products and other items tight.

    “Everybody is improving, but I’m not sure anybody is at 100%,” said Mike Duffy, chief executive of C&S Wholesale Grocers Inc., a major U.S. food distributor that supplies chains like Safeway and Southeastern Grocers. C&S is receiving about 80% of its meat orders from suppliers, and expects the supply to return to near-normal levels by the end of June, he said.

    At the retail level, beef prices increased 21.7% and pork prices rose about 17.7% year-over-year for the week ended May 23, according to data provider Nielsen. Retail chicken prices climbed 10.5% for the same period.

    Meatpacking plants have largely resumed operations this month after a succession of plant closures in April due to Covid-19 outbreaks among employees that sickened thousands and killed dozens, according to estimates from union and federal health officials. President Trump in late April issued an executive order that let meatpackers continue operating plants at the USDA’s discretion, shielding them from state or local calls to temporarily close facilities.

    Cargill Inc., one of the biggest U.S. beef processors, reopened its Schuyler, Neb., plant on May 18. The plant was the last of the company’s processing facilities to close due to Covid-19 outbreaks among employees. A spokesman said the company’s beef business is running at about 70% normal levels as some employees have yet to return and workers adjust to new safety measures like plastic dividers between cutting-line work stations.

    The possibility of further coronavirus outbreaks in the communities where Cargill’s plants are based means that it will likely take several more weeks before the company can produce ground beef, steaks and other products at normal rates, the spokesman said. For now, he said, “we are filling customer orders, but demand has temporarily outstripped our reduced capacity.”

    Slower-than-normal slaughterhouse operations, plus strong demand from supermarket shoppers and reopening restaurants, are pushing up ground beef prices. After briefly surging above $6.00 a pound in mid-May, ground beef last week averaged $4.23 a pound on a wholesale basis, more than twice their early-March level, according to the USDA.

    “With ground beef, it seems like nobody can get enough,” said Christine McCracken, protein analyst for agricultural lender Rabobank. Because restaurants have been buying fewer steaks and other high-end cuts, some processors are grinding these up to fill ground beef orders, she said.


    Beef and pork plants run by JBS USA Holdings Inc. are all open but running between 85% and 90% of normal levels, a spokesman said, with employees over 60 years old currently being paid to stay home. Pork giant Smithfield Foods Inc.’s plants are running, a spokeswoman said, though some workers aren’t coming in, and not all products are being produced at normal levels.

    The pandemic continues to close some meat plants, as Covid-19 infections keep some workers home sick, others stay home for fear of catching it, and companies perform deep cleaning in plants. Tyson Foods Inc. on Thursday said it would voluntarily close a Storm Lake, Iowa, pork processing facility, which handles about 17,250 hogs daily, due to a delay in worker testing results and employee absences. A spokeswoman said the plant is likely to resume normal operations in the coming week.

    It isn’t just meat that’s in short supply. Rice, flour and pasta remain scarce because of higher demand, according to C&S’s Mr. Duffy, and suppliers still have allocation limits for these items. Canned vegetables will be tight until the growing season starts in July and August, he said, and prices for fancy-grade large lemons have jumped 13% over the past month as supermarket demand remains strong, according to Stifel Financial Corp. analysts.

    Many grocers are still limiting how much fresh meat customers can buy and selling fewer varieties of cuts. But they say shoppers will gradually see fuller meat cases and counters.

    Conrad D’Cruz, a business consultant who lives in Apex, N.C., said meat aisles looked fuller when he went to his local Walmart Supercenter this week. Sausages were well-stocked, but chicken items were lower in supply, he said.

    “I was hopeful that things have recovered,” he said, adding that the produce section had plenty of items.

    Jonathan Weis, chief executive of Weis Markets Inc., said the Northeastern grocery chain is still carrying a smaller variety of products overall, and has been bringing in larger-size items and new brands to fill voids on shelves. “It has improved somewhat, but not as much as we’d like,” Mr. Weis said of overall grocery availability.

    Grocers say sales growth is moderating as consumers ease off on hoarding and stockpiling. Out-of-stock levels are better for most categories other than meat, paper, cleaning and some shelf-stable products such as rice and beans.

    At discount grocery chain Aldi Inc., consumer shopping patterns have returned to normal, said co-president Brent Laubaugh, versus the heaviest pantry-stocking in mid-March, when retailers scrambled to keep up with surging demand.

    While Aldi has lifted many purchase limits on food products and has returned to regular ways of forecasting how much food the chain will need, short supplies of meat mean that shoppers will likely see fewer options through the summer, Mr. Laubaugh said. Purchase limits remain for paper and meat products, with ground beef and processed cuts still being in low supply.

    Midwest chain Fareway Stores Inc. is mulling how to make more space in its stores for fresh meat and other products as executives anticipate shoppers to continue cooking more at home, said Chief Executive Reynolds Cramer.

    “We see this continuing for quite a while,” Mr. Cramer said. “As people feel safer and restaurants continue to open, more people will slide back to purchasing in that avenue. But it’s not an overnight change.”

    Write to Jacob Bunge at jacob.bunge@wsj.com and Jaewon Kang at jaewon.kang@wsj.com
     
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