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Will future be more "Big Meat" or a rebirth of independents?

The current COVID-19 crisis has exposed the vulnerabilities of American supply chains.

Chuck Jolley

May 9, 2020

8 Min Read
meat processing packing plant USDA FDS.jpg

Most people hate change, especially if it's forced on them abruptly. Small, baby steps with plenty of time in between to allow them to absorb a slowly altering 'normal' might be acceptable. Anything that might quickly shove them out of their comfort zones will be met with a firm and potentially violent, "Hell, no!" Case in point: the loud protests against mandatory lockdowns, underscored by a small number of angry and well-armed men storming state capitols.

Widespread war can be the catalyst. Pandemics can be another. The second decade of the 20th century gave us both – the 'War to End all Wars" capped by the Spanish flu.  The first event killed millions and toppled kingdoms that had ruled Europe for nearly half a millennia; the second killed tens of millions in two closely related scourges and cleared the way for the unprecedented changes in the way we perceived ourselves and the world. Witness the social excesses of the 1920s, the Great Depression of the 1930s and a second iteration of the War to End all Wars in the 1940s.

And now, we have the COVID-19 pandemic, the most cataclysmic world event in 80 years. It has upended the way we see science, government and how we interact with others. It has forced us to take a new look at the strengths and weaknesses of international trade. The complicated distribution system that it created has not reacted with the speed and efficiency necessary to keep us well-supplied with necessities from the mundane (toilet paper) to the critical (food). Although shortages in the U.S. were panic-driven, it was the failure of a complex system tied to an expected supply carefully married to steady, consistent demand that caused supply problems.  

A visit to any neighborhood supermarket is a frightening 'Friday the Thirteenth' horror show for the public. Suddenly, our national breakfast table is threatened. Eggs are rationed. Bacon is scarce. Meat cases that should be well-stocked with beef, poultry and pork look as picked over as they do the morning after Thanksgiving. Even the most nervous shopper might excuse short-term outages in the center of the store where consumer packaged goods are found. Any household can struggle for a few days without a box of Corn Flakes or a can of beans. An almost empty meat case, though, and our carnivorous nation will react with alarm.

On Monday, May 4, Business Insider reported these facts:

  •  Meat processing plants are the center of many current coronavirus hotspots in the U.S. 

  • Of the largest 10 clusters in the U.S. — excluding correctional facilities — seven are linked to meatpacking plants. 

  • In South Dakota, an outbreak tied to a Smithfield meat processing plant has been linked to more than 1,000 cases, more than a third of the 2,631 confirmed cases in the state. 

Multiple counties with outbreaks tied to meat processing plants have more cases per capita than New York City, including Dakota County in Nebraska, Nobles County in Minnesota and Cass County in Indiana. A hundred fifteen meat and poultry processing plants in 19 states have reported COVID-19 cases, according to a report from the Centers for Disease Control & Prevention (CDC). Among the roughly 130,000 workers at these facilities, there have been 4,913 confirmed cases and 20 deaths.

More bad news reported by the Washington Post - Tyson Foods said during an investor call that U.S. hog processing capacity had dropped by 50%. Three of Tyson's six main U.S. processing facilities remain closed, and three others are operating at reduced capacity."

In addition, "Steve Meyer, an economist for Kerns & Associates, an agricultural risk management firm, said Tyson's production numbers might be even more dire."

My friend, Bill Marler, a lawyer well-versed in food safety issues, told Business Insider the risks faced by plant employees should have been obvious from the beginning. Coronavirus clusters in meat-processing plants have disproportionately impacted immigrant communities. According to the Center for Economic & Policy Research, people of color make up the majority of the meatpacking workforce — 44% of meatpackers are Latino and 25% are black. A representative for Smithfield's Sioux Falls plant, the largest to stop production because of COVID cases, said its employees spoke more than 80 languages.

President Donald Trump, fearing the political fallout caused by a meat case disaster, labeled packers and processors an essential industry and ordered shuttered plants back to work as soon as possible.  The Executive Order gave U.S. Secretary of Agriculture Sonny Perdue, permissions to "take all appropriate action under that section to ensure that meat and poultry processors continue operations consistent with the guidance for their operations jointly issued by the CDC and Occupational Safety & Health Administration." The order, though, did not include a requirement that steps necessary to protect the health of employees be taken. Several of the Big Four have already claimed they were doing what was required according to government edict, steps that the increasing numbers of cases have proven to be too little, too late.

Trump said the order would shield meatpacking companies against legal complaints from workers who claim they're not adequately protected from COVID-19, but there was nothing in the document supporting his comment. Artificially shielding any business from being responsible for its actions invites the kind of production shortcuts that created the current situation. There's also nothing in the order about new steps to ensure the safety of plant employees who are required to keep reporting to work, creating the strong possibility that a possible second wave of infections would create havoc at the plant level.

With so much of our meat production controlled by just four companies – more than two-thirds of our pork and 80% of our beef pass through large facilities owned by Smithfield Foods, JBS, Tyson Foods, and Cargill – the risks of a fatal, pandemic-caused loss of income to farmers and ranchers are real. The threat of widespread plant and supermarket closures due to inadequately protected employees sickened by COVID-19 looms regardless of the Executive Order.

Stuart Appelbaum, president of the Retail, Wholesale & Department Store Union, speaking for supermarket employees, said the Administration should have acted earlier to put safety measures in place. "We only wish that this Administration cared as much about the lives of working people as it does about meat, pork and poultry products," he said.

Kim Cordova, president of United Food & Commercial Workers Local 7, which represents 3,000 workers at the JBS meat processing plant in Greeley, Colo., warned the order "will only ensure that more workers get sick, jeopardizing lives, family's income, communities, and of course, the country's food supply chain."

Protecting workers can be an impossible challenge at plants employing thousands of people who work side-by-side carving meat, making social distancing difficult. Some companies have been working to reduce infections by checking workers' temperatures, staggering breaks and altering start times. Owners said they are doing more to clean plants and have added plastic shields between workstations. Still, an eight-hour shift elbow-to-elbow erases the benefits of any effort to safeguard employees as they start their workday.

A bipartisan approach to solving the supply chain and national security problems caused by meatpacking closures caused by industry consolidation came from Sens. Josh Hawley (R., Mo.) and  Tammy Baldwin (D., Wis.). They asked the Federal Trade Commission to study how that concentration could lead to anticompetitive behavior.

"The current COVID-19 crisis has exposed the vulnerabilities of American supply chains and the importance of ensuring that, when disaster strikes, America's food supplies are not in the hands of a few, mostly foreign-based firms," the senators wrote in a letter to FTC Commissioners. Their suggestion that the monopoly of the Big Four and the increased international ownership of American meat production is at the core of the current meat shortage as well as the imbalance in pricing between grower and packer/processor.

Backing up their concerns was Temple Grandin. She wrote a column for Forbes that ended with the warning, "Big operations are extremely cost-efficient. That's why they've been built this way. The downside is the fragility of the supply chains, as COVID-19 proves. Local production provides the opposite: it will always be more expensive because fixed costs such as labor, electricity and water to process each pig will be higher. But a local supply chain is less prone to disruption.

“There will always be that tradeoff. Big suppliers are low cost, efficient and fragile. More numerous local producers are more expensive, but the entire supply is more robust. It will be less prone to disruption from floods, fires, electric power failures, storms or diseases like coronavirus or others in the future."

Bottom Line: By the end of April, more than two dozen plants had shut down or reduced output. Farmers and ranchers, already weakened by a decade of financial woes, are taking the kind of hard pocketbook hit that will be fatal for many, and they're all angered at the swiftly rising prices packers are commanding at retail. Whispered rumors that the era of the independent Aggie is disappearing are starting to gain credence. Will the surviving cattlemen have to accept the lot of the poultry industry? Contract farmers, only, please. A representative of one of the Big Four will drop off the next 'crop' of calves at the farm gate, issue feeding instructions and promise to pick them up for a fixed price later? I don't see any rancher, hat-in-hand, accepting the position of tenant farmer on his own land.

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