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Spotlight on Economics: COVID-19 Impact on Meat Consumers and Producers

The pandemic caused major disruptions in the U.S. meat industry.

By Tim Petry, Extension Livestock Marketing Economist

NDSU Agribusiness and Applied Economics Department

The COVID-19 pandemic has caused severe disruptions throughout the entire U.S. meat industry.

A dilemma is that consumers found limited availability of some meat items on grocery store shelves, while at the same time, producers were not always able to find a market for livestock and poultry ready to harvest. And consumers saw increasing prices for preferred meat products, while if producers could find a market, prices were likely declining.

The function of the price system is to prevent shortages and surpluses. That works very well until a sudden shock such as the COVID-19 pandemic unexpectedly disrupts the system.

Normally, the meat industry is very efficient in moving large quantities of market-ready animals through processing, distribution and retail channels to the ultimate consumer. And because meat is perishable, the meat industry has a relatively short time frame to complete the task.

Approximately half of domestically consumed meat is purchased in the retail food market segment (supermarkets, convenience stores, specialty meat shops, etc.). The other half is utilized in the food service segment (restaurants, schools, sporting events, hotels, etc.).

The stay-at-home and social distancing orders meant that food service meat demand declined significantly, with restaurants and schools closing and recreation canceled. Demand in the retail market skyrocketed and panic buying further increased retail demand and fueled price increases.

In many cases, meat products that were destined for food service could not be rerouted easily to retail. Bacon, for example, may go to restaurants in 25-pound cartons, while retail customers prefer to purchase 1-pound packages.

The ability of packing plants to harvest livestock and poultry in a timely manner was impacted by the spread of COVID-19 in the workforce. Plants had to shut down to clean and disinfect premises, test employees for the virus, and implement Centers for Disease Control and Prevention and Occupational Safety and Health Administration guidelines. Closed plants reduced demand for market animals particularly in that region. And plants that reopened usually operated at lower volumes than were previously possible.

U.S. meat production was at a record high level during the first quarter of 2020. However, as COVID-19 impacted meat packing and processing, meat production declined. Livestock prices also declined with packing plant closures and slowdowns.

Each month, the U.S. Department of Agriculture’s Office of the Chief Economist publishes a World Agricultural Supply and Demand Estimates report, usually referred to as the WASDE report. In the April 9 report, the USDA was projecting record U.S. beef, pork, chicken and total meat production in 2020. Beef production was projected to be up 1% from 2019, with pork production increasing 5%, chicken production advancing 3% and total meat production climbing 3%.

However, just one month later, the May 12 WASDE report estimated declines in meat production expected for 2020 due to COVID-19-related issues just discussed. Estimates were for beef production to decline 5%, with pork production down about 1% and chicken production only off slightly, with total meat production declining 1.6%.

The USDA Economic Research Service publishes monthly retail beef, pork and chicken prices. The latest price information for June indicated meat prices at record levels, which was no surprise to many consumers. The all-fresh retail beef price, at $7.38 per pound, was a record high, up 26% from June 2019.

During the pandemic, the demand for hamburger at retail markets skyrocketed, with consumers emptying shelves. And many fast-food restaurants still were able to provide drive-through and take-out service. High-demand ground beef prices increased to a record high of $4.74 per pound during the height of the pandemic.

Retail pork prices increased 8% over last year to a record $4.25 per pound. And chicken prices rose to record levels as well, at $1.75 per pound. Market steer, hog and chicken prices declined to lows for the year as the pandemic worsened.

Packing plant and meat distribution issues have at least partially been resolved quicker than first thought possible and restaurants have started reopening in many states.

The latest July WASDE report again revised beef, pork and chicken production upward, with total meat production back up to record levels, increasing 1.2% over last year. Correspondingly, meat prices are declining and consumers found ample meat supplies for celebrations on the Fourth of July holiday.

Market prices for livestock are still at depressed levels, much below pre-COVID-19 expectations, due to backlogs from reduced processing capacity during the previous several months.

These are unprecedented times with tremendous uncertainty and price volatility. No one knows how severe the pandemic will be or how long it will last. When the hysteria surrounding COVID-19 subsides, we hope everyone will have a greater appreciation for how important an efficient meat production, processing, distribution and retailing system is.


NDSU Agriculture Communication - Aug. 5, 2020

Source:Tim Petry, 701-231-7469, tim.petry@ndsu.edu
Editor:Ellen Crawford, 701-231-5391, ellen.crawford@ndsu.edu
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