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America’s Indispensable Industry

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America’s Indispensable Industry

Long-term strategies are needed to keep the nation’s meatpacking plants open and its food supply chain moving. May 5, 2020
Covid-19
Economy, finance, and budgets

America’s ample supplies of bacon and burgers, long taken for granted, are now at risk. Covid-19 has forced numerous meatpacking plants to close. In South Dakota, more than 500 workers in a now-shuttered pork-packing plant were diagnosed with coronavirus, representing more than 40 percent of cases statewide. Government leaders increasingly fear the dire economic consequences of these closures. In Iowa, Governor Kim Reynolds mobilized National Guard troops to help test and monitor plant workers. President Donald Trump has invoked the Defense Production Act to keep plants open.

Concerns about the livestock and poultry sectors are well founded. The process of transforming live animals into the wide array of edible products demanded by consumers is a complicated one. Resembling an hourglass, the meat industry includes many farmers supplying animals to a smaller number of slaughterhouses and meatpackers, which then provide processed meat to a larger number of distribution outlets.

The repercussions of Covid-19-related plant slowdowns and shutdowns have become apparent. The number of cattle and hogs slaughtered weekly is down about 40 percent compared with this time last year, and additional closures would drop the number even further. As a result, increasing numbers of farmers and ranchers are left without a destination for their livestock, leading to a drop in prices. Animals can be kept on feed longer, and plants still in operation can run longer and even on weekends, but pig farmers are euthanizing piglets because the supply-chain pinch point has narrowed.

Processing fewer animals ultimately means less meat for consumers, which pushes up retail prices. Wholesale beef prices have already reached unprecedented levels, and pork prices are near record highs. The amount of beef, pork, and chicken in cold storage at the end of March—amounting to approximately ten days of normal consumption—exceeded the amount in storage at the same time last year. Still, the specter of reduced meat supplies, and less consumer choice, will require a close evaluation of the industry’s potential vulnerabilities.

If this crisis has revealed anything about our food supply chain, it’s that our vulnerabilities are greatest where labor is most involved. Over the past century, the overriding story of American agriculture was the dramatic increase in productivity that helped make food more abundant and affordable. American farmers now produce twice the amount of food that they did in 1970, though agricultural labor use has fallen 55 percent. Those same labor savings, however, aren’t as apparent in the food-processing sector. Meat-processing facilities require intensive labor, with workers in close quarters, where it’s difficult to prevent the spread of contagious disease. These labor challenges will intensify as operating plants adapt to comply with President Trump’s order.

In the future, owners of large food-processing and packing facilities may look to more regionally distributed facilities to mitigate supply risks that occur from a total plant shutdown. It may be prudent to sacrifice some economies of scale in order to provide insurance against plant shutdowns caused by human-spread illnesses. Such analyses will surely start soon, warranting a balance of security during pandemics with economic efficiency during normal times.

Besides economies of scale, the concentration of meat processing is a function of high regulatory and oversight costs, which may deter the emergence of a larger number of smaller processors. Requiring federal inspectors and testing regimes is prudent from a food-safety standpoint, but as we’re now seeing, such measures may create other risks when the barriers to entry are too high. In fact, adjustments in some of these regulations may well help the industry navigate current Covid-19 challenges.

Another solution is to reduce labor use through increased automation. The nuts-and-bolts assembly of automobiles or even computer chips doesn’t carry over well to animals that come in widely varying shapes, sizes, weights, and even colors. Advancements in robotics, machine learning, and artificial intelligence, however, are beginning to allow more automation in the processing of animal carcasses. We need to invest in research in digital agriculture and automation to help eliminate tedious—and sometimes dangerous—jobs, while reducing the likelihood of disrupted food supplies resulting from illnesses in processing plants. This approach, combined with the likely continuation of workforce health monitoring, may permanently alter labor relations in the meat-processing industry.

Food workers have been deemed essential during the pandemic. If that’s true, dire supply shocks in future pandemics might be mitigated by plans to quarantine healthy workers in hotels or dormitories to ensure the integrity of the food supply chain. Such a system would be expensive and might even require bonuses or hazard pay, but current events demonstrate how costly it is to lack contingency plans.

It’s crucial to develop immediate strategies to deal with this pandemic and pandemics of the future. Many packing plants are already testing employees’ temperatures upon entry, enforcing social distancing, and installing shields between workers. Compensation mechanisms are needed to encourage healthy employees to return to work, while discouraging sick workers from doing the same. On-site, speedy, and widely deployed antibody testing may help implement such protocols. An improved understanding of immunity is also crucial in order to help closed facilities return to business with reasonable assurance of a healthy workforce. American consumers’ desire to retain a large and diverse set of meat products is likely to be reaffirmed in the coming weeks.

Photo: asikkk/iStock

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