The emergence of the COVID-19 pandemic shook every economic market. Beyond simple financial concerns, health and safety took the forefront. Efforts to combat the spread, including social distancing and working from home, helped preserve some industries from long-term effects. Yet, some industries cannot work remotely. Direct manufacturing and processing require on-location work that puts employees at risk. Particularly for workers involved in critical supply chain professions, this meant continuing to work despite the risk.
As a result, meat-processing plants have become coronavirus hotspots. As is usually the case with U.S. workplaces, they prioritized production and efficiency. Companies like Tyson Foods, Inc. (NYSE: TSN) and Smithfield barely altered their day-to-day practices until it was clearly too late. At twice the national average for infections, reality forced these companies to respond with shuttered factories and reduced output. Now, meat shortages threaten to spike prices across the board for American consumers.
Beef, Pork and Poultry Impact
The impact of the coronavirus slowdown affects different sectors of the meat industry in different ways. Beef may see the longest-lasting impact, as it also possesses the longest lead time for mature cows. At 1.5 to 2 years from birth to harvest, a lowered number of new cows now means less product in 2022-2023.
Pork production is faster, with birth-to-harvest at just under a year. That could see disruptions continuing throughout 2021. Yet, recent culls to prevent overstock will likely see both beef and pork disruption beginning soon and continuing until normalcy returns.
In contrast, chickens require only 12 weeks to reach maturity and availability as meat. As a result, we may see chicken replacing more expensive red meat options in the near-term future. However, closures at chicken processing plants could disrupt the supply chain, even for poultry.
Proactive vs. Reactive
At the core of the issue lay an endemic problem with American employers. Although they would state differently, many companies valued continued production higher than employee safety. As a result, local communities suffer, and the pandemic continues to rage around the country. This short-term thinking will almost certainly cause greater loss in profits over time. Companies that wisely choose to reduce production to accommodate social distancing and proper PPE restrictions will see a smaller overall decline in output.
A variety of costs will hit companies that failed to respond properly. Training new employees, suffering public backlash and rising healthcare costs will offset any gain from staying open. This is all without mentioning potential litigation from former employees. As always, responding early and proactively will pay off when compared against reacting after the fact.
Article By: Adam Stone