Americans on cusp of meat shortage with food chain breaking down

The coronavirus pandemic is pushing the food supply chain to its limits.

Plant shutdowns are leaving Americans dangerously close to seeing meat shortages at grocery stores. Meanwhile, farmers are facing the likely culling of millions of animals and mass burial graves could soon be dug across the heartland.

"The food supply chain is breaking," said John Tyson, chairman of Tyson Foods Inc., the biggest U.S. meat company.

Outbreaks are forcing the closure of some of the country's biggest slaughterhouses, where tens of thousands of animals are processed daily. As the plants shutter, producers are left with nowhere to sell their livestock. It's forcing farmers to make gut-wrenching decisions to dispose of their animals. The situation is so severe that the U.S. government is setting up a center partly to assist on "depopulation and disposal methods."

"Millions of pounds of meat will disappear" as plants close, Tyson said in a blog post on the company's website. "In addition to meat shortages, this is a serious food waste issue. Farmers across the nation simply will not have anywhere to sell their livestock to be processed, when they could have fed the nation. Millions of animals - chickens, pigs and cattle - will be depopulated."

His comments echoed warnings from Smithfield Foods Inc., the world's No. 1 pork producer, and JBS SA, the biggest global meat company, that consumers are likely to see meat shortfalls.

Almost a third of U.S. pork capacity is down, and JBS said Sunday it will shutter another beef production facility in Wisconsin. Brazil, the world's No. 1 shipper of chicken and beef, saw its first major closure with the halt of a poultry plant, and key operations are also down in Canada, the latest being a British Columbia poultry plant.

While hundreds of plants in the Americas are still running, the staggering acceleration of supply disruptions is alarming. Taken together, the U.S., Brazil and Canada account for about 65% of world meat trade.

"It's absolutely unprecedented," said Brett Stuart, president of Denver-based consulting firm Global AgriTrends. "It's a lose-lose situation where we have producers at the risk of losing everything and consumers at the risk of paying higher prices. Restaurants in a week could be out of fresh ground beef."

Meat prices are surging on the supply disruptions. U.S. wholesale beef has surged to a record, and wholesale pork soared almost 30% last week.

Jersey Mike's Franchise Systems Inc., which has 1,750 stores across the U.S., is working with its ham supplier Clemens Food Group to ensure its supply of pork, something they sell quite a bit of in their sub sandwiches.

"We're backing it up already because of the coming -- we feel -- the coming shortages," said Peter Cancro, chief executive officer.

To be sure, some plants have restarted after testing workers and improving conditions, and most Brazilian facilities are still operating. Another point to consider: There haven't yet been big shutdowns in Europe. The European Union accounts for about a fifth of global meat exports, U.S. government data show.

It should be noted that the output from a plant where infection pops up doesn't pose health concerns because by all accounts covid-19 isn't a food-borne illness. Products from a farm or a production plant with a confirmed case can still be sent out for distribution.

But a production halt means that there are no new supplies.

And these shutdowns are happening at a time when global meat supplies were already tight. China, the world's top hog producer, has been battling an outbreak of African swine fever, which destroyed millions of the country's pigs. Plus the virus is hitting production after some meat companies had already taken steps to slow output because of the closure of restaurants around the world.

Total American meat supplies in cold-storage facilities are equal to roughly two weeks of production. With most plant shutdowns lasting about 14 days for safety reasons, that further underscores the potential for deficits.

Meanwhile, plants are also facing a labor crunch as employees fall ill. It's been reported that a large chicken-processing company was forced to kill 2 million of its birds earlier this month because of worker shortages.

It's hard to say exactly why the virus is spreading so fast among meat-plant employees. Some analysts have cited the fact that these are usually low-paying jobs that are often filled by immigrants and migrants. That means workers can live in cramped quarters, with sometimes more than one family sharing the same dwelling -- so if one person gets sick, the disease can spread quickly.

Employees are also in close proximity on the job, with the work on some processing lines being described as "elbow-to-elbow." Even if line speeds are slowed, workers spread out and shifts are staggered, there's still the chance of mingling in break rooms, hallways and shared transportation to often far-flung sites.