Meat plant closures in the early days of the pandemic were hard to wrap his brain around, said analyst Kevin Grier.
He recalled the moment he heard Cargill’s beef-processing plant in High River, Alberta had gone down to one shift.
“I literally could not believe it because of the ramifications,” Grier said.
“Shortly after it went down to zero shifts,” he added. Beef processing at the JBS plant in Brooks also ground to a halt.
Over the next couple of months, other Canadian and American meat processors would be hit by COVID-19. A “who’s who of the U.S. (pork) slaughter industry was hit,” said Grier.
“We all learned a new word,” he said. “It was ‘backlog.’”
Why it matters: Meat processors proved themselves surprisingly resilient in unprecedented circumstances.
Grier spoke to an online audience during the Keystone Agricultural Producers annual general meeting on January 26. He is a market analyst and researcher specializing in the meat and grocery industries.
Despite dark days, Grier called the meat industry’s performance “phenomenal.”
“I make that claim because it is,” he said. “I never ever predicted that this industry would bounce back as fast as it did in terms of being able to move hogs and cattle through the plant.”
Grier showed graphs of monthly Canadian cattle slaughter. In March, the figure sat at between 250,000 and 270,000 head — actually well above the 2014-18 average. In April, as the closures began, it dropped to just under 190,000. In May, it rose and hovered just above that.
By June, the monthly slaughter had almost returned to pre-pandemic levels and just below the previous year’s figure at just above 250,000 head.
The Canadian pork industry did not have the same concentration of plant shutdowns, though Ontario’s Conestoga pork-processing plant shut down in April because of an outbreak. Manitoba’s Maple Leaf Foods in Brandon saw a spike in cases midsummer which slowed processing but did not shut the plant down. Olymel in Quebec saw an outbreak in October.
A graph Grier showed of weekly Canadian hog slaughter shows a large dip below average in April, falling to just above 340,000 head. The average for that time is just above 400,000 hogs per week. Other dips in production track similarly to 2019 downturns.
In the U.S., production began to fall off at the end of March, according to graphs in Grier’s presentation. Production had been humming along at well above the 2014-18 average, reaching a height of between 2.7 million and 2.9 million hogs per week at the beginning of March.
As plants shuttered over COVID-19 outbreaks, the number of hogs slaughtered plunged to just above 1.5 million head per week at the beginning of May.
However, slaughter numbers rebounded swiftly and by early June had risen to above 2019 levels, though not to its pre-pandemic heights.
Despite the swift turn back toward production, the damage had been done. Backlogs of cattle and hogs would hang over the industry for most of the year, said Grier. Quebec has a current backlog of about 140,000 hogs, he said.
From a producer perspective, this meant a big dip in prices, said Grier.
A graph of U.S. lean hog prices, to which Canadian hog prices are tied, shows prices were already down from the 2014-18 average coming into 2020, though they were slightly above 2019 figures.
Prices dropped sharply in April, rebounded into May, and then dropped again — bottoming out in late June and July between $40 and $50 per cwt. Prices stayed well below 2019 figures into September before rising to slightly above average.
Because of the backlog, producers lost out on the usual summer rally in prices, said Grier.
For packers and wholesalers, the effect was opposite. When plants shut down, the shortage of meat drove prices “to levels never imaginable” in spring, said Grier. Wholesale prices stayed “reasonably firm” for the rest of the year, he said. Cut-out prices were relatively stable.
Margins for packers were extraordinary for most of 2020, he added.
Consumer beef and pork prices also shot up, peaking at over 20 per cent year-over-year change in June (in 2019, prices were at between five and 10 per cent year-over-year change in June). However, by August price inflation was just above average and actually deflated in early fall.
Consumer pork prices are rising again due to high exports, Grier added.
Grier reminded his audience that despite these challenges, it was March’s panic buying that caused empty shelves and not meat plant closures later in the spring. Grocers worked with suppliers and sourced meat from elsewhere in the world.
“The system bent but it did not break. I believe that the response was remarkable,” said Grier.
He tipped his hat to processing plant management and workers who were able to implement distancing, safety measures and deep cleaning where needed.
“They worked together,” said Grier. “There was mutual respect, and they got this thing back going again.”