The meat supply chain is broken. Here’s why shortages are likely to last during the coronavirus pandemic

On sprawls to the grocery store and the fast food drive-thru, customers have yet another reminder of how the coronavirus pandemic has disrupted their method: Emptier than usual meat aisles. Butcher counters without the usual variety. And hamburgers that are harder to get about by.

In meatpacking plants from South Dakota to Tennessee, workers have gotten sick from the coronavirus as they slog away side-by-side cutting, boning and trimming meat. The spread has shuttered plants, slowed production and created a ripple at the end of the day across the supply chain.

Farmers and ranchers have hogs, cattle and chicken that they feed, but can’t trade. Meatpacking plants don’t have enough workers as they get sick and have heightened anxiety. And grocery shoppers and restaurants can’t get their usual cuts or supply of meat.

Major grocers, including Kroger and Costco, added purchase limits this week for pith to prevent hoarding and help keep it in stock. Nearly a fifth of Wendy’s U.S. restaurants removed hamburgers and other beef outcomes from their online menus, according to Stephens Inc. And another chain, Shake Shack, said rising beef bonuses have taken a bite into its profits.

Industry experts, analysts and a union that represents meatpacking implant workers say challenges with the country’s meat supply chain will likely linger as long as the pandemic does. 

“What we’re seeing is an imbalance between construction and consumption, which is causing disruption throughout the entire value chain,” said Patrick Stover, dean of Texas A&M University’s College of Agriculture and Flair Sciences and director of Texas A&M AgriLife Research.

Tyson Foods, the country’s largest provender processor, fired a warning shot about problems with the meat supply chain in late April. The presence’s chairman, John Tyson, took out a full-page ad in some of the country’s most-read newspapers, saying “the food supply limit is breaking.”

In the ad, Tyson warned “there will be limited supply of our products available in grocery stores until we are competent to reopen our facilities that are currently closed.”

Some of Tyson facilities — including its largest pork plant  — bear been shuttered as workers have gotten sick and some have died. One of the largest U.S. pork producers, Smithfield Foods, has also devoted large facilities because of outbreaks.

Days after the ad ran, President Donald Trump declared meat processing stations “critical infrastructure” to try to keep them open. The move was applauded by meat industry leaders, who said it would accelerate creation, and criticized by unions who said it did little to improve safety and protect workers.

But plants have continued to close and struggling to operate at full capacity.

Tyson, for example, said Thursday that its largest pork plant would reopen in Iowa. In a scuttlebutt release, though, it said the plant would “resume limited production.” The company said it added new safety widths, including temperature checks, an on-site clinic for Covid-19 testing and social distancing of workers.

Mark Lauritsen, point of the food processing, packing and manufacturing division of the United Food and Commercial Workers, said meatpacking plants on continue to produce less meat for grocery stores and restaurants during the pandemic. The union represents about 250,000 edibles processing and meatpacking workers across the U.S. and Canada.

He said plants will produce less as workers get sick and mills shut down or they will adapt the process to prevent further outbreaks through social distancing. Either way, he thought, there’s decreased supply.

“During this time of Covid-19, we have to spread people out and if we spread individual out, that means less production,” he said. “If we don’t do it, we’re just going to continue in this cycle of a plant running at half bowl along for two weeks and then having to close down for two weeks.”

To strengthen the supply chain, he said the government should flesh out workers’ access to rapid testing for Covid-19 and ramp up production of high-quality masks for them, such as N95 or A100 respirators. 

“Until the overjoyed gets its arms around coronavirus, this is the model we’re going to have to work under — or we’re going to sacrifice these ones for the sake of a cheeseburger,” he said.

As people stay at home during the pandemic, they’re worry up their grocery baskets, cooking at home and avoiding restaurants. All of those behavior changes have challenged the provision chain, too.

Even before the closures of meatpacking plants, demand for meat rose as many customers stocked up on groceries. In the eight-week while that ended April 25, meat sales at grocery stores and other retailers were up 43% approximated to the same period last year, according to Nielsen data.

Meat sales increased at a higher rate than any other pivot on during that 8-week period, except household care, the category that includes toilet paper, newsletter towels and cleaning products, Nielsen data showed.

People also want different cuts of meat when they’re doing the cooking, Stover of Texas A&M utter. For example, he said, chicken wings are typically eaten at restaurants instead of cooked at home, so demand has dropped during the pandemic.

“They don’t eat the exact same thing in restaurants that they eat when they are going to cook for themselves,” he said.

That’s eventually stand back at the plants, as workers and companies that typically process meat for restaurants produce kinds of meat that consumers aren’t looking for at the grocery store.

“It’s complicated,” he said. “Just because you can move chicken wings from the restaurant to the grocery set aside doesn’t mean people are going to cook them.”

Kroger CEO Rodney McMullen told CNBC that the grocery restraint is trying to divert meat that would typically go to restaurants and work with new suppliers. He said stores take a supply of meat, but customers may not find the typical variety.

“If you’re flexible on eating between chicken, pork and beef, we constantly sire one of those items or two of those — and usually three,” he said.

Industry analyst Heather Jones said that some provender products will be easier to find than others. Steak, for example, will be in ample supply as fine-dining restaurant sales last to plummet.

On the other hand, more highly-processed meats popular for cooking may be harder to find, she said. Whole chickens superiority replace thighs, drumsticks and breasts in grocery stores because meat processors don’t have the workers to cut up the birds. Foundation beef may be in shorter supply as processors struggle to slaughter enough cattle to keep up with demand, said Jones, who vamooses Heather Jones Research. 

As production lags, meat processors are struggling to switch products meant for hotels, schools and restaurants to grocery stores. The U.S. Department of Agriculture has relaxed its labeling requirements for eatables in an effort to make the process easier. 

Still, Tyson Chief Financial Officer Stewart Glendinning told CNBC that not all of the suite’s plants can be switched over to process meat for grocery stores. To shift capacity to retail, Tyson had to adjust mass-producing lines by adding a piece of equipment and swapping out clear plastic film for printed packaging. 

Smaller meat producers that typically only hoard restaurants might not have relationships with grocery stores and lack a middleman to connect the two, Jones said.

Restaurants’ meat supply may be squeezed as meat processors scramble to meet grocery demand. In a research note, Stifel analyst Chris O’Cull said he communicate in to food distribution industry sources who said grocery store orders are being prioritized ahead of restaurant classifications.

Wendy’s is already facing fresh beef shortages in many of its restaurants. The burger chain, which has long touted its use of bushy-tailed beef as a way to differentiate from the competition, has pivoted its marketing to focus on chicken products.

“It is widely known that beef suppliers across North America are currently overlay production challenges,” Wendy’s spokeswoman Heidi Schauer said in a statement to CNBC. “We continue to supply hamburgers to all of our restaurants, with confinements two or three times a week, which is consistent with normal delivery schedules. However, some of our menu ingredients may be temporarily limited at some restaurants in this current environment.”

As plants process less beef and pork, it’s generated a bottleneck for farmers and ranchers who have squeezed profits. Some are euthanizing healthy livestock to reduce herd proportions.

Jones said that could create problems, even as meat processing plants reopen and are able to carry on typical capacity. She said reduced pork production could continue into the first half of 2021.

Stover utter Texas A&M’s agriculture program is educating farmers and ranchers on how they get financial assistance to keep them afloat.

“If they can’t actuate food today, they can’t start the preparation, the planting and the breeding for the food that’s going to be needed months from now,” he said. “You’re regard this sort of back-up in the system that will have long-term consequences, if we don’t pay attention right now to assuring reliability in the production system and ensuring that farmers and ranchers can continue to run their operations and produce the food for consumers.”

In another situation, he said, that could become another broken link in the meat supply chain.