THE BIG READ: Food inflation looms as US meat industry tries to restart

Stuffed into a meat factory like a pack of sardines with little space to move.

No, it’s not the animals that are about to meet their end, but employees who are facing unsafe working spaces.

Or at least that is according to the US’s biggest union representing the workers, who last week urged the country to reinstate hazardous pay for workers that are deemed to be most at risk from contracting the fatal coronavirus Covid-19.

The union in question – the United Food and Commercial Workers International Union – represents 1.3 million workers in grocery, meatpacking, and food-processing industry – and says that more than 10,000 of its members have been infected or exposed to the disease so far.

It’s a huge figure, given that many of these factories are located in rural America where population density is low.

Companies such as Tyson Foods and JBS say they have been quick to respond, setting up on-site testing facilities for workers, instructing them to wear face coverings, installing plastic shields between workstations, and implementing social distancing measures in a bid to get production back up and running.

But a restart of the 30 or so facilities that have estimated to have temporarily closed since April is unlikely to stem what will be a sharp period of food inflation over the next few months, just in time for the barbeque season.

According to a report by Cobank, an agricultural credit agency, pork and beef prices could rise 20% over the next few months.

That comes on top of US Labor Department statistics that show that grocery costs jumped the most in April in 46 years.

And it’s not because of a dearth of supply of animals.

Indeed, the National Pork Producers Council estimates that 10 million pigs might have to be killed as a result of overcrowding.

It’s because workers at facilities are becoming sick and the measures installed will slow capacity.

But why is a meatpacking factory such a hotbed for the virus?

Nurses, prisoners, and meatpackers

After medical facilities and jails, workers in plants that turn animals into meat for sale are some of the most vulnerable people in the US when it comes to getting infected with a virus that is thought to kill between 0.5% and 1% of people it infects.

In an industry that requires a huge throughput of animals to turn a profit, employees for years have worked shoulder-to-shoulder on assembly lines that move at an ever-increasing pace.

Often sharing transport to and from work, they also share workstations and tools such as saws and grinders that make social distancing all but impossible.

In addition, the workers in the US meatpacking community are a tight-knit bunch, often socialising outside of work after shifts.

Indeed, the US Centre for Disease Control refers to a particular problem with the sector as "having frequent contact with fellow workers in community settings that contribute to the spread of the virus".

Tyson Foods – one of the US’s biggest meat producers – said this week that it had tested 2,000 employees at one of its poultry processing complexes with a staggering 570 testing positive.

And according to a study by the Washington Post, the number of employees who have had the virus or are ill with it the disease at Tyson Foods could be as high as 7,000 – between 5% and 10% of its workforce.

Indeed, estimates of those infected in the sector range between 11,000 and 15,000.

And that, as well as the need for regular health screening for all employees, has a knock-on effect in meat-producing capacity.

Some analysts, including Cobank, expect meat production to fall 35% over the current period year-on-year, and the US government itself said earlier this month that per capita meat consumption will fall 4% – the first fall for five years.

So what does that mean for US corn and soymeal consumption?

Wasde

Not much, according to the USDA, which this month forecasted that 2020/21 domestic consumption of corn for feed and residual use would soar to 6.05 billion bu (153 million mt), 5% up on the year and 10% up on the 2018/19 figure.

And for soymeal, the USDA said domestic disappearance would be 37.5 million st in the 2020/21 season, up marginally on the 2019/20 season and around 4% up on the 2018/19 figure.

Other feed ingredients show an increase too, bar wheat, which shows a modest 35-million bu (900,000 mt) decline.

So what’s going on?

Given how much corn, soymeal, and wheat is expected to go to the domestic feed sector this year, and with meat processing capacity low, the USDA is clearly forecasting a strong return for the sector over the rest of the year.

Or at least it was when it made its latest estimate back in early May.

Its next estimate is out in two weeks and analysts privately expect the USDA to trim its forecast of consumption of those feeds, but not by a lot.

That’s because a fall-off in corn use will be stemmed due to a loss of supply of the substitute dried distillers grain – a by-product of producing ethanol.

The next USDA forecast for US corn and soymeal use is due June 11.