COVID-19 is a health pandemic. However, because of the various restrictions placed on movement of people within countries and internationally, there have been concerns that there could be disruptions in food supplies and the possibility of a food crisis. With travel curtailed and many restaurants closed, there has been a sudden shift in demand patterns as demand in food service (restaurants, caterers) has largely dried up and demand in grocery stores has sharply increased. This has led to problems in processing and distribution and a sharp contraction in the demand for some food products where demand was concentrated in food service.
The concerns about a possible food crisis have been amplified by the actions of some countries or territories to impose export restrictions on certain agricultural products and the actions of some other countries to increase tariffs on certain imported agricultural products to protect domestic producers amidst falling food prices. The concerns arise during a period (2020) when there is ample food production globally, and hence a food crisis should be avoidable.
For the WTO, FAO and most governments, the actions of dozens of countries in 2007-2008 who imposed export restraints on certain food products remain fresh of mind. The vast majority of trade restrictions then were on rice and wheat, two staples for populations around the world. The introduction of export restraints by one or more countries led to similar actions by others. The result was serious shortages of products for import dependent countries and highly volatile prices which affected most countries.
In an earlier post I reviewed actions taken by the G20 agriculture ministers and a group of WTO Members to pledge to work to keep markets open for food products during the COVID-19 pandemic. Deputy Director-General Alan Wolff provided a virtual statement yesterday looking at food security and the increased reliance on international trade in food for many WTO Members. Similarly, different groups monitor countries who are imposing export restraints on food. See DDG Wolff, “Reliance on international trade for food security likely to grow,” https://www.wto.org/
Today’s post looks at the challenges being experienced in North America, Europe and globally from the high level of infections of COVID-19 at meat and poultry processing plants. These infections have resulted in thousands of workers testing positive, many being very ill, some dying and many plants closing for some period of time to achieve a safer working environment. In the U.S. and Canada, a large number of facilities that handle a significant part of total U.S. and Canadian production have been affected. Workers are understandably concerned about returning to work when the facilities reopen despite an Executive Order by President Trump invoking the Defense Production Act to mandate the continued functioning of the meat and poultry processing facilities. See https://www.
But the consequences of the large number of infections in meat and poultry processing plants have been a reduction in operating capacity, reduced supply to domestic markets, possible reductions in export supplies and massive waste of cattle, pigs and chickens which are being killed and not processed because of the challenges and with downward prices to farmers and ranchers.
While it is not known if the problem will be very short term, a sudden reduction in capacity or production can lead to imbalances in the supply/demand ratio which could result in higher prices, reduced supplies and possible actions to satisfy domestic demand needs, including export restraints.
Because to date there has been no evidence that COVID-19 is transmitted from food or food packaging, there should not be any reason for food embargoes of meat and poultry imported from countries where facilities have closed temporarily due to COVID-19 worker infections. See https://www.
Problems in meat processing plants in the U.S. and Canada
There have been a host of articles in the press in recent weeks in both the U.S. and Canada reviewing the huge number of plants that have had COVID-19 confirmed cases. As many as 30 plants in the U.S. and Canada are involved with more than 3,000 workers testing positive. More than 70% of beef processing in Canada has been affected and some 25% in the United States. See, e.g., https://time.com/
Not surprisingly, the eruption of COVID-19 cases in processing plants and the resulting need to close facilities at least temporarily has led to concern about worker safety as well as the economic effects of a sudden reduction in meat supplies. The Center for Disease Control issued guidelines for meat processing plants to permit improved safety for workers. See CDC, Guidance for Meat and Poultry Workers and Employers, https://www.cdc.
It has also led to reductions in production of processed meats and poultry and the wasting of cattle, pigs and chickens unable to be processed in recent weeks. USDA reports on beef and pork in the last week show sharp contractions in production. For beef, the USDA data show collapsing production and falling prices for cattle and rising prices for beef.
For pork, hog slaughter which had been up significantly through March has seen sharp declines in April with prices for pork products falling til April and then increasing rapidly.
For poultry, USDA data through April 24, show relatively steady production volumes although press reports have reviewed millions of chickens being killed because of lack of access to processing facilities.
Challenges in Canada would be similar or greater since a larger part of their beef processing facilities has been affected.
Meat Production Outside of the U.S. and Canada
An article by IHS Markit from March 31, 2020, reviews challenges of COVID-19 in meat processing facilities around the world as well as other challenges flowing from COVID-19 (shift in mix as restaurants shut down; export challenges with transportation limitations). “Meat industry on a knife-edge as COVID-19 disruption deepens,” https://ihsmarkit.
The last forecast from USDA on U.S. exports of meats and poultry continues to show generally growing U.S. exports around the world, but the report predates some of the COVID-19 outbreaks in meat processing plants in the U.S. and the resulting concerns from communities and workers. https://apps.fas.
Conclusion
It is likely that over the next several months, there will be a temporary shortage of meat and poultry products in at least several important consuming and producing nations. Reduced supplies could lead to reduced exports and concerns about food security in importing countries. Reduced supplies could also lead to higher prices and internal political pressure to increase domestic availability. One such approach to increase supplies for domestic consumption for exporting countries is to restrict exports.
Fortunately, most of the major producing nations of beef and pork and at least some of the major poultry producing nations are parties to the joint statement to the WTO of April 22 2020 indicating their commitment to keeping trade flows open for agricultural products. Many are also part of the G20 and hence similarly supporting the need to keep agricultural trade open. See my prior post on the G20 agriculture ministers and the statement of Members to the WTO, https://
In the United States, the Executive Order of President Trump can send a signal to meat and poultry processors to work to keep facilities open, but the Executive Order can’t force workers to return to working environments which workers see as unsafe. The CDC’s guidance to workers and employers should be helpful but both increase costs for employers and likely reduce productivity of facilities. The increased costs are necessary for worker safety as may be reduced productivity. Both, however, will likely result in higher prices to consumers and lower prices to farmers and ranchers.
The bigger question will be whether more countries who currently don’t have export restraints on food products introduce such restraints on non-meat and poultry products from fear of spreading food security issues.
Hopefully, the world will not find itself with dual pandemics – COVID-19 and food security. Stay tuned.