During the COVID-19 pandemic gaps between livestock producer profitability, processing capacity and meat availability challenged stakeholders in all areas of food production to re-examine the true efficiency of American food production — especially beef.

And while it’s certainly a luxury to have the quality and reliability of small, local packers, a growing wave of new processing plants may not be the answer to increasing the stability of the overall food system. According to research presented by Kansas State University agricultural economics graduate student Justin Bina during last week’s Risk and Profit Conference in Manhattan, labor not physical plants could be the true obstacle.

“At the onset of the COVID-19 pandemic we saw the choice box beef cut out increase to about $475 per hundred weight on May 20,” Bina said. “At the same time, we saw live cattle futures drop to about $85 per hundred weight. With those two combined, we were seeing farm to wholesale choice beef price spreads approaching $400.”

A rapid shift beef consumption from restaurants to retail grocery really shifted demand and led to shortages, a perfect storm that led to consumers and cattlemen alike calling for industry change.

“So the proposed method last spring to increase the system resiliency to major disruptions was to add physical capacity in the forms of more, smaller processing facilities across the country,” Bina said.

To understand the ebb and flow of packing capacity across the country, Bina said it is important to first look at trends in cattle slaughter over the last several years.

“At the start of the decade, FI slaughter was routinely over 500,000 head per week,” Bina said. “Over time we saw those numbers drop and at the low end of the cattle cycle in the spring of 2015 we saw that FI slaughter dropped to about 400,000 head of cattle per week.”

In 2019, cattle slaughter numbers were back up routinely over 500,000, Bina said.

Fluctuating cattle inventories can put pressure on relatively fixed slaughter capacity as it takes time to build new plants or shut plants down.

In the past several years, increasing cattle numbers has resulted in a larger need for overtime slaughter numbers to compensate for both physical and operational capacity. Bina said Saturday slaughter made up about 2.1 % of slaughter in 2015 and had risen to 9.2% by 2019.

“The stage was really set. Not only in processing, but across numerous labor-intensive industries for big problems when COVID-19 came and cut out all the labor,” Bina said. “COVID-19 impacted operational capacity, which is the amount able to be produced in a given time and is heavily influenced by labor.”

Operation capacity is often looked at in contrast to physical capacity, which reflects the engineer-rated guidelines for the physical systems in place in the plant.

During COVID-19, processing plants in the United States were functioning well below their physical capacity. Bina said over half of beef and pork plants across the country slowed or temporarily halted production.

Surprisingly, Bina said regions with less reliance on large plants had the largest decreases in slaughter volume during the pandemic.

“These regions that had a heavier reliance on large plants did not pair any worse than other regions during the pandemic. We actually saw that they faired a little better,” Bina said. “Adding physical capacity in the form of smaller facilities across the country may not provide that increased resiliency that we want it to when labor is the constraint. That additional capacity during normal economic times may sit unused, which could increase costs to the entire food system.”

Trending Video

Recommended for you