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Efforts to contain COVID-19 pressure North American hog industry but situation will improve

An Economist with Kerns and Associates expects the economic pressure on the pork supply chain resulting from COVID-19 to get worse before it gets better.

22 April 2020, at 10:00am

Disruptions caused by efforts to contain COVID-19 have impacted all points of the pork production, processing and delivery chain. Speaking to Farmscape, Dr Steve Meyer, an economist with Kerns and Associates, describes this as a demand disruption piled on top of an ample supply satiation with a roadblock thrown in.

"The first thing that happened was the establishment of new safety precautions all over the United States and Canada that have reduced food service demand dramatically," says Dr Meyer.

"Retail demand has been very good because people have had to buy more product through grocery stores but the problem is you can't shift products very well between those two.

"The best example of that being bacon, which has been our darling for the last few years because of its use as food service. Those lines that produce food service bacon, that product coming out of those lines looks very different from the product that goes into our grocery stores.

"You don't just flip the switch and go from food service to retail.

"The food service operation side has certainly been hurt.

"The retail side has also been hurt because they've spent a significant amounts of time in the United States without stock.

"If you walk into an empty meat case, there’s no way to generate sales out of that rascal.

"Obviously, the producer is getting hurt by these very low prices that tend to go lower every day and the fact that now we can't get our hogs moved. There very well could be either market hogs or the weaned pigs that are following them into a barn that are going to be destroyed.

"That represents a huge loss and, because of the loss of food service demand, packers have struggled as well and now some of them have to close plants."

Dr Meyer says, once we get to the back side of cases, there's going to be a huge demand for pork but it's a question of can you get there? He says we have some producers with strong balance sheets who will come through this okay but others who are weaker will probably go out of business.