Corporate Profiles - 2020 - 34

INDUSTRY REVIEW: MEAT AND POULTRY

Meat and poultry
Processors are adapting to the new reality of COVID-19
orth American meat and poultry processors have been buffeted in the
past by the impact of animal diseases like African swine fever, avian
influenza and porcine epidemic diarrhea on the supply/demand situation during the past decade. In 2020, the situation changed when a new virus
crossed the species barrier and sent shockwaves throughout the industry.
Rarely has the meat and poultry supply chain attracted as much attention as it
did during 2020. The coronavirus (COVID-19) had such an impact that at times
observers questioned whether the industry could maintain consistent operations.
Through March, April and May the concerns were well founded. Processing plants
owned and operated by the largest companies in the industry were closing on a regular basis and disrupting the receipt of live animals and the delivery of products to retail.
A meat plant's wet, crowded environment makes it an ideal vector to spread
COVID-19. Companies have had to invest significant amounts of money to protect and incentivize workers. During the second quarter of fiscal 2020, ended July
28, pork processor Smithfield Foods, Inc., Smithfield, Va., spent approximately
$350 million in direct and indirect costs related to the COVID-19 pandemic.
Tyson Foods, Inc., Springdale, Ark., spent approximately $340 million during its third quarter of fiscal 2020, ended June 27, on COVID-19-related costs.
Management specified the costs came in the form of employee bonuses, safety
equipment and safety measures.
While fewer plant closings occurred as summer transitioned to fall, companies still faced disruption. In late August, poultry processor Foster Farms,
Livingston, Calif., closed its plant for a "deep cleaning" after 392 cases and
eight deaths were linked to an outbreak at the facility.
And James P. Snee, chairman, president and chief executive officer of Hormel Foods Corp., Austin, Minn., outlined during an Aug. 25 earnings call with
securities analysts the challenges meat companies are facing as the pandemic
continues. He emphasized that as plants closed earlier in the year, the company
had an excess of product to deliver to customers.
"We've burned through that inventory," he said. "And so now as we head into
the fourth quarter, I mean, it's going to be very important, paramount, if you
will, that we keep our supply chain operational.
"We can't afford any disruptions. And although we're not seeing the level
of outbreaks of COVID cases, we are still having cases on occasion and those
cases can have production impacts."

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RETAIL SALES SURGE
The dramatic shift in demand away from foodservice and to retail has trended throughout the year and is forecast to continue. Data from 210 Analytics,
San Antonio, and Information Resources, Inc., Chicago, showed perimeter retail
food sales the week ended Aug. 16 came in at 10% above sales during the
same timeframe in 2019, holding steady with the rest of the month.
The meat category came in at 16% above 2019 dollar sales and 7% above volume sales. Dollar wise, lamb (up 19.8%), beef (up 19.5%) and turkey (up 11.2%)
were the top performing meats. Chicken was up 9.6%, and pork was up 8.9%.
"Between the continued social distancing mandates, highly elevated consumer concern about the virus, economic pressure and the impact of virtual
schooling, meat sales are likely to hold well above 2019 levels for the foreseeable future," said Anne-Marie Roerink, president of 210 Analytics.
Per capita consumption of meat and poultry was expected to be flat during
the year, according to the US Department of Agriculture's Economic Research
Service.Total consumption was forecast to be 224.1 lbs per capita vs. 224.3 lbs
in 2019. In 2021, the ERS forecast per capita consumption will rise to 224.8
lbs, with both beef and chicken consumption edging up.
The agriculture investing firm Rabobank said the poultry demand was recovering from the early shock from COVID-19, as demand fell due to restaurant
closings. But, the company said, the market will be unpredictable due to an
economic downturn and as consumers may become more price driven.
A similar scenario may play out for beef consumption. Quick-service restaurant

UNITED STATES

red meat and poultry forecasts
PRODUCTION
million lbs
2020*
27,048
28,237
44,552
5,708

2021*
27,355
28,445
45,020
5,770

Total red meat
and poultry 100,169 102,435 105,266 106,296

107,348

Beef
Pork
Broilers
Turkeys

2017
26,187
25,584
41,662
5,981

2018
26,872
26,315
42,601
5,878

2019
27,155
27,638
43,905
5,818

PER CAPITA DISAPPEARANCE
retail lbs
2017
2018
Beef
57.0
57.3
Pork
50.2
51.0
Broilers
91.0
92.6
Turkeys
16.5
16.2

2019
58.1
52.4
95.1
16.0

2020*
58.2
51.0
96.4
15.8

2021*
57.7
50.6
97.1
15.7

Total red meat
and poultry

224.3

224.1

223.9

217.3

219.8

Source: US Department of Agriculture

34 \ October 2020

*forecast

Milling & Baking News * Food Business News * Baking & Snack * Meat+Poultry * Pet Food Processing

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Corporate Profiles - 2020

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