The Deal With Meat »Albuquerque Journal
ALBUQUERQUE, NM – Dan Garcia said he first noticed the price of meat had gone up a few weeks ago.
Garcia, owner of Garcia’s Kitchen in Albuquerque, said the increases fluctuated from 50 cents to $ 1 per pound of beef, chicken and pork – depending on the cut – a result of the shutdown of a number of meat processors in the United States to spread COVID -19.
Garcia was a firm believer his company wouldn’t raise prices during a pandemic, but he acknowledged that Garcia’s kitchen feels the pressure when the dining rooms at the five locations are closed.
“We’ll feel the jump a little sooner,” Garcia told the Journal.
Garcia is far from being alone.
People in the meat supply chain – from ranchers to traders to the grocery stores and restaurants they work with – have been hard hit by the closings of plants operated by industry giants like Tyson Foods and Smithfield Foods.
The closings sparked by the COVID-19 outbreak in several facilities have dramatically reduced the country’s ability to process meat. This, in turn, has spiked prices for restaurants and made it difficult for some grocery stores to keep meat in their freezers.
“We’re going to see prices like we’ve never seen before,” said Mike Perea, owner and president of Albuquerque grocery store Eagle Rock Food Co.
How we got here
The COVID-19 pandemic infiltrated almost every aspect of American life in March, and the meat processing industry was more vulnerable than most. Smithfield, Tyson and JBS each closed plants in response to virus outbreaks in facilities.
Mike Minifie, owner of Western Way Custom Meats in Moriarty, said industrial-scale facilities can process around 20,000 animals per day and the loss of that capacity has slowed production dramatically.
Last week, President Donald Trump signed an executive order citing the Defense Production Act that requires meat processing plants to remain open. Several experts told the Journal the order is unlikely to take effect without adequate social distancing measures and staff support.
“I’m glad the (plot) was taken, but it’s not going to do much if we don’t protect the workers,” said Hitendra Chaturvedi, a professor at Arizona State University’s WP Carey School of Business, majoring in Supply Chain management.
Chaturvedi added that large slaughterhouses house workers in confined spaces, making social distancing a challenge. Any attempt to keep the workers six feet apart would likely require the facilities to be around 50% busy, Chaturvedi said.
With large processors currently unable to reach full capacity, farmers and ranchers have had no space to ship cattle, chickens and pigs. As a result, contract farmers had to euthanize animals even when meat prices rose, Chaturvedi said.
“We have no shortage of offers,” he said. “We have a shortage of workers to handle the delivery.”
As a result, meat prices have risen. A weekly report by Uri Barry, which publishes data on the food industry, reported that beef rose from less than $ 2.10 a pound in February to almost $ 2.70 a pound on April 24. Pork, which had fallen earlier this year, rose to nearly $ 0.80 a pound by April 24, although chicken prices remained lower than 2019, according to the weekly report.
According to Perea, at Eagle Rock, which works with around 150 New Mexico restaurants, the prices of some cuts of beef have risen by nearly 50%. Since the personal dining rooms of New Mexico restaurants are closed, Eagle Rock has responded by reducing deliveries from two to three times a week to once a week.
“I feel lucky to be doing that at all,” said Perea.
Perea added that he was particularly concerned about restaurants – especially those with set menus – that are increasing their prices during the pandemic.
“Menu prices may change weekly and monthly,” said Perea.
So far, the effects in local restaurants have varied from company to company.
Those who shied away from industrial meat producers seem to have done better.
Larry and Dorothy Rainosek, owners of Frontier Restaurant and Golden Pride BBQ, said they work with local producers and have not yet felt the effects of major shutdowns.
Jean Bernstein, President and CEO of Flying Star Cafe, said that many of her company’s deals with suppliers have been pre-negotiated, which has also minimized the damage so far.
However, Bernstein said a combination of factors – from labor shortages to virus-related insecurity to an above-average wet winter on the east coast – has caused food prices to behave in unpredictable ways. For example, Bernstein said Flying Star switched tortilla suppliers after prices rose nearly 30%.
“We had some surprises,” she said.
Bernstein said Flying Star responded by tightening its menu and focusing on online delivery to adapt to the pandemic.
“Everything is different now,” she said.
David Livingston, a Hawaii-based supermarket research analyst, said even if the shuttered meat processors could soon reopen with partial capacity, the gaps in the supply chain would be unlikely to close.
“You can’t come back at half speed and expect to meet the demand,” said Livingston.
By the time meat processors are at full capacity again, the strain will likely weigh on grocery stores, which are already seeing a surge in demand as restaurant dining areas are closed.
According to Livingston, most grocers are able to move inventory to prevent shelves from being empty. However, it is difficult to keep meat on the shelves until the supply chain is restored.
“If the supply is interrupted, there will always be empty shelves,” said Livingston.
Chaturvedi predicted that meat prices will stay high in the short term, but probably won’t stay that way for long. Prices could fall below pre-virus levels in the medium term as processors export less meat to overseas markets like China and Europe, where nearly half of American meat is currently shipped.
A silver lining for major plant shutdowns could be the resulting boost for smaller meat producers in an industry that is increasingly dominated by the largest companies. Minifie, who said he had worked in the meat industry for six decades, said the field is now even more consolidated at the top than it was after the Great Depression.
While Minifie said Western Way lost business to restaurant closings, the facility is slaughtering more animals than it was before the pandemic as local farmers and ranchers brought cattle and pigs to process for friends, family and neighbors.
“Fortunately, we have the ability to meet that need,” said Minifie.
Likewise, Brett Rizzi, owner of No Bull Prime Meats in Albuquerque, said his small meat market uses meat that he raises himself and processes at a small facility in Texas. Because of this, Rizzi said he didn’t see much of an impact from the industrial closures.
“I think I’m in a good position,” said Rizzi.