Consumer spending has changed a lot over the first several weeks of the coronavirus pandemic, but the U.S., which eats more meat per capita than any other nation, hasn’t stopped stocking up on burgers, chops and steaks to ride out the social distancing being pushed in most states. Virus outbreaks, however, are putting extra strain on the food supply chain.
In an effort to stop panic buying, retailers such as Costco, Kroger and Wegmans are limiting how much meat customers can purchase. Wendy’s isn’t selling its famous square burgers in 20% of its fast-food restaurants as the meat supply chain is showing kinks.
With unemployment surging and commerce far from typical since the COVID-19 pandemic changed the daily lives of most American consumers, the freight environment has seen dramatic changes: From the panic buying of paper and cleaning products in March to lower demand for most goods as the pandemic has continued into the spring.
The transportation of a wide range of goods is sharply lower due to extraordinary conditions in both supply and demand, according to a 2020 second-quarter outlook by transportation management and logistics technology company Transplace. One of the most worrisome outlooks for goods this quarter is with the food supply chain.
The early days of the pandemic put a strain on consumer packaged goods (CPG) shipments, which have recently returned to pre-COVID-19 load volumes, according to FourKites, a supply chain management solution. “As the pandemic wears on, FourKites platform data illustrate that supply chain impacts are moving upstream, now showing more signs of wear on the food supply chain than in CPG,” notes Vivek Vaid, FourKites chief technology officer.
Since mid-April, hundreds of workers at food processing companies have contracted the coronavirus, leading some plants to shut down and disrupt the food supply chain. FourKites’ data signals a 10-15% drop in shipped loads of meat, dairy, alcohol and pet food in April. “While that is certainly a significant drop, it’s not quite as precipitous as we expected,” Vaid noted on May 1.
President Trump last week signed an executive order that declared the meat supply critical to make sure the processing plants remained open to prevent shortages of beef, pork and chicken. Nearly a week later, concerns are still growing about the food supply chain.
Because most meat processing in the U.S. is so consolidated, the closing of just one beef processing plant can mean the loss of more than 10 million servings of beef per day, according to a White House fact sheet, which adds: A single plant closure can also cost an entire grocery chain more than 80% of a single meat product, such as ground beef. And failure to process livestock could make millions of pounds of meat disappear from the supply chain.
Tyson Foods, the U.S.’s largest processor of chicken, beef and pork has closed half of its six largest processing facilities — the other three are operating at reduced capacity, according to an investor call held on Monday.
“In the current environment, we see strong demand and ample supply of hogs, but reduced industry processing capacity of nearly 50% to COVID-19 has pressured the supply chain and dramatically reduced overall profitability,” Dean Banks, Tyson Foods president, told investors. “As pork plants across the country have continued to shut down, hog producers are met with much lower processor demand for their market-ready hogs. We recognize how this impacts our producer community and are anxious to safely resume operations at our facilities to provide them with an outlet for their hogs.”
Looking at just the major meat processing companies in the U.S., there was a 17% decline in shipping volume the week of April 13 compared to its 2020 peak the week of March 23, according to FourKites. This preceded a historical high of load cancelations for meat companies during the last week of April, which FourKites said was up 9% from mid-April and up 22% month-over-month.
“The data confirm the impact of the current health crisis on the national food supply, including meat and poultry, with meat processing load volumes declining even below their typical volume from a couple of months ago,” Vaid said.
With the exception of near-term restocking of high demand items, Transplace expects the COVID-19 crisis to sharply reduce freight in both industrial and consumer sectors. And while the food supply chain is fragile, it is among the few freight markets expected to see modest growth during the pandemic.
FTR’s 2020 total truckloads forecast expects a 4% drop in total truck loadings this year, down from 1.3% growth before the pandemic. All segments now forecast for negative comparisons with 2019 except refrigerated freight. Dry van loadings are forecast to fall 2.6% in 2020. The pre-pandemic forecast saw 0.7% growth. Now all major dry van commodities — except food — look negative this year.
Reefer is forecast to grow 1.3% in 2020, according to FTR, which is down from 2.2% growth previously. Flatbed loadings are forecast to fall 6% in 2020. The pre-crisis forecast had been for 0.6% growth.