Did you think the toilet paper shortages were bad? Wait until Americans clear the store shelves of pork, chicken, and beef.
Meat processing plants across the country are shutting their doors as coronavirus outbreaks sicken and kill their workers. Tyson’s Waterloo Iowa plant, the company’s biggest pork plant, is the latest domino to fall. And the impacts of this crisis may soon hit a supermarket near you.
Stock market futures are in the red after a strong Wednesday close. Tyson (NYSE: TSN) stock is down by 3.21% as the market comes to grips with this terrifying crisis. Other affected stocks include Hormel Foods (NYSE: HRL) whch fell 1.08% and Pilgrims Pride (NASDAQ: PPC) which bucked the trend with a 5.46% rally.
America’s food crisis is spiraling out of control as meat processing plants across the country suspend operations amid the coronavirus pandemic. At least seven massive U.S. meat facilities have shut their doors in a matter of weeks. And Tyson’s Waterloo, Iowa pork plant is the latest domino to fall.
The facility processes 19,500 hogs per day which is equivalent to 4% of America’s entire pork processing capacity. It employed 2,800 people but had to shut its doors after 182 employees fell ill with the coronavirus. Earlier in the month, Smithfield Foods closed its Sioux Falls plant which supplied 4-5% of America’s pork processing capacity. The company’s CEO Kenneth M. Sullivan had this to say about the situation:
The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply.
It is impossible to keep our grocery stores stocked if our plants are not running.
Now, it looks like Mr. Sullivan’s fire prediction is coming to fruition.
There is a disturbing trend in the meat industry. Live hog prices are falling because the plants needed to process meat are shutting down. Meanwhile, spot prices for pork belly and other intermediate meat products are soaring due to shortages of processed pork. This had led some farmers to consider mass culls of their herds even though pork belly prices have doubled in the last four days alone.
The situation is so bad that analyst Dennis Smith of Archer Financial Services predicts that the U.S. could experience meat shortages in as little as two weeks.
This is extremely bad for the economy because if consumer prices rise (core inflation) while economic output decreases, that would mean that the United States is in so-called stagflation — a devastating combination of stagnant economic growth, high unemployment, and high inflation. It’s considered unnatural because inflation isn’t supposed to occur in a weak economy. And monetary and fiscal policy tactics like government spending or interest rate adjustments simply make the problem worse.
The United States is not the only country facing food shortages and potential stagflation. The United Nations warns of a famine of quote “biblical proportions” in the next few months. This is due to — not only the coronavirus — but also wars in Syria and Yemen, as well as massive locust swarms in Africa and the Middle East.
On top of this, swine fever as already wiped out around 40% of China’s pig herd, sending prices soaring in the country as well as driving demand for imports from the U.S.
David Beasley of the World Food Program, claims that 821 million people currently go to bed hungry every night, and an additional 130 million could be pushed to the brink of starvation by the end of 2020. America’s food shortage crisis looks relatively minor in comparison to those of horrifying figures.
Dow futures are down by around 92 points as of early morning trading on Thursday. This dip could be because of profit-taking after Wednesday’s strong close — as well as investors’ concerns that the food shortages could lead to more severe problems in the U.S. economy.
Overall, stocks appear to be in a bull market. But with all this uncertainty in the economy, how long will this last?
This article was edited by Samburaj Das.
Last modified: April 23, 2020 6:31 AM UTC