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Global meat markets are being pulled in different directions as
Covid-19 triggers a transformation in the way people buy food,
while at the same time sickening workers, disrupting supply chains
and complicating international trade.
So how have markets been developing across the globe and how do
the world's leading processors view the situation going
forward?
Meat and poultry prices in some countries have moved sharply
lower, while in others they have stayed firm or even risen. Markets
for different types of meat products are also uneven - with beef
and pork prices weakening in many parts of the world but chicken
and eggs tending to strengthen.
Meanwhile many of the world's largest meat processors have been
keen to stress their commitment to supplying markets and preventing
shortages on supermarket shelves. But in some cases, this is now
being jeopardized by the spread of Covid-19 among the workers and
inspectors who keep meat plants running - potentially bringing even
greater disruption if the disease continues to spread.
Europe
These tensions and sectoral differences are all evident in
Europe, where measures to control Covid-19 are reshaping the way
people buy and consume meat. The closure of restaurants and fast
food chains is adding to pressure on beef
markets in particular - driving down prices and causing serious
problems for producers and processors.
Pigmeat markets have been more mixed - partly because of
developments in China, the EU's largest export destination. Pork
exports faced some disruptions in February as Chinese disease
control measures caused logistical problems at Chinese ports. These
issues have now started to
ease however - leading to optimism that China will once again
help prop up prices and offset some of the disruption seen in
Europe itself.
Overall, European pig prices have seen some ups and downs over
the past month, but remain well up on year-ago levels. This is
partly due to Covid-19 related issues but also reflects the drop in
supplies seen in countries such as Germany.
Meanwhile, the poultry sector shows that all is not doom and
gloom when it comes to Covid-19's market impacts. Unable to eat
out, many consumers are buying more chicken breasts and eggs to eat
at home. In many European countries, supermarket shelves have
regularly been stripped bare of these items since Covid-19
lockdowns were first put in place. Average prices for broilers and
eggs have risen as a result and now stand at their highest
levels for several months.
Workforce concerns
Serious challenges remain however - not least because the meat
and poultry sectors face potential labour force
issues if Covid-19 spreads among meat workers.
In Northern Ireland, employees at a Moy Park processing plant
walked off the job last week and unions are calling for more to be
done to protect the health of their members.
South of the border, Irish livestock producers have been calling
for support measures to help them through current turmoil, which
has seen steep falls in prices paid for both cattle and sheep.
European governments are also being pressed to ensure that
border closures do not disrupt supplies of animal feed and other
inputs to farmers. At the same time, border delays have added to
pressure on the live trade, sparking complaints from animal welfare
groups and MEPs.
Although the industry is facing a number of supply chain
challenges - there are signs that EU authorities are recognizing
the need to address these issues in order to avoid food shortages
further down the line.
In mid-March, the European Commission published guidelines on
how to strike a balance between fighting the Covid-19 pandemic and
protecting 'essential' supply chains from disruption. European
governments are also looking at ways to prevent border delays and
free up the movement of seasonal farm workers.
In another example, Denmark is taking steps to potentially allow
meat plants to stay open for
longer so that working hours can be staggered and employees
given more space between them and their colleagues.
View from processors
European meat processor, Danish Crown, says it is adjusting to
the shift in consumer purchasing patterns.
"We are confident, because basically, people still need
something to eat. We have seen a big change in sales, because while
sales for foodservice… have almost stopped, there is a marked
increase in supermarkets. It keeps the market going, and we have a
staff of employees who show an impressive readiness to change, so
that's a situation we can handle," says Lars Albertsen, global
sales director at Danish Crown Pork.
The company says it is aware that slaughterhouses may be
affected by illness but says steps are being taken to ensure food
supplies can be maintained.
When it comes to markets, Albertsen says there is no need to
panic.
"In terms of prices, they have fallen in Europe, but there is
nothing to indicate that the bottom is falling out of the market,"
he states.
German processor Tonnies says it is well equipped to deal with
the current pandemic - promising to keep the German market fully
supplied with meat and sausages. At the same time however, it says
export demand has been hit by international uncertainty, especially
with regard to transport logistics. As a result, pig carcasses
cannot be fully utilized as some parts of the animal only find
buyers in overseas markets.
For its part, Netherlands-based Vion says Covid-19 is creating
'major uncertainties' in 2020.
"The turnover of convenience meat products, such as minced meat,
is increasing in comparison to more luxurious products. These
shifts have a major impact on meat values, causing the relationship
between purchase and selling prices to shift as well," the company
notes.
Although the disease has caused some disruption to sales in
Asia, Vion says the continent continues to offer opportunities in
2020, in part due to the persistent African Swine Fever outbreak
there.
Meanwhile, the British Meat Processors' Association (BMPA) says
a shift in demand for minced beef has left a glut of other cuts,
such as steak and hind quarter, which processors can't sell on.
Even if it is frozen, or retailers buy these other cuts to sell
on promotion, the association says it will be at a lower price that
makes it unprofitable to continue processing, unless the price of
livestock is reduced.
"In this scenario, the problem will end up at the farm gate,
with farmers struggling to sell their animals at a price that
covers their costs," the group warns.
North America
Similar tensions are apparent in North America, where meat and
livestock prices have been volatile in recent weeks as markets
react to the rapid spread of Covid-19.
As in other countries, prices of poultry have been pushed up as
consumers rushed to stock up their freezers. After an initial
uplift however, prices of some other types of meat have begun to
soften as markets factor in how rising unemployment and economic
recession could harm demand going forward. The impacts of this
would be made more serious by the fact that US meat production is
at record high levels.
Prices for livestock are also showing signs of weakening as
traders worry that supplies could back up if more processing plants
are forced to close because of Covid-19 outbreaks among
workers.
Canada's Olymel recently said it would shut a hog slaughter and
cutting plant for two weeks after nine workers tested positive for
the virus.
Canadian pork plant halts operations after nine workers catch
Covid-19
These and other processors are attempting to keep workers on
board by offering bonuses but
if large numbers of workers get infected, more plant suspensions
can be expected - causing further disruption to markets.
Quizzed on Covid-19's impact on consumer buying patterns, André
Nogueira, CEO of JBS USA, last week said the group would have
little difficulty adjusting to the switch away from food service as
restaurants close and consumers eat more at home.
"The change is very simple - very few lines cannot be
immediately used for retail - maybe some, but it's so small as to
be irrelevant - we can change pretty much 100%. There is no impact
on margins overall - so long as total consumption doesn't change,"
he added.
South America
Brazilian processors were initially bullish about Covid-19
impacts - playing down concerns over exports and highlighting how
the world will still need to buy Brazilian meat even in the face of
a pandemic.
This view was supported by export data which showed Brazilian
pork, beef and poultry exports performing well in February despite
logistical issues at Chinese ports.
A rise in the number of Covid-19 cases in Brazil itself has
subsequently seen restaurants close - with consumers buying more in
supermarkets. This has caused some volatility - though prices have
held up better than in many other countries. This is partly because
high feed costs have discouraged producers from expanding too fast
- meaning supplies of most types of meat are fairly tight.
At the same time, South American suppliers have benefited from
recent currency shifts, with sharp drops in the Brazilian Real
keeping cattle prices competitive and making low-cost beef
accessible to global markets.
Minerva, the country's third largest beef company, has suspended
operations at some of its Brazilian plants. But market leader JBS has vowed to do
all it can to keep markets supplied with meat. The group says it is
well prepared to face the challenges posed by Covid-19 and expects
Chinese demand to remain strong over the months ahead.
Argentina and Uruguay appear to have been worse hit by
logistical problems at Chinese ports - with exports suffering in
February as a result. But as the situation improves in China,
exporters from these two countries now appear more worried about
the situation in Europe, where the closure of restaurants and
hotels is hurting demand for high quality Hilton beef
cuts.
As in other countries, the spread of Covid-19 could trigger
plant closures in South America. However, unions in Uruguay are
divided over whether they should urge workers to walk out over
safety concerns - or instead support efforts to keep facilities
open to limit the risk of food shortages.
Australia
Until recently, Australian cattle prices were bucking the
downward trend seen in many other parts of the world. Prices rose
sharply between early February and mid-March but have slipped back
over the past couple of weeks, suggesting that markets are
beginning to suffer from some of the uncertainties prevailing
elsewhere.
On the plus side, Australian red meat exporters have seen their
competitiveness boosted by a weakening of the Australian dollar
against its US counterpart. They should also benefit from the
recent easing of logistical problems at Chinese ports.
However, some exporters are vulnerable to the grounding of
planes as certain meat products are normally sent as freight that
piggy-backs on passenger liners. Although the bulk of red meat is
still sent as sea freight, planes are critical in servicing certain
markets and customers, which have developed supply chains and
marketing channels geared to quick-delivery chilled product -
particularly for lamb. These business models are now facing
significant challenges amidst a fast-evolving procurement
landscape.
Australian red meat air-freight exports were worth USD823
million in 2019 - more than three times the value recorded in 2009,
according to Meat and Livestock Australia. Sheepmeat, particularly
the chilled lamb carcass trade to the Middle East, accounted for
almost half of that export revenue.
China and India
China, where Covid-19 first surfaced, is further ahead on the
curve and can maybe give some indications as to future direction of
markets.
The initial impact of the disease was compounded by the fact it
clashed with Lunar New Year, which is typically the peak season for
red meat consumption. Government lockdowns hit ports and processing
facilities - disrupting local meat production as well as
imports.
The situation has since improved, with businesses gradually
reopening as the number of new Covid-19 cases declines.
China's WH Group, the
world's largest pork processor, says there are early signs that
government measures are helping spur a recovery in Chinese pork
production. With Covid-19 adding to complications caused by African
Swine Fever (ASF) however, the company remains cautious and says it
will expand its poultry operations to reduce its exposure to
problems in the pork sector.
"In 2020, the overlay effects of sluggish global economic
growth, risky geopolitical relations, continuation of ASF and
outbreak of coronavirus disease 2019 will bring us unprecedented
challenges. In China, the impact of ASF is expected to endure," the
company explains.
"We believe that pork products are consumer staples, the impact
of Covid-19 on the Group will be manageable under current
assessment. Yet we are highly cautious about the latest development
and the later implications of the epidemic," the group adds.
Meanwhile, markets in India have been infected by misinformation
on Covid-19. Rumours that the disease is linked to poultry
consumption sparked a sharp fall in demand for chicken and eggs,
which caused prices to plummet. India has also seen exports of
buffalo meat collapse as orders dry up in countries affected by
Covid-19.
Conclusions
Forecasting what will happen on global meat markets is
particularly difficult at the moment as much will depend on efforts
to bring Covid-19 under control. If China manages to prevent a
second wave of outbreaks, it will once again help absorb supplies
and limit any downside to prices. ASF remains a problem and
Covid-19 is setting back efforts to rebuild China's own production
capacity. This should sustain Chinese import demand for all types
of animal protein in 2020.
How markets develop elsewhere in the world depends on their own
specific supply situation. The US has been ramping up production of
animal protein, leaving it more vulnerable to demand-side shocks.
In contrast, Brazilian producers have kept a lid on expansion -
leaving them less open to potential problems of oversupply.
US exporters will also be disadvantaged by recent exchange rate
movements, which have seen the dollar strengthen against the
currencies of rival suppliers in South America and Australasia.
As always, any future global recession will affect poultry less
than competing meats due to its relative affordability. However,
further disruptions to global trade could make it harder to find
outlets for parts of the bird not favoured by consumers in Europe
and North America. In the same way, pork and beef exporters could
find it hard to maximise carcase balance if sales to Asia are
interrupted again.
For now, however, the industry will be focused on keeping
workers healthy and preventing further shutdowns of meat processing
plants, while at the same time pressing authorities to keep supply
chains moving so that meat can continue to reach supermarket
shelves.
