Today, I participated (virtually) in the WSJ Global Food Forum, and there continues to be lively discussion about COVID19 disruptions to the food supply chain, and there were ample questions put to food industry executives about how to improve resiliency. The shutdowns that happened in the beef and pork packing sectors in April and May continue to raise questions about size and concentration. I’ve written about this issue repeatedly and have run simulations, revealing my somewhat contrarian view that a smaller, more distributed packing sector wouldn’t have necessarily performed better in response to this pandemic.
A key challenge is that we do not have good data relating packing plant size to likelihood of shutdown or disruption. However, the USDA does publish a monthly report revealing hog and cattle slaughter and red meat production by state, which might provide some indirect clues about size and vulnerability.
For some states (even some of the most important packing states), data on slaughter volumes are not release due to confidentiality rules, but there is better coverage for total red meat production. So, let’s start there. I focus in on data in April and May, when the worst of the COVID-related shutdowns occurred, and compared total April+May production in 2020 to production in April+May in 2019 across all 50 U.S. states.
The median change was -1%, however there was wide dispersion across states ranging from -49% in South Dakota to +130% in West Virginia. How does this change relate to the total volume of red meat production in each state in the prior year (a proxy for the processing capacity of the state)? Did states that have more red meat production capacity (presumably because of larger, more concentrated plants) experience larger year-over-year declines during the COVID19 shutdowns?
The figure below plots the relationship. Among the states with the smallest levels of production in 2019 (i.e., the smallest capacity), there was a tendency to see an increase in production during the 2020 shutdown periods compared to the same time last year, and moreover, as state’s total production capacity increases, the declines initially seem to get worse. This would seem to confirm the prevailing narrative that places with less concentration were less affected (and generally benefitted) from the COVID19-related packing plant shutdowns.
However, after about 300 million lbs of production (during April and May), there is essentially no relationship between these variables. For example, Nebraska produced 1340 million lbs of red meat in April and May 2019, and they experienced a year-over-year decline of 25% in 2020. However, Colorado produced “only” 361.8 million lbs of red meat in April and May 2019, and they experienced a -32% year-over-year decline in 2020. A states total capacity didn’t seem to matter much after a certain level.
Here is a map of the changes in red meat production in April and May 2020 compared to April and May 2019, showing how each state faired during the worst of the COVID19 plant shutdown period. The biggest red meat packing states are: 1) Iowa, 2) Nebraska, 3) Kansas, 4) Texas, 5) Illinois, and 6) Minnesota. Three of those states are in red but three aren’t. Moreover, there are states like Washington that experienced one of the largest declines, despite being middle of the pack in terms of total production.
Some of the states with the largest percent increases (dark green) are near states with the largest decreases (red), a phenomenon likely resulting from producers trying to find nearby processing facilities when their “typical” plant shutdown.
Here is the same analysis but focusing in on number of hogs slaughtered in April and May 2020 relative to April and May 2019. Again, states with a smaller number of hog slaughtered, while all over the map, tended to be more likely to experience gains than losses; however, once one moves beyond about 500,000 head slaughtered (in April and May 2019), there is essentially no relationship between the size of a state’s processing capacity and the extent of it’s shutdown.
And, here is the change in number of hogs slaughtered in April and May 2020 compared to April and May 2019 by state.
The relationship between a state’s cattle slaughter in 2019 and it’s change during COVID is below, and a similar phenomenon is observed as was the case for pork and red meat production. States with minimal slaughter capacity tended to see a strong uptick in processing during COVID, but once one moves beyond the smallest of processing states, there is essentially no relationship between COVID19 processing changes and a state’s processing capacity.
And, finally, here is the geographic distribution of the change in cattle slaughter in April and May 2020 relative to April and May 2019.
