Headlines have started to appear indicating the shutdown of meat packing plants around the country as a result of COVID-19.
So, just how concentrated is meat processing and how impactful might a plant closure be? As it turns out, the National Pork Board puts out information on processing capacity. According to their data, the U.S. has the capacity to slaughter 506,470 pigs per day. Almost 60% of this capacity comes from just 15 plants.
These plants are heavily concentrated around Iowa.
Given the size relative to the industry, the closure of any of these plants has the potential to reduce hog prices and increase wholesale and retail pork prices (the economics are explained here). Glynn Tonsor and Lee Schultz’s recent analysis by suggests every 1% reduction in pork processing capacity is associated with a 1.82% reduction in hog prices. Hog prices have already been tumbling over the past couple weeks, potentially reflecting the market’s expectation of some capacity being brought off-line.