The meat supply chain gained the attention of the White House recently with the announcement of $1 billion to improve capacity for independent processors. But how did the supply chain get here? Lee Schulz, an associate professor and extension livestock economist from Iowa State University says the issue goes beyond the pandemic.
“I think this has been years coming, especially when we dial into the labor situation, that’s been a constraint that many businesses have to face and I think certainly that the meatpacking industry. And it just was exacerbated by that pandemic, that impacted the labor supply and I what really focused on, it was the operational capacity of these plants to operate, the physical capacity was there, that was going to remain regardless, but it was the ability to get that throughput through these plants, which constrained our meat supply.”
And there’s the price of beef at the butcher counter, and consumers are having to pay more.
“We have to think of what’s driving this inflation in meat prices and I like to break it down into two factors that have really coalesced to drive this. And so, we have the demand, pull inflation where there’s just a lot of dollars chasing fewer pounds of beef and pork available. And so, the economy has been doing well, and that’s really allowing consumers to continue to buy meat. And then you have this cost push inflation where it costs more to do everything, right, and it costs more to produce beef and pork, about 30 percent higher in my calculation. So,. both of those coalescing is giving us much higher meat prices.”
Schulz expects the supply chain to “equal out” soon.
“That capacity is relatively fixed. And in a situation where you have lower capacity and larger supplies of meat, you get price divergence there where you get prices higher, retail price higher because we’re producing less meat and you get live animal prices lower because there’s more available. But what I encourage us to think about this is the cycles in those industries. So, the beef, the beef inventory cycle, were declining inventory, how numbers are declining. we’re talking about adding processing capacity. So, we will get to more of an equilibrium level here, but yes, there’s been some painful pinch points along the way.”