Is the food supply chain in trouble?
Corona-virus has prompted thousands of workers to walk off their jobs butchering hogs at a JBS plant. Chris Niemann- who we interviewed on episode 3 of Corona-virus perspectives - was told that his job driving hogs from farms to slaughter houses is done until further notice. He discusses how long the meat packing plants can keep supplying grocery stores before they get workers back to work. View the full interview here.
VC: So how long do you think it is between when the plants shut down and people start feeling this in the grocery store?
CN: I personally I think it’s already kind of kind of mixed into the price already in anticipation for this but aside from that, the bigger question I think that comes before it is more of are we going to get workers back? — Because right now all these plant’s coolers are full. I mean that’s what they do, they fill coolers daily but at this point, meat is going out but it’s not coming in and so I think a lot of it is going to depend on how fast the consumer consumes what they do and then kind of trickle down from there as to how long it takes to get this from the packing plants to the store and then how fast in return people buy it up. I think when word gets out about these plants getting closed down and I keep saying closed down but it’s not really closed down — they’re not closing their doors and I guess I should make that very clear but the workforce is not there to slaughter the animals at the rate that they did before and so in turn they’re going to slaughter one truckload of cattle a day not 26 or the 21,000 they had at one plant but nonetheless these coolers are going to start running out and then it’s just a matter of do the coolers run out before workers come back or do workers come back before coolers run out?
If workers come back before coolers run out, I don’t think the store is going to see the price jump but if coolers run out and the workforce isn’t coming back to work, your pork chops going to triple in price.
It’s the scariest thing that I think maybe anybody said so far with this corona-virus is if the workers decide not to come back, the clock is now started between ways when you’ll start seeing that in the grocery stores and nobody really knows what that is going to look like. Somebody knows but it’s not us and it’s not forever and the biggest thing I guess that I would want to push for anybody that’s reading is I’m far from trying to create even more of a chaotic pandemic out of this; By all means I would love to tell you to run to your store right now and buy all the pork you possibly can frankly because I’d like to go back to work at some point but at the same time I don’t want to create chaos out of this, I just want everybody to understand and be educated so that they do understand what’s going on at the store so one day when you do go and you do see those pork chops for $37 dollars for a package of two instead of $8.99, hopefully somebody somewhere listened to this or saw and understands — oh yeah there were eight packing plants in the Midwest that all closed practically the same day or diminished their numbers the same day and that’s where this shortage is coming from. We do not have a shortage of pork or beef or poultry or vegetables in this country at all. We have got such a surplus it is ridiculous, it is the fact of getting it processed and where the funnel is coming from right now people don’t understand. They do not really make the jump between where you get a pig or a cow and then to the store like there’s some part, but they don’t really think about it much and I don’t blame them. I didn’t think about it either until I went and got involved in agriculture and all of a sudden you’re like “oh I never really thought about the fact that you have to kill this cow — you have to have its blood drain out — you got to have all that go somewhere” — It’s what keeps us safe and it’s what makes it so we have such a bountiful system but right now, all of the production goes into these pipes and if those pipes get stopped then that’s through.
A couple other things that have kind of gone on around here as well is ethanol has almost come to cease production nearly nationwide. Just because with the price of crude, it can’t compete, it can’t turn a dollar profit off of it either and so that’s a snowball effect there — there’s their synergy, there’s gluten, there’s DDG, there’s wet slop feed, there’s a steep water, there’s one more by-product I’m missing right now all of which get turned into feed for cattle and other animals. When you cut down your ethanol production you cut down all your byproducts as well. Now that creates a catastrophe for feedlots and dairies all of a such that have been feeding their animals all these byproducts which trucks move and so trucks aren’t moving any of this product anymore at the rate that they were before and so there’s more trucks getting parked because of that. Our local ethanol plant got there — down to I want to say 6 a.m. to 2 p.m. and they stopped loading at 2 p.m. for distiller’s grains. The dairy Meijer that’s a family member of mine that hauls to, they’ve switched from hauling everything DDG to they’re trying to find other stuff to do now. They’re trying to look for other byproducts for their cows to be fed for the dairy. A lot of dairies and a lot of feed lots are switching over to soy meal. You can imagine you tell everybody that Walmart’s closed and Target’s closed — You can about imagine what the lines are like at Target and so it’s exactly the same way with DDGs — everybody switched into soy meal well now let’s all go to the soy plant — there’s lines days long and for people that don’t know, I’ve got a buddy up in South Dakota who feeds cattle and he was talking about if the ethanol plants go down he can still feed cows, yeah but now he’s got to change basically everything. Everything. It’s not one little thing, he has to change how he’s getting stuff arranged so he’s getting stuff delivered. It’s not an easy thing to go with it if DDGs were taken, five parts DDG, one part alfalfa, well the soy might take one part soy and five parts alfalfa, now you got to come up with five parts of alfalfa when you know for the last 10 years you’ve been feeding your cattle one part alfalfa. You’ve got the stockpile for one part off alpha now you have to find five. It’s alfalfa to compensate for the loss at the exact same time that everybody else is right there and then at the end of the supply chain they aren’t taking the cattle that you’re putting out so now you’re looking at all these changes — an increase in the expenses to be able to get those cattle to beef. Absolutely then you’re going to increase prices for margin.
Let’s keep the conversation going,
Vance
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