"Meat" of the Matter during COVID-19

“Meat packers in the country are doing well when coping with the effects of COVID-19. The only exception is in High River, Alberta. With 400 COVID-19 cases identified in households linked to the plant in High River, COVID-19 is telling management that risks outside the plant are as important as mitigating risks inside it.”

As COVID-19 ravages communities across North America, many experts agree that meatpacking plants, where employees work physically close to each other, are the next ground zero for the spread of COVID-19. We are likely in the worst of it right now. Over a dozen plants have had to close, over the last two weeks, including 5 in Canada.

By now, the “Big Three” of meat processing in Canada have been affected by COVID-19. Maple Leaf Foods had four plants affected by COVID-19, two (Brampton and Montreal) are back in operation. Protocols are being carefully followed to put plants back in operation as quickly as possible. Plant closures can be disruptive, and especially for farming closures can be disastrous.

Olymel, controlled by La Coop Fédérée, with several pork processing plants, have had issues with at least two plants. Indeed, two pork processing plants were closed, one in Yamachiche and one in Ange-Gardien. Both plants had to close for two weeks, and given the intense production cycle, hogs needed to be harvested. While other sectors struggle to manage waste, pork processors made vertical coordination work as no animals were euthanized. Throughout the crisis, we should expect to see more of these scenarios erupt, but we should not expect meat shortages.

With the pandemic affecting the entire planet, meat consumption across the globe is down, which puts less pressure on meat packers. Futures are telling the story these days, especially for cattle and hogs, as farmers are being paid less for their livestock. Inventories are high enough to provide comfort to the supply chain. Also, meat sales in Canada have been unusually high since mid-March, when most Canadians were home, likely treating themselves with BBQ. We are expecting peak BBQ season to be flattened this year, again, putting less pressure on the entire meat supply chain. BBQ season will likely last longer this year, beyond what we would normally see. 

But beef, and one packing plant, appears to be offering a different story. There always been a unique culture in the cattle industry, nothing like it. Beef and cattle processing in Canada are dominated by three large players. Cargill Foods operates in High River, Alberta and Guelph. Lakeside Packers in Brooks, Alberta, is operated by JBS Canada, part of a Brazil-based multinational. Both are private companies and tend not to be too forthcoming. The Cargill plant in High River has been the focus of much scrutiny these past few days.

Unlike other plants affected by COVID-19, Cargill chose to keep operating after seeing employees contracting COVID-19, but opted to slow down production to allow for cleaning and physical spacing to be possible. Reports now suggest that close to 400 COVID-19 cases have been identified in households linked to the plant in High River. That is a problem. Risks are now inside the plant. They are also affecting the community. Similar scenarios are being reported in the United States as well.

A few issues do merit some attention. First, many of our plants need to be retrofitted. Since the beginning of the crisis all plants under 10 years old in the country have evaded COVID-19. That is a sign. The virus could eventually get in, but modern infrastructure can play a significant part. Because automation, robotics, and modern up-keeping have been privileged, most European plants have been spared so far by the virus. Those having issues have been in operation for decades and the result of years of patchworking and provisional solutions. The high-volume, low margin nature of the agrifood sector puts tremendous pressure on the entire supply chain, in particular, in North America. Price volatility also makes things more complicated. There is barely any room for capital investments. The High River plant is 31 years old. The Brooks plant operated by JBS is more than 40 years old. These were built before BSE even existed and when food safety was key. The region needs more processing, either with newer facilities or with more players. But the economics are very poor for any new entries. 

The other issue is worker mobility. Many plants hire workers who commute by bus from urban centres to remotely located plants. To comply to physical distancing rules in a bus can be complicated, if not impossible. In scope of management’s decision to deal with the pandemic, it should be making the safety of the community one of its priorities. Maple Leaf, Olymel, and other companies made the right decisions to temporarily close their facilities to clean and establish safety measures.

Employees at the Cargill plant have continuously, and awkwardly, voiced concerns about the safety of the working environment. Despite teleconferences, a few interviews here and there, Cargill has failed to reassure the safety of its employees. One can only imagine how different the outcome would be if Cargill was in fact a publicly traded company.

Moving forward, COVID-19 will force management to think about employee safety, inside and outside the plant. Beyond what Cargill is trying to do to mitigate risks and keep employees and the community safe, it does not appear to be working. It is not helpful to have employees go to media while the number of cases in the community continues to grow. Not wanting to temporally close the plant can be understandable, particularly for ranchers dealing with the plant. But there is a unique culture in the beef industry, public health and the safety of employees must be priorities above anything else.

In 2012, XL Foods in Brooks closed for several days amid the largest food recall in Canadian history. Canadians continued to get their beef fix while prices in those days remained stable. The market can handle a temporary closure.

Overall, the meat processing industry will be fine, but it will not be perfect, and that is ok. There should be enough products.