The deal with meat - Albuquerque Journal

The deal with meat

Rosa Velasquez works on making chicken flautas at Garcia’s Kitchen. Restaurant owner Dan Garcia said the price of beef, chicken and pork has gone up anywhere from 50 cents to a dollar per pound in recent weeks. (Adolphe Pierre-Louis/Albuquerque Journal)

Dan Garcia said he first noticed the price of meat rising a couple of weeks ago.

Garcia, owner of Garcia’s Kitchen in Albuquerque, said the increases have varied from 50 cents to $1 per pound of beef, chicken and pork – depending on the cut – a consequence of a number of meat processing plant shutting down operations across the United States due to the spread of COVID-19.

Garcia was adamant his company wouldn’t raise prices during a pandemic, but he acknowledged Garcia’s Kitchen is feeling the pressure with dining rooms closed at its five locations.

“We’ll be feeling the jump a little sooner,” Garcia told the Journal.

Garcia is far from alone.

People up and down the meat supply chain – from ranchers to distributors to the grocery stores and restaurants they work with – have been hit hard by the closure of plants operated by industry giants like Tyson Foods and Smithfield Foods.

The closures, prompted by outbreaks of COVID-19 at multiple facilities, have dramatically reduced the nation’s ability to process meat. That, in turn, has prompted a price spike for restaurants and made it more difficult for some grocery stores to keep meat in their freezers.

“We’re going to see prices just like we’ve never seen before,” said Mike Perea, owner and president of Albuquerque food supplier Eagle Rock Food Co.

How we got here

The COVID-19 pandemic infiltrated nearly all aspects of American life in March, and the meat processing industry was more susceptible than most. Smithfield, Tyson and JBS each shuttered plants in response to virus outbreaks at facilities.

Mike Minifie, owner of Moriarty-based Western Way Custom Meats, said industrial-scale plants can process around 20,000 animals per day, and losing that capacity has dramatically slowed down production.

Last week, President Donald Trump signed an executive order invoking the Defense Production Act to require meat processing plants to stay open. Several experts told the Journal it’s unlikely the order will be effective without sufficient social distancing measures and support from employees.

“I’m glad the (act) has been invoked, but it’s not going to do much unless we protect the workers,” said Hitendra Chaturvedi, a professor at Arizona State University’s W.P. Carey School of Business, with a focus on supply chain management.

Chaturvedi added that large slaughterhouses pack workers in tight spaces that make social distancing a challenge. Any effort to keep workers six feet apart would likely require the facilities to run at around 50% capacity, Chaturvedi said.

With large processors currently unable to run at full capacity, farmers and ranchers haven’t had a place to send cattle, chickens and pigs. As a result, contract farmers have been left to euthanize animals even with meat prices on the rise, Chaturvedi said.

“We do not have a shortage of supply,” he said. “We have a shortage of the manpower that processes the supply.”

Consequently, meat prices have trended upward. A weekly report from Urner Barry, which publishes data about the food industry, reported that beef rose to nearly $2.70 per pound on April 24, up from less than $2.10 in February. Pork, which dropped earlier this year, spiked to nearly $0.80 per pound by April 24, though chicken prices remained lower than in 2019, according to the weekly report.

Flying Star Cafe owner Jean Bernstein said while pre-negotiated agreements with suppliers have shielded the company from feeling the effects of meat price increases, she’s seen volatility in other areas like the cost of tortillas. (Roberto E. Rosales/Albuquerque Journal)

Local impact

Perea said Eagle Rock, which works with around 150 restaurants in New Mexico, has seen prices jump nearly 50% for some cuts of beef. With restaurants’ in-person dining rooms closed in New Mexico, he said Eagle Rock has responded by cutting deliveries from two to three times per week down to once a week.

“I feel fortunate to even be doing that,” Perea said.

Perea added he is particularly worried about restaurants – particularly those with fixed menus – upping their prices during the pandemic.

“You may see menu prices changing weekly, monthly,” Perea said.

So far, the impact at local restaurants has varied from business to business.

Those who have shied away from industrial meat producers seem to have fared better.

Larry and Dorothy Rainosek, owners of Frontier Restaurant and Golden Pride BBQ, said they work with local producers, and haven’t felt the effects of major plant shutdowns yet.

Jean Bernstein, president and CEO of Flying Star Cafe, said a lot of her company’s deals with suppliers were negotiated ahead of time, which has also minimized the damage so far.

However, Bernstein said a combination of factors – ranging from labor shortages to virus-related uncertainty to a wetter-than-normal winter on the East Coast – have caused food prices to behave in unpredictable ways. For example, Bernstein said Flying Star changed tortilla suppliers after prices went up nearly 30%.

“We’ve had some surprises,” she said.

Bernstein said Flying Star has responded by tightening up its menu and focusing on online delivery to adjust to the pandemic.

“Everything is different now,” she said.

Looking ahead

David Livingston, a Hawaii-based supermarket research analyst, said even if the shuttered meat processors can re-open soon at partial capacity, it would be unlikely to fill the gaps in the supply chain.

“You can’t come back at half-speed and expect to meet demand,” Livingston said.

Until meat processors are once again operating at full capacity, the burden will likely fall on grocery stores, which are already experiencing a spike in demand with restaurant dining areas closed.

Flying Star Cafe owner Jean Bernstein said while pre-negotiated agreements with suppliers have shielded the company from feeling the effects of meat price increases, she’s seen volatility in other areas. The company has responded by tightening its menu and focusing on online delivery. (Roberto E. Rosales/Albuquerque Journal)

Livingston said most grocers are able to move inventory around to keep shelves from staying empty, but acknowledged it could be challenging to keep meat on the shelves until the supply chain is restored.

“With a disruption in supply, there’s always going to be empty shelves,” Livingston said.

Chaturvedi predicted meat prices will remain high in the short term, but likely won’t stay that way for long. Prices could drop below where they stood prior to the virus outbreak in the mid-term, as processors start exporting less meat to overseas markets like China and Europe, where nearly half of America’s meat is currently sent.

Silver lining

One silver lining to major plant shutdowns might be the resultant boost to smaller meat producers in an industry increasingly dominated by the largest companies. Minifie, who said he’s worked in the meat industry for six decades, said the field is even more consolidated at the top now than it was coming out of the Great Depression.

A table at Flying Star Cafe is labeled with a reminder that it’s not to be used.

While Minifie said Western Way has lost business from restaurant closures, he said the facility is slaughtering more animals than it was before the pandemic, as local farmers and ranchers have brought in cattle and pigs to process for friends, family and neighbors.

“Luckily we have the ability to fill that need,” Minifie said.

Likewise, Brett Rizzi, owner of No Bull Prime Meats in Albuquerque, said his small meat market uses meat he raises himself and processes at a small facility in Texas. Because of that, Rizzi said, he hasn’t seen much of an impact from the industrial closures.

“I think I’m in a good position,” Rizzi said.

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