Pork Industry Centralization Creates COVID-19 Problem

The COVID-19 pandemic has hit the US pork sector particularly hard. Slaughterhouses and processing plants are being forced to suspend operations as employees fall sick and the risks of exposure rises. In the last week, three of the largest processing plants in the US have been forced to close down temporarily: JBS pork processing in Minnesota, Smithfield Foods in South Dakota and Tyson Fresh Foods in Iowa. These plants account for 15 percent of national pork production.

The CEO of Smithfield Foods, Ken Sullivan, has warned that “it is impossible to keep our grocery stores stocked if our plants are not running.” At least 13 processing plants have closed in the US in the past two months, leading to a drop of 25 percent in processing capacity. The majority of consumed pork meat is processed, with 78.6 percent (sausages, bacon, ham) against 21.5 percent consumed fresh (chops, ribs, roasts). The primary risk of the closure of processing plants, according to industry experts, is not necessarily empty shelves but less variety in meat products available to the consumer.

A primary reason why the US pork supply chain is vulnerable is because the industry is concentrated in a handful of companies which are vertically integrated along the supply chain. Over the years, the amount of production farms has reduced drastically but their average size has increased massively. To demonstrate this, there are now 27 production sites that produce over 500,000 pigs a year and hold 43 percent of the market. In 1950, there were 1,057,570 pig farms in the US. By 2000, this number had reduced to 85,760. By 2018, this stood at 21,687 farms. Of the eight largest pork producers in the US, five are also among the largest packaging companies. The consequence is that if one of these plants gets hit by COVID-19 or the company decides to impose a company-wide suspension, the impact on pork supply is significant.

The phenomenon of production and processing centralization around a few big market players is not unique to the US. In Mexico, the livestock industry has several major players that over the years garnered more market share. One such example is SuKarne, a producers of different meat types that is responsible for 75 percent of Mexico’s meat exports. Another is Bachoco, which in poultry alone has a 35 percent market share. With industries that favor the profitability of larger production sites and larger processing plants over small scale operations distributed over more locations, it is no surprise that COVID-19 has made a damning landfall.