Consumers detached from producer challenges

Consumers detached from producer challenges
Apr 24, 2020

As livestock producers struggle to deal with market and processing challenges associated with COVID-19, food availability and prices remain relatively stable for consumers 

By Jackie Clark
Staff Writer         

The disconnect between producers and consumers in our Canadian food supply means that even when producers are facing significant challenges and disruptions, consumers can usually still purchase the food products they want at a reasonable price. Food economics experts predict that this will continue to be the case when it comes to meat throughout the COVID-19 crisis.

“I don’t expect short-term closures of a small proportion of our packing capacity to have an impact on availability at the grocery store,” Mike von Massow, associate professor of food, agriculture and resource economics at the University of Guelph, told “If we were going to have more plants close and they were going to close for a longer period of time, that would clearly change.”

The livestock and meat industries in Canada and the United States are integrated.

“If you look at the North American beef processing, we have flow of both live animals and product in both directions, so even if you have a plant that represents a significant volume of processing to one region, product can still move around fairly freely,” von Massow explained.

That movement of meat, as well as inventories in cold storage, should keep meat available and prices stable for consumers.

“That said, if we stop there, I think we’re doing a significant disservice to the producer side of the equation, because even short-term closures will result in significant disruption and some financial pain for producers,” he added.

Beef producers have to hold onto cattle for longer than usual, which incurs additional costs. Then, the built-up supply of cattle may cause downward price pressure.

“That hurts producers,” von Massow said.

“In swine production, the problem could become more acute more quickly” because facilities are set up for a continuous flow of animals.  

“While the news on the consumer side isn’t very dire, it’s much more significant on the producer side, and I think that’s getting lost in some of the discussions,” von Massow explained.

There is a disconnect between the challenges faced by Canadian livestock producers, and the supply and prices seen by consumers.

“There’s not always a very direct connection between (prices) producers are getting and what consumers are paying in the market, and that’s particularly true as farm level prices go down. We see much more stickiness in retail prices downward than we do upward,” von Massow said.

Though consumers may not see the cost or availability of meat change, producers will be hurting.

“We are likely, with closures, to see erosion of profits both in terms of higher costs and lower prices, because of the short-term reduction of capacity,” von Massow explained.

If COVID-19 outbreaks had further, sustained impact on processing, consumers may start to feel the effects.

“In the short run, I don’t think we’ll see price or supply issues. If these are sustained closures, and more closures occur, then we could see both supply and price issues at the retail level as well,” von Massow said. But because we export a lot of meat “the question would become which markets do we not provide product to.”

In that situation, government would need to decide whether to prioritize domestic supply over the export market, he explained. The decision would not be easily made. There is both a need to safeguard domestic food supply and the imperative to manage global relationships with international customers.

Despite struggles at farm level, “from a food supply perspective, the system has worked pretty well. Even though we’ve seen some plant closures, we’ve continued to see food flow to the consumers,” von Massow said.

However, the current situation has highlighted some concerns in the system. The focus of health and safety in the meat processing industry has been on food safety and preventing cuts and injury, with little consideration of viral transmission between employees.

“In the long term we will see some reconfiguration of processes to allow physical distancing,” von Massow predicted. The industry may see “an acceleration of a move to automation in some of these plants,” take pressure off labour and allow for less workers to do the same amount of work.

Even before COVID-19 arrived in Canada, industry stakeholders were discussing the vulnerability of the concentration of meat processing in Ontario. COVID-19 has underscored the risk of the majority of meat processing being done by only a few, large plants.  

“My guess is we will revisit in the long run whether we need a little less concentration in our processing capacity. The trade-off is efficiency. As you have more plants, they tend to be smaller plants and costs tend to go up,” von Massow said. Industry experts will be asking “do we need more diversity in processing capacity to reduce the risk of individual plants closing?”

To make decisions on that question, meat processing stakeholders will “have to balance the risk of another episode like this with costs” of diversifying the processing sector.

97\E+ photo

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