U.S. MEAT intended for export piling up in warehouses as virus spreads.
U.S. pork, chicken, beef stored awaiting export go-ahead
The coronavirus outbreak is resulting in a domestic meat glut, filling cold storage facilities with pork, chicken and beef earmarked for export to markets hit by the global spread of the virus.
Rising supplies pushed the amount of chicken in cold storage up by 12% to 957.5 million pounds in January, according to the U.S. Department of Agriculture.
Pork in storage climbed 11% compared with January 2019.
Meat companies — including Pilgrim’s Pride, Sanderson Farms and Tyson Foods — have been waiting for the chance to ship large orders to Chinese buyers as trade tensions ease and China tries to cover for a domestic pork production shortfall, the result of the loss of hundreds of millions of hogs to a swine disease. Companies have ramped up production, and meat exports to China surged in late 2019, according to the USDA.
The spread of the coronavirus has hampered that outlook.
The outbreak has touched all fronts — production, distribution, consumption and trade — creating a long-term problem in China, according to Durch bank Rabobank. Many food service stores such as Starbucks and McDonald’s are closed until further notice in affected areas, redirecting people to eat at home as supplies wait in the wings.
In China, where the virus was first identified, strict travel restrictions have led to severe industry disruptions, specifically in food service.
“The ports are basically backed up,” Noel White,
Tyson’s chief executive officer, said at a conference last month.
Conditions are expected to get worse before they get better, according to analyst Ben Bienvenu of Stephens Inc.
Bienvenu said U.S. meat supplies have been abundant for some time and remained that way into 2020, pressuring prices. While there is not a clear metric to determine the market effects of coronavirus on supply, he said “we can see intuitively it is going to weigh on demand.”
Bienvenu and others at Stephens anticipate American
exports to return to healthy levels as the outbreak is resolved, but the “impact we’ve witnessed so far certainly adds pressure to the demand side of the equation,” they said in a research brief last week.
According to Tyson strong demand remains given the current state of things.
“We are continuing to ship product,” White said last month. “Now, is it flowing at the same rate as it was before? No. But there continues to be strong interest. … So when we do see coronavirus improve, we think that we’ll be back to the rate in which we were shipping earlier in January.”
Tyson shares fell 12% last week, mirroring a declining
stock market. The shares fell $2.04, or 2.9%, to close Tuesday at $68.50.
Chinese factory activity fell at its fastest rate and to its lowest level on record in February as anti-disease efforts closed factories and disrupted supplies, according to surveys by a business magazine, China’s statistics agency and an industry group.
A monthly purchasing managers’ index released Monday by Caixin magazine fell to 40.3 from January’s 51.1 on a 100-point scale on which numbers below 50 show activity contracting.
Despite that, business confidence rose to a five-year high after the ruling Communist Party launched efforts to revive industry with tax cuts and other aid, Caixin said.
“Manufacturers were confident that output would rise over the next year,” the magazine said in a statement.
The Communist Party is trying to revive business activity in some parts of China while ordering areas deemed at high disease risk to stay focused on fighting the virus. Beijing has cut a key interest rate and promised tax breaks, low-cost loans and other aid. Local officials have orders to help millions of employees get back to work while preventing a rebound in infections.