Tyson Foods chair says ‘the food supply chain is breaking’

Discussion
Source: Tyson Foods
Apr 28, 2020
George Anderson

Tyson Foods ran a full-page ad this weekend to alert Americans to a problem with the nation’s food supply chain and to explain the steps it is taking to help fix it.

The ad, which was published in the Arkansas Democrat-Gazette, The New York Times and Washington Post, included a letter from company chairman John Tyson. It warned Americans that the temporary closures of beef, chicken and pork processing plants around the country would mean lower supplies of meat in grocery stores.

“The food supply chain is breaking,” wrote Mr. Tyson.

Tyson closed its pork plants in Waterloo, IA, and Logansport, IN, so that workers in those facilities could be tested for COVID-19. The brand’s ad also listed sanitization procedures and other steps it is taking to protect workers.

The plant in Waterloo, in particular, had come under increasing public scrutiny as employees complained about unsafe working conditions. Nearly half of the confirmed cases of COVID-19  in Black Hawk County, where the Tyson plant is located, were tied to the facility.

Tyson Foods chair says ‘the food supply chain is breaking’
Source: Tyson Foods

Earlier this month, Smithfield Foods closed its pork processing plant in Sioux Falls, SD, and JBS closed its pork facility in Worthington, MN. Those two plants, along with Tyson’s Waterloo facility, account for about 15 percent of pork production in the U.S.

Dennis Smith, a commodity broker/livestock analyst with Archer Financial Services, told NBC News that overall meat production is down about 25 percent. He estimated that “shortages will begin developing at retail meat counters” around May 1.

Terry Reilly, a senior commodity analyst at Futures International, acknowledged that fresh meat shortages were a concern in the short-term, but that alternative sources existed to help offset any shortfall.

“There is a lot of frozen pork and beef sitting in freezers, so people shouldn’t panic,” he told NBC. “In San Diego, they’re trying to figure out where to store all the fish that they would normally be serving the tourists.”

The news of meat shortages has been good news for at least one plant-based alternative brand. The stock price of Beyond Meat was up 41 percent last week, its biggest jump since going public last year, Bloomberg reports.

Beyond Meat has taken a revenue hit with the coronavirus outbreak as orders from foodservice and restaurants have declined. Its recent stock price gains are attributed to a deal for the brand to supply Starbucks in China and concerns about meat supplies in the U.S.

DISCUSSION QUESTIONS: Are you concerned about the nation’s food supply chain — and fresh meat, in particular? How should food retailers deal with any shortages they may encounter?

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23 Comments on "Tyson Foods chair says ‘the food supply chain is breaking’"


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David Naumann
BrainTrust
David Naumann
CEO and President, Cogent Creative Consulting
6 months 29 days ago

Meat may be the new toilet paper. If the meat processing plant closures impact the supply in grocery stores, or even create a whiff of news of a shortage, we will likely see consumers stocking up and hoarding meat. Grocers may start limiting the quantity of meat purchases just like they did for toilet paper and other paper products and cleaning supplies.

Bob Phibbs
BrainTrust

Seems more like a PR CYA. “Nearly half of the confirmed cases of COVID-19 in Black Hawk County were tied to the facility.” I don’t find “The food chain is breaking” quote helpful for anyone. He then says there is plenty of frozen meat to go around – geez. It already feels like I’m shopping in Russia when I go out to get a whole chicken and settle for a wing, a piece of breast, and some unrecognizable part. I think the consumer is aware of shortages and is making it work.

Evan Snively
BrainTrust
Evan Snively
Loyalty Strategist, Chapman & Co. Leadership Institute
6 months 29 days ago

Agreed – definitely sounds like someone in marketing recommended a classic distraction play to get as ahead of the “confirmed cases” lead as possible.

Scott Norris
Guest

Given Tyson’s connections to the Administration, there’s probably a political angle and hand outstretched for money. Another Big Ag power play and again the small farmers get left behind….

Scott Norris
Guest

And there is is – Trump orders the meatpacking plants open and gives them immunity from lawsuits, and the Governor of Iowa says workers who won’t go back to the plant because they’re frightened won’t get unemployment. Gun to the head of the rural worker. Just what Tyson wanted.

Mohamed Amer
BrainTrust

The future supply chain and organizing principle for companies, especially high process industries with significant labor content, will shift from maximizing efficiencies to maximizing resiliency and product integrity. This requires identifying and investing in new design and flow constructs. The results will manifest in two main areas, first expect a reduction in labor content and increased automation, and second, a rise in cost structure leading to a reduction in margins and/or a rise in consumer prices.

Gene Detroyer
BrainTrust

Mo, I only partially agree with you here. I believe there will be a reduction in labor content and increased automation. But I think it will lead to increased margins and no change in consumer prices. Most of all it will lead to permanent elimination of jobs in this industry.

Mohamed Amer
BrainTrust

Hey Gene, I foresee a segment of companies that will do a short to medium term fix by keeping the same process and reducing the headcount on the lines. For that cohort of companies, productivity will go down (less throughput) as will their output (their contribution to overall supply), this is likely to drive prices higher. Others will invest based on strength of their balance sheet and access to capital markets. Over time this latter group will reduce their cost structure but will take every opportunity to increase prices under any existing cover of supply shortages. The net of all these misalignments is that over next two years the imbalance between demand and supply signals will be exaggerated by exogenous virus related shocks, willingness to commit and invest, uneven access to liquidity, and consumer demand and sentiment.

Ron Margulis
BrainTrust

I talked with two retailers and a wholesaler about this last night and they all said the same thing – there are temporary shortages in a few fresh meat and seafood subcategories, but that’s all they are – temporary. There are systems in place that help re-align and coordinate the fresh supply chain. The mechanisms take a little time – weeks, not months – but ultimately result in getting the right products to the consumer.

Ralph Jacobson
BrainTrust

Honestly, my wife brought up a great point the other day. How are we not experiencing mass contagion of COVID-19 across the grocery industry? Staffers are still not consistently wearing masks in stores. Hmmm. One could therefore think that meat packing plants could strictly enforce effective PPE usage (masks, gloves, etc.) as well as sanitation practices in order to stay in operation. Potential shortages? Hmmm…

Brian Cluster
BrainTrust

At the NRF session in January of 2020, the leader of Beyond Meat said that 52 percent of Americans are trying to include more plant-based meat foods in their diets. The reasons that were cited then were: health, environmental concerns, and animal welfare. Now add to the list worker safety and virus anxiety and there will be more consumers looking at alternative meat-like options.

These plant closings are unfortunate but may not mean that the food supply is broken. It may indicate a more rapid shift toward more plant-based meats. I think that what we have all seen during this crisis is that consumers are flexible and will shift and adapt to meet their households needs. The question is what will this mean for the long-term demand for pork and other products.

Richard J. George, Ph.D.
BrainTrust
Unfortunately the Tyson CEO’s comment “The food supply chain is breaking” is helping no one, nor is it significantly reversing Tyson’s stock value, which has dropped 34 percent since the start of the new year. The full page ad warning Americans “that the temporary closures of beef, chicken and pork processing plants around the country would mean lower supplies of meat in grocery stores,” makes sense. The sky is falling does not. There are a couple of facts that need to be highlighted: 1.) Total American meat supplies in cold-storage facilities are equal to roughly two weeks of production, 2.) Foodservice demand for meat supplies is severely limited due to restaurant closings. That being said, Americans will exhibit meat buying behaviors similar to that displayed for purchases of hand sanitizer, paper products, etc. when the first round of hoarding began. Unfortunately, most retailers did not limit the number of units available to each customer until it was too late. That run on supplies is fresh in their minds and I expect meat purchase limits will… Read more »
Brandon Rael
BrainTrust

It’s a broad exaggeration to say that the food supply chain is breaking. Shopping at the local grocery stores says otherwise, as they are well equipped to keep up with the surging consumer demands. Some grocery stores have enforced shopping limits on core items such as chicken and ground beef, which has helped.

If anything, there is a temporary shortage due to the need to enforce and ensure that the front line meat processing employees have enough PPE and measures in place to protect and prevent the spread of the COVID-19 virus. In the meantime, consumers are adaptable, and will find viable alternatives if the grass-fed skirt steak is out of stock for a week or so.

Peter Charness
BrainTrust

In a time of great uncertainty, prediction is a fools game as there are no norms or patterns for these times. All that can be said is “I hope not.” Supply chain interruptions are expected, particularly in the absence of any strong central leadership to prioritize the safety and ongoing support of these basic societal needs.

Ricardo Belmar
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader
6 months 29 days ago

If there is a supply chain disruption it should be temporary. I have noticed this week in my local grocery stores shortages of beef (other than groin beef) as well as pork, but chicken seems to be doing OK. I suspect part of the appearance of disruption is due to consumers buying more meat products than they may need right now out of fear that there will be a shortage in the near future. Talking with store associates I’ve run into stocking shelves, they confirm that if they stock the shelf in the morning, by the end of the day it starts to look pretty bare as customers buy up as much as possible. Some stores are starting to impose quantity limits as a result. With these measures in place, I believe the food supply chain is capable of adjusting quickly enough to make any true shortages temporary.

Gene Detroyer
BrainTrust

I am in a cynical mood today. This is only critical if the consumer makes it critical. Can we get along for a while without fresh meat? I hope so. Our grandmothers could tell you about meatless Tuesdays during WWII.

Most of all, we are experiencing a mismatch in the supply chain. Farmers have dumped milk at the same time we could not get milk in the supermarket. We wrote how restaurants who could get supplies converted their operations to be able to sell to consumers.

Ultimately the supply chain is resilient, though it will take some time. They will automate more and become more flexible. In the meantime, the cows and pigs will not stop growing for the sole purpose to feed our bellies. Gee, maybe they will eventually pay us to take the excess like the current situation with oil?

Evan Snively
BrainTrust
Evan Snively
Loyalty Strategist, Chapman & Co. Leadership Institute
6 months 29 days ago

Not trying distract from the immediate COVID-19 concerns, but wouldn’t it be awesome for the environment if the U.S. realized that it could shift its habits and survive while meat production — and therefore consumption — was down 25 percent?

But if that change is ever going to be sustainable it will need to be driven by demand, not supply, so this supply chain interruption won’t have any meaningful impact there.

Cathy Hotka
BrainTrust

A strong federal government plan to mitigate this could help the situation — but that isn’t in the cards for us. Expect shortages in many categories (including meat) and potentially dangerous reactions by consumers.

Joe Skorupa
BrainTrust

Tyson’s business model may be breaking, but the retail supply chain has bounced back pretty well, with some well publicized glitches. Tyson’s colossal processing plant concept has been proven vulnerable in a crisis to both its workers and the parent company. As retailers shift toward more local suppliers and non-meat alternatives Tyson will have to shift its business model, too.

Mohamed Amer
BrainTrust

Hey Joe, you bring up a good point on the tradeoffs between highly centralized and distributed networks. The concentration of the former is all about efficiencies and scale, which happen to become an Achilles heel in the current (or similar) situation. Supply chains will shift from a bias for efficiencies of scale and concentration to ones made for resiliency and are, to borrow professor Taleb’s term, antifragile.

Andrew Blatherwick
BrainTrust

The best way to increase sales and panic buying is to tell the public that there are going to be shortages! So if meat is going to be in short supply, why say so as this will only make it a self-fulfilling prophesy. However, if you want to increase your sales, it is a very good strategy. In the UK, food sales went up over 7% this year on last in the period to April — people are not eating more so they are just stockpiling and panic buying.

Most food production companies are having to take extra care and measures to ensure safety at this time. It does not mean that there will be shortages. I am not sure that shouting about it is the right approach unless, as I say, they are worried about their sales and want to get them up.

Craig Sundstrom
Guest

My impression was that the Tyson letter was somewhat self-serving: why the Washington Post, as opposed to say, USA Today? A little in the way of scare tactics never hurts when you’re trying to get legislative relief or deflect blame, right? (I’m not saying that’s true, only that it’s my impression).

There have been a number of outbreaks in meat-packing plants; whether that’s because of the conditions inherent in such facilities or due to sloppiness in the operations I don’t know, so I’ll avoid offering advice. Retailers will deal with shortages in the usual way: raised prices, empty cases and signs asking for patience.

T GILL FUQUA
Guest

Last decade, farmers were forced to “cull” the pork and beef heard when banks cancelled farm loans due to recession and high input costs (weather). Retailers maintained chicken pricing and changed other protein pack sizes so consumers saw price per serving, not 20% price increases per pound. A wall of poultry is coming every 45 days to retail!

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