In Rethinking Food & Agriculture, published in 2019, we predicted that there will be 50% fewer cows in the U.S. by 2030 and that by 2035 the livestock industry will be all but bankrupt. This was considered fast by many observers, but Covid-19 has since revealed the fragility of the global food supply chain, pulling back the curtain in dramatic fashion on its economic vulnerabilities and inefficiencies.
This particular disruption of livestock happened because of an acute event, the pandemic, rather than the convergence of new technologies as we predicted in our report. But our analysis that the livestock industry is on the verge of economic collapse is still valid. And we know from our in-depth studies of other disruptions that the collapse of the old system often happens sooner and more quickly than the breakthrough of the new. We at RethinkX call this market trauma[1]. It is like a forest fire–a quick and brutal destruction of the old system, while the new one may take years to emerge and reach maturity. Leverage (both financial and operating) means that a small downturn in demand can bankrupt an industry. We believe we are now on the cusp of a step change like this to our whole food system, and as a result, the way that we design, develop, produce and distribute food will change.
SARS-Cov2 is the virus that causes Covid-19 and it originated in animalsas have three-quarters of all infectious diseases that have affected humans in the last decade.[2] The proximity of animals to one another and to humans in intensive factory farming operations provides optimized conditions for the spread of diseases.
In fact, slaughterhouse workers and bushmeat hunters are two populations already monitored for new zoonotic diseases, because of how closely they interact with a large number of animals.[3],[4],[5] To help curb the spread of disease, 80% of the world’s antibiotics are given to animals, mostly as a preventative measure. This results in another risk to humans–antimicrobial resistance, which could lead to the loss of 10 million human lives every year by 2050, along with a total of $100 trillion of economic output, if no action is taken.[6]
The economic vulnerabilities of the current livestock industry come from its centralization, with some key bottlenecks like meat processing facilities providing points of weakness. Working conditions in these types of facilities are notoriously unsafe, not only risking disease transmission but also serious injury to workers – many of whom are immigrants or from disadvantaged communities. Growing public awareness of these conditions–on top of all the other environmental and social impacts of meat production and consumption–is leading to a loss of social license for the meat industry. A recent survey indicated that half of respondents don’t think the meat industry cares about the health of its workers and 65% don’t think it cares about the treatment of animals.[7]
The current food supply system was built to minimize costs, at the expense of everything else. Features that were believed to be strengths, including large-scale centralized production, just-in-time inventories and a highly specialized value chain, have actually turned out to be weaknesses, revealing inflexibility and fragility when the system was put under stress.
In the U.S., at least 20,000 workers in the livestock industry have been infected with Covid-19, most of whom were working in slaughterhouses or processing facilities.[8] In fact, almost half of the U.S. Covid-19 hotspots are linked to meat processing plants, shining a light on the serious safety and health hazards that workers have suffered, long before the pandemic broke.[9] Working conditions within the facilities means that social distancing is almost impossible, and plant closures are the only way to prevent the virus from spreading through the workforce. Because the system consists of few very large plants, when a plant is forced to close (for one reason or another), the capacity to process animals decreases significantly, creating a backlog of animals that are ready to be processed but can’t be. The U.S. has strict anti-whistleblower laws in the agriculture industry (“ag-gag” laws), which prevent undercover filming or photography on farms without the consent of their owner.[10] These laws are not protecting the workers but the companies, and the pandemic is revealing this. Workers were only provided with protective gear once the plants had been shut down.[11] As these are coming to light, the industry is losing its social license.
Processing facility closures have led to the culling of 2 million pigs in the US so far, with this number likely to increase to an estimated 10 million by September 2020.[12] About 10 million chickens have also been culled.[13] When you consider that African swine fever has been responsible for the loss of 150-200 million pigs over eight months in China[14] our forecast of 50% fewer cows by 2030, which sounded impossible to mainstream analysts, suddenly looks a bit conservative![15],[16],[17]
These single points of failure in the centralized supply chain have led to the seemingly contradictory fact that animals are selling for zero or even negative prices at the wholesale level and higher prices at the retail level.[18] These rapidly decreasing livestock populations are leading to more expensive meat (according to the IRI inflation tracker, the price of meat went up 14% the week of June 14 2020),[19],[20] while the demand for plant-based foods, including plant-based meats and milks are skyrocketing (though demand for retail meat is up as well). Meanwhile, investors are being told that livestock is “looking as precarious as oil” for the year,[21] as losses for the cattle industry is being estimated at nearly $14 billion.[22]
Food production, as it currently exists in the U.S., is based entirely on the growth cycles of plants and animals, meaning that supply is dictated by what was planted or raised in the previous season, or even years in advance.
But food consumption has changed profoundly and suddenly in recent months, and the return to previous consumption patterns might not happen at all. Producers have been required to flex between different markets, but have had difficulty due to packaging requirements, the inability to scale down production in response to decreased demand, reliance on brick and mortar stores or other businesses to distribute products and a reliance on human workers instead of automation.
For example, dairy products consumed in restaurants and schools come in completely different packaging than they would if they are sold in retail stores. So in the short term, supplier contracts have been terminated, products dumped and profits lost.[23] Producers going forward will divert the supply of milk to where there is the most demand, undoubtedly, but this takes both time and investment.
The foundations of the meat production industry are cracking as well. Like with milk, consumers consume meat differently inside the home versus outside of it. There has been increased demand for ground meat while expensive cuts have seen a decline.[24]
As with milk production, there is limited flexibility in meat production. A decline in the selling of expensive cuts has led to a decline in profits for meat processors. The decline in the market has led to decreased profitability–devastating for an industry that already operates on razor-thin margins.
The collapse of the industrial livestock industry is there for all to see. This market trauma is happening quickly and brutally. But isn’t everyone negatively affected by Covid-19? In our next blog post, we’ll explore how the Covid-19 disruption is affecting the emerging modern food industry.
[1] See Tony’s presentations (see here)
[2] Zoonotic diseases originating in livestock as opposed to wild animals include strains of Avian flu, Swine flu, and Nipah virus. https://www.independent.co.uk/environment/coronavirus-meat-animal-farming-pandemic-disease-wet-markets-a9505626.html
[3] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3367616/
[4] https://www.sciencedirect.com/science/article/pii/S0140673699043792
[5] https://www.wired.com/story/opinion-modernizing-meat-production-will-help-us-avoid-pandemics/
[7] https://www.bloomberg.com/amp/news/articles/2020-06-05/half-of-americans-want-meat-free-options-after-industry-s-crisis
[8] https://www.cdc.gov/mmwr/volumes/69/wr/mm6918e3.htm; https://www.fairr.org/article/industry-infected/; https://www.washingtonpost.com/business/2020/05/25/meat-industry-is-trying-get-back-normal-workers-are-still-getting-sick-shortages-may-get-worse/
[9] https://www.theguardian.com/world/2020/may/15/us-coronavirus-meat-packing-plants-food
[10] Ceryes, Caitlin A.; Heaney, Christopher D. (2019). “”Ag-Gag” Laws: Evolution, Resurgence, and Public Health Implications”. New Solutions: A Journal of Environmental and Occupational Health Policy. 28 (4): 664–682. Please find here.
[11] https://www.washingtonpost.com/business/2020/04/25/meat-workers-safety-jbs-smithfield-tyson/
[12] https://www.fairplanet.org/editors-pick/millions-of-farm-animals-slaughtered-in-u-s-during-coronavirus/
[13] https://www.theguardian.com/environment/2020/may/19/millions-of-us-farm-animals-to-be-culled-by-suffocation-drowning-and-shooting-coronavirus
[14] https://www.nature.com/articles/s43016-020-0057-2#ref-CR3
[15] https://www.grassley.senate.gov/sites/default/files/Iowa%20group-2020-covid-pork-letter-1.pdf
[16] https://www.nytimes.com/2020/05/21/opinion/coronavirus-meat-vegetarianism.html
[17] https://www.nytimes.com/2020/05/14/business/coronavirus-farmers-killing-pigs.html
[18] https://www.reuters.com/article/us-health-coronavirus-livestock-insight/piglets-aborted-chickens-gassed-as-pandemic-slams-meat-sector-idUSKCN2292YS
[19] https://advantage.iriworldwide.com/Engineering/covid19/
[20] https://www.fooddive.com/news/impossible-foods-and-beyond-meat-highlight-cost-and-safety-as-they-race-to/577614/
[21] https://www.cnbc.com/2020/05/13/coronavirus-goldman-sachs-says-livestock-looking-as-precarious-as-oil.html
[22] https://www.ncba.org/newsreleases.aspx?newsid=7225
[23] https://uk.reuters.com/article/uk-health-coronavirus-dairy-insight/u-s-dairy-farmers-dump-milk-as-pandemic-upends-food-markets-idUKKBN21L1E2
[24] https://www.nationalgeographic.com/science/2020/05/covid-19-disrupts-complex-food-chains-beef-milk-eggs-produce/