Why 1 million pigs could be euthanized due to COVID-19-related supply chain issues

• Beginning in April 2020, the US has been experiencing a meat shortage and unprecedented meat prices.
• That's because COVID-19 outbreaks in at least 167 meat-processing plants forced almost 40 plants to close.
• In an already compact industry, any one plant closure strands millions of pigs at farms.
• Business Insider visited a Minnesota hog farmer faced with euthanizing his herds.
• Could this break in the supply chain been avoided? Agricultural economist Jayson Lusk says automation in meat-processing plants could be one solution. Another? Smaller, vertically integrated farms, like Belcampo Meat Co. in Northern California.

Following is a full transcript of this video.

Narrator: When coronavirus outbreaks shut down meat-processing plants across the US, animals headed here were suddenly stranded here.

Mike Patterson: As time has gone on and plants haven't been able to operate, that's created a big backlog of pigs.

Narrator: With nowhere to send their pigs, some farmers were forced to euthanize their herds.

Jayson Lusk: You're literally talking about millions and millions of pigs that were intended to go to market but are still remaining on the farm.

Narrator: The backup at farms led to record-breaking meat prices and cleared-out shelves. The US was in the midst of a meat shortage.

Anya Fernald: You start with the ethics of it, like, animals live and die to make your product, and then you get to the concentration of it. It's a pretty hairy beast.

Narrator: But why did this all happen? And how can we avoid it from happening in the future? America is the world's leading producer of beef and poultry. It's also one of the top producers of pork in the world. In the US alone, an estimated 9 billion animals are slaughtered a year.

In order to process all that meat, the industry is efficient and concentrated. Simply put, as many animals as possible move from the farm to the slaughterhouse as quickly as possible. When the system works, US meat prices are among the most affordable on the planet. But that efficiency becomes a problem in the face of COVID-19. For one, workers operate in tight quarters.

Lusk: They're in refrigerated environments with recirculating air. This was an environment in which COVID could apparently be spread easily from worker to worker.

Narrator: An estimated 25,000 meatpacking workers have contracted COVID-19. And outbreaks in 167 plants forced 38 in South Dakota, Minnesota, and Iowa to close. Since only a small number of plants handle most of the industry's meat...

Lusk: When any one of them closes, it has an impact on the entire industry.

Fernald: It's like the only store shut down in town and you can't get milk [laughs] if you're a farmer.

Lusk: By early May, beef and pork plants were running at about 40% below the processing volumes we saw just a year ago. So that's an enormous reduction in processing volumes and caused all kinds of disruptions.

Narrator: This has hit farmers like Mike hard.

Patterson: When COVID started really impacting the plants, our percentage of utilization of the plants just kind of kept going down and down and down. That's created a real backlog of pigs.

Narrator: Every year, Mike and his co-op send about 150,000 hogs to the Smithfield plant in Sioux Falls, South Dakota. But when COVID-19 closed that plant, they had nowhere to send their animals.

Patterson: We got our letter April 11 that the Smithfield plant was gonna be closed. Turned out to be four weeks that they didn't receive any hogs in Sioux Falls.

Narrator: Remember, the meat industry is streamlined to be exact.

Patterson: We're looking for a uniform end product. Last ones were 284. These might be... I think they're gonna be pretty close to that. It's real similar.

Narrator: All the pigs Mike, or any farmer, sends to a plant have to weigh about 280 pounds.

Lusk: If it gets above 300, 330 pounds, the plants are just not configured to take animals of that size.

Narrator: Mike tried to put them on a diet.

Patterson: Right now, it's just basically ground corn. There's some vitamins and minerals and salt in there. Now, usually we would have soybean meal, dried distillers grains from the ethanol process in there as well. But those feeds are more expensive, and we were trying to slow their growth. This diet should slow them down to about one pound a day, and usually they're gaining two, two and a half pounds a day at this stage.

Narrator: But even on a diet, they were growing beyond the 280-pound mark by the day. It was a no-win scenario. They had shipments of baby pigs still coming in from nursing farms. They were running out of space and feed. The current pigs were getting too fat, and factories were still closed.

Lusk: Last-case situation is unfortunately where farmers have to consider euthanizing some animals. Narrator: Combined, Mike's cooperative has had to euthanize over 3,400 pigs.

Patterson: About a half million dollars' worth.

Narrator: But Mike estimates if you add in the feed costs, the loss for his co-op is upwards of $1.5 million.

Lusk: I don't know that it's even possible to compare the economic losses to sort of the psychological impact that this has on producers. Neither one are positive. It's really kind of a double whammy, I think.

Narrator: The situation Mike's co-op faced was happening all over the country.

Lusk: So, one way to think about it is like this: In this country, we have a processing capacity of about 500,000 pigs per day.

Narrator: Remember, the industry was running at about 40% below capacity.

Lusk: If you do the math every day, that's an extra 200,000 pigs that were meant to go to market but instead stayed on the farm. So you do that for five days, which happened, that's a million extra pigs that were gonna go to market.

Narrator: After a couple of weeks, that's millions of pigs at risk of being euthanized. All of this is why consumers have seen higher meat prices and those empty shelves, which Jason estimates may stretch out for at least another six months.

Since mid-May, things have started getting better. Factories like Smithfield Sioux Falls have reopened with limited production and social-distancing measures. Euthanization of animals has slowed, and as a result, production and meat prices have started to stabilize.

But what can we do so this doesn't happen again? One option is to rely more on smaller, vertically integrated farms.

Fernald: When you see a piece of meat in the grocery store, it's typically been touched by 15 or 20 different types of companies, and all of those companies are hyper-specialized and they operate at a really efficient scale.

Narrator: That's Anya. She owns Belcampo Farms, a vertically integrated meat company out in Northern California.

Fernald: Our supply chain relies entirely on our own infrastructure. We own our own farms, our own slaughterhouse, and several direct-to-consumer businesses.

Narrator: Belcampo's home to 3,000 grass-fed organic cattle. They have 30,000 acres to roam and live seven to 10 times longer than conventional cattle. The slaughtering process is also slowed down, with only 50 to 60 animals processed a day in a slaughterhouse that Belcampo owns, just 20 minutes from the farm.

Fernald: I think of it as, like, intentional inefficiency.

Narrator: And because Belcampo exists outside of the normal meat industry...

Fernald: We're not reliant on the broader meat infrastructure. Since we have our own slaughterhouse that we've had extremely aggressive and proactive safety measures in, we have not had any issues.

Narrator: This also made it easier for Anya to start social-distancing measures in the plant before the CDC required it.

Fernald: We implemented mandatory temp checking and a questionnaire every day as of, like, March 18.

Narrator: Direct-to-consumer models could be another shake-up in the industry, cutting out distribution centers. Anya's e-commerce site saw unprecedented traffic, and her app delivering meat to homes in San Francisco and LA...

Fernald: Went from, like, 3,000 to 20,000 users in the past month.

Narrator: As for the bigger meat companies at the heart of this issue, Jayson has a few ideas. More medium-sized plants, for starters, so if one goes down, it doesn't take the whole supply chain with it.

Lusk: Even if you're one of the large processors, you may think about giving up some of that economies of scale to maybe reduce some risks.

Narrator: But Jayson says the most effective change would be:

Lusk: Automation.

Narrator: Robots don't get sick.

Lusk: It's just hard. We're not putting together car parts that are uniform in shape and size. Animals are different sizes, shapes, weights.

Narrator: But whether or not the meat industry will make any of these changes comes down to what the consumers demand and how much they're willing to pay for any real changes.

Fernald: That's been a choice we've been making with our wallets for years, where we love cheap protein. Are customers gonna pay up for a secure supply chain? And I think that the more we talk about it, the more people are gonna raise their hands and say, "I'm opting out."

Abby Narishkin: Hey, guys. My name's Abby, and I'm the producer on this video. One thing that came up in our reporting was whether or not this meat shortage would lead to more nonmeat purchases, like if you're at the grocery store and you go and get chicken but there isn't any, do you then turn to pick up soy nuggets? Let me know what you think in the comments below, and make sure to hit the subscribe button so you don't miss the next episode of "Big Business."