U.S. meat plants are exporting more to China: Report

Yahoo Finance’s Heidi Chung joins Zack Guzman to break down how the U.S. meat industry is facing new pressures amid the coronavirus, as Reuters reports domestic meat processing plants are exporting more to China.

Video Transcript

ZACK GUZMAN: It might be hard to find meat in your supermarket, folks. We've been talking about the shortage on that front, as meat production facilities across the country grapple with reopening here as more coronavirus cases continue to spread in those facilities.

Of course, Tyson falling victim to that, as we've covered on the show. And the disruptions could potentially mean a 30% cut to supply of the meat around this country. For more on that, I want to get to Yahoo Finance's Heidi Chung, who's been tracking that for us. Heidi?

HEIDI CHUNG: Hey, Zack. So the latest in the US meat industry saga is getting very complicated. We have a situation right now where, on one hand, the US meat industry is potentially facing shortages widespread across the country due to COVID-19. And on the other hand, we're seeing exports of pork ramp up to countries like China at the same time.

So in order to sort of understand the scenario, we have to look back to the summer of 2018, when the African swine fever really wreaked havoc across Asia, and specifically China. At the time, a huge bulk of China's hog population had to be wiped out. And it's very important to note that China is the largest pork producer-- or was, I should say-- and also the world's largest consumer of pork.

So as the country was grappling with the sort of pork shortage that they were seeing, in January, the US and China inked that phase one trade deal in which China promised to purchase more pork from the US. So at the time, headed into 2020, everyone was extremely happy about that. Specifically, meat processors like Tyson were saying that it was going to be a tailwind for their company this year, but, of course, as we know, COVID-19 hit, and the situation became very, very different.

So right now, here in the US, the meat industry is facing some extreme challenges to keep meat supply abundant in the States as companies like Smithfield, Tyson, and JBS closed about 20 production facilities over recent weeks due to COVID-19. And a lot of their other facilities are currently running on limited operations.

According to Nielsen, fresh meat sales soared 54% in the week ending May 2, and also, average unit prices rose nearly 12% during the same time period. So prices are rising as we're seeing supply get constricted here in the US. On the other hand, according to a report released by the US Census Bureau, the US exported more than 95,000 tons of pork to China in March, and that was the second-highest volume on record behind December 2019.

So the main issue here is, OK, is this situation that we're facing going to potentially spark additional tensions between the US and China? Because optically, it doesn't look so good if you're having a meat shortage here in the US but also boosting product-- or, excuse me, exports to countries like China at the same time.

So the question going forward here is, what is the US going to do about this? Is it going to limit exports to countries like China to alleviate some pressure here in the US? That is the question going forward, Zack, and that remains to be seen here.

ZACK GUZMAN: Yeah, especially if you're talking about President Trump invoking the Defense Production Act there, putting Americans into, you know, risky situations here where they could contract COVID-19. You know, when you look at it optically, doesn't look good if you got people in danger just to be shipping products across the sea there to China, but also interesting just considering the fact that we've highlighted the flip side there, where obviously you don't want farmers just killing off their herd either-- a very tricky situation. But Heidi Chung always tracking it for us. Appreciate that.