Two of the largest slaughterhouses in America just shut down, opening the possibility of eventual shortages in fresh meat and gluts in livestock.

On Sunday, Smithfield Foods Inc. said it was closing a plant that accounts for four per cent to five per cent of U.S. pork output. A day later, JBS SA shut a giant beef facility in Colorado as a spike in coronavirus infections forces the industry to slow. Last week, U.S. pork output fell six per cent and beef slumped 15 per cent. In the case of pork, eight per cent of capacity may now be down because of the pandemic, according to Kerns and Associates.

While frozen stockpiles are high, the slaughterhouse interruptions come at a time of unprecedented disruptions along the supply chain as producers shift from restaurants to supermarkets. If more plants shut, fresh-meat shortages may start to appear as stocks run down.

“A shortage is certainly possible, but I don’t think it’s likely currently,” said Joshua Specht, a visiting assistant professor at the University of Notre Dame. “As far as an absolute shortage, the pandemic would have to shift into some of the more grim forecasts, which is certainly possible, but at this point, it’s hard to say.”

If the trend of extended shutdowns continues, retailers domestically and abroad may be forced to buy from somewhere else. The U.S. typically exports about a quarter of its pork and about 14 per cent of its beef, according to the U.S. Meat Export Federation.

China, the top global pork consumer, has been slowly emerging from coronavirus. Shipments of U.S. pork to China have picked up, and the slaughter halts could disrupt that even as importers in Asia could be taking advantage of low pork prices now. While operations in another meat-exporting heavyweight, Brazil, have been largely unaffected by the virus, it’s spread is some weeks behind the U.S. curve.

Abundant supplies of both hogs and pork should help buffer some of the disruptions. The U.S. hog herd is the largest ever for March, at 77 million, U.S. Department of Agriculture data shows. Pork supplies in U.S. cold storage in February of 662 million pounds were up 7.5 per cent from the same month a year ago.

Animal backlog

Still, Smithfield, which is closing the Sioux Falls facility until authorities clear it to reopen, said it would be impossible to keep stores stocked if plants aren’t running. Hog futures fell by their daily limit on the news to the lowest since October 2016. U.S. cattle futures also slumped Monday.

“This is going to cause a serious backlog in animals,” said Dennis Smith, senior account executive at Archer Financial Services Inc. “The worst fears in the industry are now becoming reality.”

Farmers who have fed their animals to the desired market weight could have no alternative outlet if a slaughter facility shuts down. They could be forced to haul animals further away, keep feeding them or even consider euthanizing.

“The problem lies at the farms because they have nowhere to keep the surplus hogs,” Dermot Hayes, an Iowa State University economics professor, said in an email. “It is like putting a barrier on the exit of an elevator that is full of people.”

The risk of further interruptions is particularly high for the U.S. pork industry, with farmers raising pigs in a relatively concentrated area in the western half of the Midwest.

“You have 20 plants that account for 70 per cent of capacity,” Altin Kalo, analyst at Steiner Consulting Group, said by telephone.

Some plants relying on fresh pork that’s not frozen might have some shortages, he said. Closures would also force farmers, many of whom supply hogs on a contract basis, to scramble for another market.

“The ones you really feel sorry for are the producers,” Kalo said.