Meat Output Curbs in Australia Could Spur Near-Term Shortages

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Photographer: Brendon Thorne/Bloomberg

Photographer: Brendon Thorne/Bloomberg

Fresh curbs on meat production in Australia‘s second-most populous state are unlikely to have a long-term impact on the country’s supply chains, though consumers will experience near-term shortages in grocery stores amid panic buying, according to analysts.

Most meatworks and processors in Victoria will from midnight Friday have to cut on-site worker numbers to two-thirds, as the government tries to stem coronavirus transmission amid stubbornly high cases.

Chicken processors will have to cut staffing levels to 80%, state Premier Daniel Andrews said Thursday, adding that these levels would provide the minimum staffing necessary to avoid meat shortages. The state of more than 5 million people is already several weeks into a widespread lockdown.

Australia exports more than 70% of its beef and lamb, meaning there is ample supply to redirect to domestic markets, said Matt Dalgleish, manager of commodity market insights at Thomas Elder Markets. “There may be some short-term localized supply issues but thats more a supply chain problem than a lack of supply,” he said by email. “Spikes in panic buying will cause a short-term shortage in some areas.”

Melbourne Retail, Manufacturing Shut to Contain Virus

The Victorian government urged consumers in the state not to panic-buy ahead of the restrictions, which will also involve shutdowns in retail and manufacturing, and grocery chain Woolworths reintroduced purchase limits on meat and some other staple items. Still, shoppers posted images of empty meat shelves to social media.

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Victorian meat plants are already operating below their peak capacity, so the mandated reduction in worker numbers will have less of an impact, said Mecardo analyst Angus Brown.

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Processing activity has been weaker in some parts of Australia in recent months as producers withhold their animals from slaughter to restock herds amid optimism over improved rainfall this year, following several years of drought. The reduced supplies of livestock have kept the countrys benchmark cattle price index near its March record for several months.

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Some of Australias biggest virus outbreaks have emerged from red meat and chicken slaughterhouses, as well as further processing facilities. Hundreds of current cases have been linked to at least half a dozen such facilities in Victoria, echoing similar clusters in the U.S., Brazil and Europe.

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The curbs on meat processing come at a fortunate time, as its a seasonal ebb for cattle and sheep slaughter, Dalgleish said. However, if a backlog emerges of pigs and chickens for processing, there may been a need to cull animals.

Meatworks in New South Wales and Queensland states will also be able to pick up some processing slack from Victoria, he said.

Spring lamb season will also be challenging if processing capacity is not restored, said Mecardos Brown, with supplies usually increasing markedly from the middle of this month until the end of the year. “Limited processing capacity will see lambs building up on farm and in feedlots, and they could become cheap,” he said.