As Tyson Foods Inc. continues to work through a slowdown in its meat processing plants due to worker illness and social distancing requirements brought about by the coronavirus pandemic, the company said it was cutting prices by 20% to 30% for retailers and foodservice customers for certain products such as chuck, round roasts and various ground beef products, such as chubs, patties and trays, that are commonly used to feed families or larger groups of people.
Tyson, which processes one-fifth of the country’s beef and is the largest U.S. meat company by sales, sells nearly half of its beef to grocery stores and other food retailers. One-third of its $42.4 billion in sales comes from beef.
“As we work to continue to replenish beef supplies and in appreciation of the support of our customers, for the remainder of this week, we are discounting prices on certain beef products. We’re doing this because we want to help keep beef on family tables across our nation, especially as our beef plants return from reduced levels of production,” said Gary Mickelson, senior director of public relations for Tyson.
Speaking in a conference with BMO Capital this week, Tyson Foods CEO Noel White explained the current pricing situation in proteins has been driven by reduced supply of pork and beef that have come with plant shutdowns. That has encouraged consumers to buy more chicken, which has also seen price increases with increased demand.
“The number of hogs and cattle that were available are still available. So if the plants resume to normal operating speeds fairly soon, then that’s going to fill the void that has developed over the course of the last several weeks,” White said, according to a Sentieo transcript. “And that could quickly change with increased supplies of both beef and pork. Typically, when that would happen, the prices would move lower from historical levels that they're at today. And at that point in time, then poultry wouldn't be quite as attractive as what it is today. So I think that what we see over the course of the next 60 to 90 days, plant operations are really going to dictate what happens to the availability, and in turn, the pricing of poultry.”
The price drop comes as retailers and, in turn, consumers are facing higher food prices. This week, the U.S. Department of Agriculture reported that wholesale ground beef prices had tripled since March, hitting $6.21 a pound. Prices for some cuts of steak have doubled in the same time period.
Consumers are feeling the pinch as retailers are forced to raise prices on grocery products across the board. According to the Bureau of Labor Statistics, the price of groceries increased 2.6% in April, including seasonal adjustments—the largest one-month increase since February 1974.
Some of largest price increases have been in eggs (16.1%) and meat (3.3%). In the meat category, chicken increased the most at 5.8%, while fresh fish saw a 4.2% rise and pork went up 3%. Not even the typically inexpensive meat products, such as hot dogs, were exempt, as they saw a 5.7% price bump.
The index for cereals and bakery products rose 2.9% in April, its largest monthly increase ever. Nonalcohol beverages also rose 2.9% in April, its fourth consecutive increase.
This rise in grocery prices was caused by a perfect storm of stay-at-home orders and restaurant closures that precipitated nearly all meals being prepared at home, which caused the average grocery basket size to increase dramatically, coupled with supply chain disruption due to plant closures caused by ill employees. While the foodservice channel was essentially left with nowhere for its food to go, that production isn't able to seamlessly shift into the retail channel, leading to dairy farmers dumping milk and ready-to-harvest crops being plowed under.