Sort & Cull

The food service industry landscape continues to be rocked by the COVID-19 pandemic, and the outlook over the near future seems to be even more bleak. According to a recent study and report by the National Restaurant Association, as of Dec. 1 2020, 17% of restaurants have closed, either permanently or "long term." This amounts to more than 110,000 establishments throughout the country, many of which will never open their doors again when things eventually "get back to normal."

Although this has had a significant impact on demand for all food, it has been particularly devastating to the meat industry. During the past few months, retail buying by consumers has jumped significantly as people adjust to the restrictions on food service providers and cook more meals at home. But the fact is, changes in the industry will be felt for months and even years down the road.

Along with the sheer number of restaurants that were affected, the study indicated that most of these businesses were "well-established," with an average age of 16 years in operation. The fact is that this is not likely the worst news, as 58% of operators expect continued furloughs and layoffs for at least the next three months. With records being set for new COVID-19 cases and deaths just in the last week, the food service industry continues to be under pressure, which continues to have a direct impact on meat demand, which is the staple of nearly all meals served in the restaurant industry.

In another National Restaurant Association study posted in early December, total "eating and drinking" sales fell $2 billion in November 2020 from October highs. This is down nearly $12 billion from pre-pandemic levels. In a survey in the same report, 83% of restaurant operators expect sales to decrease in the next months, with only 3% expecting an increase in sales volume.

Traditionally, food service demand has accounted for 55% to 60% of all meat demand, with continued pressure in the industry expected to have a direct impact on domestic meat demand. Not only will there be fewer businesses open in the coming months and years, but the expectation is that streamlined and reduced menu selections seen over the past year will continue, leaving fewer meat options for consumers who do venture out, either through takeout or dine-in opportunities.

But despite the dramatic changes in business landscapes, meat demand continues to remain strong. According to the latest World Agricultural Supply and Demand Estimates (WASDE) U.S. Meat Supply Report released Tuesday, domestic beef use in 2020 is estimated to increase 1.2% from 2019 levels, while pork demand fell 1.1% in 2020. Poultry domestic demand increased between 2019 and 2020. Expectations for total domestic use in 2021 are mixed, with beef demand projected to fall 1.1%, while pork and poultry domestic use is expected to increase fractionally. However, long-term concerns of how consumers will react to limited options will continue to add uncertainty to beef, pork and poultry prices and have a significant impact on livestock markets and producers during the upcoming year. Even though strong retail demand is expected to continue over the coming months, the transition back to "normal" lives is expected to add even more uncertainty to the meat complex, but also could cause long-term market disruptions for years to come.

Although the meat industry has been able to bounce back from early pandemic levels nicely over the past few months, concerns about the strength of demand through 2021 continue to grow. The health and stability of the food service industry is expected to have an even bigger impact on overall meat demand during 2021. Hopefully, continued strong retail and at-home dining demand will help to carry the industry through the winter and spring months, and at that time, "dining out" activity will quickly resume, helping to spark long-term growth through the meat industry.

Rick Kment can be reached at rick.kment@dtn.com

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