The 'Meatless' Trend That Nobody Expected
The coronavirus in the heartland... The 'meatless' trend that nobody expected... Supply chains at risk... 'Not working at home'... Amazon can't keep up... 'Big Tech' can't save the economy... The oil world in crisis...
The coronavirus is hitting the heartland, like everywhere else...
We learned over the weekend that hundreds of employees of a Smithfield Foods pork processing plant in Sioux Falls, South Dakota, have tested positive for COVID-19.
And yesterday, Smithfield – which stocks grocery stores with items like cold cuts, bacon, and any number of meat products – said it will indefinitely close the South Dakota plant, one of the largest in the U.S.
As of this writing, the U.S. Department of Agriculture doesn't have any evidence that the coronavirus is being transmitted through food or its packaging. That's the good news...
The bad news? Smithfield said this facility usually accounts for 4% to 5% of U.S. pork production... or about 130 million servings per week.
This isn't the "meatless" trend that anyone had in mind this time last year, when plant-based-food maker Beyond Meat's (BYND) initial public offering was all the rage.
Ah, those were the days.
And Smithfield's huge food-processing plant isn't the only one to experience a virus outbreak recently...
Two workers at a JBS USA beef plant near Denver have died... Dozens more are sick... And about 800 to 1,000 workers have been staying home each day since the end of March, worried for their own safety.
Call it "not working at home." And these people aren't included in the 17 million who filed for unemployment nationwide over the past three weeks.
In Iowa, more than two dozen employees tested positive for COVID-19 at a Tyson Foods (TSN) facility. In Alabama, at a Wayne Farms chicken processing plant, employees reportedly had to pay the company 10 cents a day to buy masks.
Smithfield's president and CEO sounded the meat supply-chain alarm yesterday. When announcing the closure of the company's facility in South Dakota, Kenneth Sullivan said in a statement...
The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply.
Sullivan said if his plants aren't running, grocery stores won't be stocked... and there will be "severe, perhaps disastrous, repercussions for many in the supply chain, first and foremost our nation's livestock farmers."
This is an important development for a lot of reasons...
First, we all need to eat. Even the most polar opposite of folks can agree on that.
On the consumer end, when the pandemic panic initially broke out in mid-March, one of the first groups that President Donald Trump met with was grocery store executives. Trump asked that the country's stores remain stocked with all the essentials.
Back then – which seems like years ago, as we all remain holed up in our houses – people were already making giant runs to places like warehouse-club retailer Costco Wholesale (COST) and other stores to stock up on groceries, meat... and yeah, toilet paper.
Officials urged folks to stop the hoarding... And stores started instituting quantity limits. By doing that, they ensured that there would be enough for everybody... Transportation routes were still running... And the supply chains were still going strong.
But imagine the panic – and legitimate fear – we'd see if meat or other food-supply chains break down...
Because as far as we know, a lot of people are ordering groceries online... at rates we have never seen before. The concept was just starting to gain traction before all this happened.
We're all curious what the enduring marks of the COVID-19 crisis will be... And a surge in online-grocery ordering seems to be a sure bet.
Retail giant Amazon (AMZN) can't keep up with demand... The company's online grocery orders more than doubled in March.
And as Stansberry NewsWire analyst Nick Koziol reported today, the e-commerce giant said last night that it will start placing new grocery delivery sign-ups on a "wait list."
In other words, place your orders for next week now...
At the same time, Amazon said it plans to hire 75,000 more people for jobs ranging from warehouse staff to delivery drivers. That's in addition to the 100,000 people Amazon said it would hire last month.
As we wrote back in the February 27 Digest, "What Happens If Everyone 'Works From Home,'" we expected this would happen...
Think about it: Amazon (AMZN), as well as other online retailers and related web-based platforms, do an insane amount of business... in part because of the convenience they provide.
In a world where parts of the U.S. would be under quarantine with folks working from home for a long period of time, those businesses become a necessity.
'Big Tech' can only save the economy so much, though...
Airlines... travel... restaurants...
Technology can only help to a certain point. That's why 11% of the population filed for unemployment over the past few weeks. More from that February 27 Digest...
Of course, we hope this post-apocalyptic scene never happens...
We can't imagine quarantine orders going over very well should they happen in the U.S.
Plus, the virus has disrupted normal supply and demand across many industries already. And not all business can be done online...
For instance, people certainly can't drive online...
Unless we're talking about in video games (another industry that's busier these days).
The people delivering groceries might still be driving... and the same goes for truck drivers to stores. But the delivery folks have stopped by our house in the past few weeks almost as many times as we've driven our car altogether... which is to say, about three or four times.
We can't imagine many people have bought more than a gallon of gas during this whole episode. And the numbers say so... Gasoline consumption in the U.S. has dropped nearly in half since March 13 – from 9.6 million barrels per day (bpd) to 5 million bpd by April 3, according to U.S. Energy Information Administration data.
Global demand for oil has fallen by about 35 million bpd. And the U.S. has accounted for a drop of about 8 million bpd, when you add jet fuel and diesel fuel into the numbers.
That means almost 25% of the decline in global oil demand occurred because of what's going on in the U.S. alone...
Meanwhile, officials from Saudi Arabia, Russia, and the rest of the OPEC cartel managed to agree on a "historic" cut of 10 million bpd for May and June.
That may sound like a lot less oil being taken from the Earth (and it is), but everything is historic these days when put in context.
Plus, the world was already massively oversupplied with oil. Today, more tankers are sitting off shore than ever before, just holding the stuff, and waiting for the tide to turn.
The amount of oil that the OPEC nations will cut isn't enough to help the many overleveraged oil and gas companies that rely on benchmark international prices above today's going rate of roughly $30 per barrel.
It's just simple math... which is one thing we can still rely on in this pandemic economy.
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In today's mailbag, feedback for Dan Ferris' Thursday Digest, noting a William Shakespeare line about opportunity. Do you have a question or comment? As always, send your notes to feedback@stansberryresearch.com.
"As I read Dan's essay, which, as always, was clear, coherent, logical, and compassionate, it reminded me of something I haven't thought about in a long time.
"When I was in 8th grade back in the mid-60s, I developed a passion for reading biographies. I used to ride my bike to the library and check out at least 2 a week. One that I have always remembered is a biography of Albert D. Lasker, a legend in the advertising business who struggled as a poor young man during the Great Depression and ended up a multi-millionaire.
"The title of the book is Taken at the Flood. That is part of a quote from Shakespeare's Julius Caesar, as spoken by Brutus: 'There is a tide in the affairs of men, which, taken at the flood, leads on to fortune; omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves.'
"This is the biggest flood I've witnessed in my lifetime." – Stansberry Alliance member Stephen G.
All the best,
Corey McLaughlin
Still working from home in Baltimore, Maryland
April 13, 2020