Thursday, rancher group R-CALF-USA announced that they were in support of President Donald J. Trump’s (R) executive order invoking the Defense Production Act to declare meatpacking operations critical infrastructure that must remain open.
R-CALF USA said in a statement that, “Trump’s action was necessary to prevent further collapse of the United States’ meat supply chain.”
A number of meat processing plants have suffered from outbreaks of COVID-19. Most notably the Chinese owned Smithfield pork processing plant in South Dakota where 700 workers have become infected with COVID-19. Almost 900 workers at a Tyson Foods plant in Logansport Indiana have tested positive for the coronavirus, according to a report on Wednesday. 890 of the plant’s 2,200 employees tested positive in just under a week. This is just the latest of several Tyson plants that have closed due to problems with the coronavirus among the workers. A Wayne Farms chicken processing plant in Albertville in Marshall County is also an epicenter for an outbreak of the virus here in Alabama with 75 workers testing positive.
As some plants have closed temporarily to slow the spread of the virus, the animals they were supposed to process are left in feedlots, hog finishing floors, and in poultry houses. This is a major problem for farmers; because in meat animal raising when one group of animals reaches the desired slaughter weight there is another younger group of animals waiting to enter their feedlot, finishing house, or chicken house. If the processing plant is down and those process ready animals are still sitting there eating feed and getting excessively fat; then the younger animals can’t leave the stocker pasture (in the case of beef cattle), the nursery houses (in the case of pigs), or the hatchery (in the case of poultry). Animal production is not like manufacturing where if the assembly plant stops assembling the plants that make the parts also can shutter. There are new calves, pigs, chickens, turkeys, ducklings that are being born or hatched on the farms regardless of what is happening at the processing plants. The process ready animals who are waiting for the plant to come back on line are also eating feed resources, feed resources the farmer had intended for his younger animals on the farm.
Similarly, there are over 330 million Americans who need to eat every day.
The problems with the processing plants have resulted in the prices farmers receive for their finished meat animals plummeting, if they can find buyers at all. American consumers meanwhile have come to grocery stores and too often found meat cases empty and what meat that is available at artificially high prices.
Tyson Foods Chairman John Tyson said in a New York Times editorial on Sunday, “Millions of animals – chickens, pigs and cattle – will be depopulated because of the closure of our processing facilities. The food supply chain is breaking.”
The danger with the big processing plants is that meat plants are heavy on manual labor, and most of the work is done in cold, wet environments. The workers are often literally shoulder to shoulder, making it a uniquely difficult industry for the potential for the spread of the coronavirus.
The President’s executive order means that the plants will stay open
In a letter to Trump and congressional leaders yesterday, R-CALF USA stated that the current meat supply chain lacks resiliency and redundancy and threatens the food security interests of the United States. The letter stated this interest was “arguably the most vital of interests to all of America.
R-CALF USA said that the long term answer is for regulatory reforms of the nation’s beef supply chain. R-CALF said that the big problem is that the industry underwent a period of “merger mania” from 1980 through 2010, resulting in just four major beef packers controlling 85 percent of all cattle raised specifically for beef production. R-CALF USA argued then that this level of concentration was the highest level of concentration of any industry in the United States. Pork and poultry similarly have seen larger and larger conglomerates owning more and more of the industry, meanwhile they have closed local slaughter houses and concentrated processing in fewer and bigger processing plants meaning that each individual plant as an oversized importance in the industry as a whole.
R-CALF USA specifically urges the development of a strategic, national food production, processing and distribution policy that can meet America’s food security interests.
“Until this current crisis is over, and the President and Congress can conduct such a review and develop such a strategic plan, our nation must administer triage to ensure that our highly centralized and concentrated beef processing system keeps providing our citizens with nutritious food. We simply must keep the current system running through this crisis,” said R-CALF USA CEO Bill Bullard. “And that is precisely what the President did and we support it.”
The National Cattlemen’s Beef Association (NCBA) represents both ranchers and meatpackers so is in disagreement with R-CALF USA on a whole host of the long-term issues, but the NCBA also supports Pres. Trump’s executive order.
“While there are currently no widespread shortages of beef, we are seeing supply chain disruptions because of plant closures and reductions in the processing speed at many, if not most, beef processing plants in the United States. We thank President Trump for his recognition of the problem and the action he has taken today to begin correcting it,” said NCBA CEO Colin Woodall. “American consumers rely on a safe, steady supply of food, and President Trump understands the importance of keeping cattle and beef moving to ensure agriculture continues to operate at a time when the nation needs it most.”
Advocates for the processing plant workers disagreed with the President’s executive action.
Stuart Appelbaum is the President of the Retail, Wholesale and Department Store Union (RWDSU).
“We only wish that this administration cared as much about the lives of working people as it does about meat, pork and poultry products,” said Pres. Appelbaum. “When poultry plants shut down, it’s for deep cleaning and to save workers’ lives. If the administration had developed meaningful safety requirements early on as they should have and still must do, this would not even have become an issue. Employers and government must do better. If they want to keep the meat and poultry supply chain healthy, they need to make sure that workers are safe and healthy.”
(Original reporting by Forbes Magazine contributed to this report.)
Alabama Power is returning $100 million to customers
The Alabama Public Service Commission approved a plan Tuesday to credit Alabama Power Company customers on their October bills. The move returns approximately $100 million to Alabama Power Company customers.
“Putting money back into the pockets of hard-working Alabamians is one of the ways we can help on the road to recovery,” Public Service Commission President Twinkle Andress Cavanaugh said on social media. “Alabama Power to refund $100 million to customers.”
The typical Alabama Power customer will receive a $25 credit on their October bill. The newly approved credit is on top of a 3 percent rate reduction that customers are already enjoying in 2020. This previous rate cuts and the October credit amount to about $300 million in savings for Alabama Power customers this year.
“We appreciate the commission voting today to expedite this credit for our customers,” said Richard Hutto, Alabama Power’s vice president of regulatory affairs.
The global economic collapse due to the COVID-19 pandemic has hurt people across Alabama. It has also dramatically lowered fuel costs for Alabama Power Company’s plants.
A typical residential customer using 1,000 kilowatt-hours of electricity per month is expected to receive a credit of $25. Customers who use more energy will receive a larger credit. Customers who use less power receive a smaller credit but had a smaller bill to begin with. Adjustments to fuel costs are typically calculated at the end of the year, with savings passed to customers beginning in January, but due to the economic downturn and pandemic-related job losses, Alabama Power and the PSC are rushing that money to Alabama families and businesses.
“Many of our customers have been hurt by COVID-19. We hope this credit will provide some additional relief at this difficult time,” Hutto explained.
The 3 percent rate reduction, that took effect in January, was based on earlier estimates of lower costs for fuel and other expenses for 2020. The rate reduction alone equates to about a $4.50-per-month reduction for the typical residential customer.
“Our employees are working every day to keep costs low while providing industry-leading reliability for our customers,” Hutto added.
Alabama Power said in a statement that their total retail price is below the national average and has been for decades. When adjusted for inflation, the price customers pay for electricity is lower today than it was 30 years ago.
Alabama Power has been assisting customers in other ways during the COVID-19 outbreak. Since the start of the pandemic, the company has suspended disconnects and late payment fees for customers hurt by the coronavirus.
Cavanaugh is seeking another term as president of the Commission.
“It is crucial that we have strong pro-jobs conservatives supporting President Trump’s agenda at all levels of government,” Cavanaugh said on social media.
Payroll Protection Program deadline has been extended to Saturday
Congresswoman Martha Roby, R-Montgomery, this week reminded business owners that the deadline to apply for the Payroll Protection Program, knowns as the PPP, has been extended to Saturday.
“The Small Business Administration’s Paycheck Protection Program (PPP) application deadline was recently extended to Saturday, August 8,” Roby wrote in an email to constituents. “Do not forget to fill out your application if you are a small business that has been impacted by the Coronavirus pandemic.“
The PPP was a loan program administered by the Small Business Administration. It was part of the bipartisan CARES Act to address the economic collapse caused by the COVID-19 global pandemic and the forced economic shutdowns, which were implemented in the early months of the public health emergency in an attempt to slow the spread of the novel strain of the coronavirus and allow public health agencies and health care systems time to build up testing, contact-tracing and hospital bed capacity.
The PPP loans are 1 percent interest loans available through the SBA. If the business uses the money to make payroll and pay standard operating expenses then the loans will be forgiven. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. The loan forgiveness form and instructions include several measures to reduce compliance burdens and simplify the process for borrowers.
The PPP has been very popular, so much so that that program ran out of money just weeks after Congress passed it. Congress had to go back and provide more funding for the PPP.
Businesses can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
Senate Democrats are meeting with the Trump Administration, Senate Republicans and House leadership on a compromise plan for a fifth coronavirus relief package. A big point of contention has been the size of the total package. Speaker of the House Nancy Pelosi, D-California, supports a $3.2 trillion coronavirus relief bill while Republicans prefer a more modest $1 trillion relief bill. The two sides are expected to continue to negotiate through Friday in an attempt to reach a compromise before the August recess.
Roby is serving in her fifth term representing Alabama’s 2nd congressional district. She is not seeking re-election.
State’s unemployment claims slowed last week
Last week saw the lowest number of new claims since the week-to-week number first spiked from 1,824 to 10,982 when the lockdown started in mid-March.
The number of unemployment claims in Alabama slipped last week after increasing through the first half of July.
There were 17,439 claims filed from July 19 to 25, according to the Alabama Department of Labor. Of those, 15,461, or 89 percent, were COVID-19 related.
Claims soared at the start of the pandemic in late March, hitting a weekly high of 106,739 in the first week of April. The rate of new claims declined sharply in May, with each week counting under 30,000 claims.
Since then, the number has decreased somewhat steadily. Claims rose several thousand over the course of this month, from 19,058 in the week ending July 4 to 23,678 in the week ending July 18.
Last week saw the lowest number of new claims since the week-to-week number first spiked from 1,824 to 10,982 when the lockdown started in mid-March.
GDP fell by an unprecedented 9.5 percent in second quarter
The Bureau of Economic Analysis released its advance estimate of U.S. GDP for the second quarter of 2020 reflecting the months of April, May and June dropped 9.5 percent in the second quarter, According to the BEA report, real GDP contracted at an unprecedented annualized rate of 32.9 percent. This is the largest quarterly decline since the series began in 1947, though market expectations were so low the actual number was slightly better than what the market and official estimates had expected.
President Donald Trump’s Council of Economic Advisors said that despite this massive contraction, the resiliency of the U.S. economy and the swift fiscal response of the Federal Government can aid in a strong recovery.
The Council of Economic Advisors said that the U.S. economy entered this contraction on a healthier and more resilient footing than it did both prior to the Financial Crisis of 2008 to 09 and relative to other advanced economies. This was due in part, to the longest expansion in U.S. history. American households also had a smaller overall debt burden prior to this pandemic than prior to the Financial Crisis. Household liabilities as a percent of personal disposable income were 136 percent leading into the Financial Crisis but were below 100 percent prior to this pandemic.
The United States had the highest growth rate among the G7 countries prior to the pandemic, with growth roughly double the non-U.S. G7 average.
The second-quarter decline in GDP was widespread, touching nearly every facet of the economy. Consumer spending, which accounts for roughly 70 percent of the U.S. economy, contributed to most of the decline, accounting for 25.05 percentage points of the 32.9 percent decline. The report also showed sharp contractions in business fixed investment, residential investment, inventory investment, and state & local government spending which contributed to the decline.
A massive but uneven decline in consumer spending (-34.6 percent at an annualized rate) revealed how quarantines have driven spending patterns. Individuals increased consumption of recreational goods & vehicles and housing & utilities, but lessened consumption of gasoline & other energy goods, health care, transportation services, recreational services, and food services & accommodation. The decline in business fixed investment was also widely spread, though it was particularly sharp in transportation equipment investment and mining structures investment, the latter reflecting subdued oil and gas production activity responding to extraordinarily low prices.
The pandemic and the forced economic shutdowns caused a sharp drop in real personal income as many workers faced lower wages, fewer hours or loss of their jobs completely. The University of Pennsylvania estimates that the CARES Act reduced the GDP contraction in the second quarter by 7 percentage points.
The Council of Economic Advisors are predicting strong real GDP growth in the third quarter. The current Blue Chip consensus forecast of 17.7 percent annualized growth in the third quarter would be the largest recorded quarterly growth rate and a 36 percent recovery of the second quarter contraction.
The Council of Economic Advisors claim that the pace of the recovery so far has exceeded expectations, providing a source of optimism as we look ahead. In fact, the majority of major economic data releases over the past month—reflecting May and June data—have surpassed market outlooks. Most notably, the record-breaking number of jobs added in both May and June beat market expectations by a combined 11.7 million. Furthermore, high-frequency data indicate that 80 percent of America’s small businesses are now open, up from a low in April of just 52 percent. Consumer credit & debit card spending has recovered roughly 80 percent from the pandemic low, with spending in low-income zip codes rebounding the furthest, now just 2 percent below pre-pandemic spending levels.
Another 1.43 million Americans filed initial unemployment claims last week, the nineteenth week the total has surpassed one million new claims.
The recovery could be threatened by surging coronavirus cases, which could force a second shutdown in some states. Governors in Texas, Florida, and California have had to implement some social distancing restrictions and Alabama Gov. Kay Ivey has had to impose a mask requirement on all citizens and even on school children.
The uncertainty with the virus and the economy has put pressure on Congress to approve another coronavirus relief package.
“Our nation is going through a time of testing,” Vice President Mike Pence said. “And let me say from my heart that our prayers and our sympathies are with all of the more than 150,000 families that have lost loved ones in the midst of this pandemic. As we continue to contend with the coronavirus in various places across our country, President Trump and our team, and the task force will continue to marshal the full resources of the federal government and the full power of the American economy to meet this moment and put the health of America first.”
“It’s amazing to think, at the lowest point in this pandemic, our economy lost 22 million jobs,” VP Pence said. “But thanks to that solid foundation that President Trump laid in our first three years, we’ve already gained back 8 million jobs just in May and June alone.”