Member AUM
$70 trillion

Covid-19 Outbreaks at Meat Plants – Lessons From Victoria

4 September 2020

Most of us are aware that meat plants are at the centre of many Covid-19 clusters. What many people don’t realise, is the extent to which this is so. As of late August, there are almost half of industry. Similar outbreaks have occurred worldwide, including the UK, Germany, Canada, and Australia.

There are two reasons meat processing has been at the centre of the outbreaks. First, cold, moist environments with staff shoulder to shoulder facilitates the spread of the virus. Second, many meat processors, notably in the US, have prioritised continuing operations over safety at every turn, leading to huge outbreaks, devastating communities, and requiring plant-wide shutdowns after hundreds of workers are infected.

In my June interview with Farm Online, I was asked why there were relatively few outbreaks at meat plants in Australia. I said this was likely due to Australia having fewer Covid cases, not because of better protections. I wish I had been more forceful with my wording.

Fast-forward to August, where a second wave has seen daily cases reach 700 in Melbourne, the state has moved to a stage 4 lockdown. Fourteen outbreaks originated at meat plants, totalling 874 confirmed cases, or 5.6% of all cases in Victoria-wide. Deloitte estimates the second wave will cost the Australian economy $100 billion (~0.5% of annual GDP).

Worker protection policies are inadequate

Meat companies and the Victorian Department of Health and Human Services (DHHS) are no doubt working tirelessly to reduce the risk of outbreaks and protect their workforce. DHHS has introduced more stringent guidelines and requirements for meat, poultry and seafood plants under stage 4 restrictions. In summary, the guidelines include:

  • Reducing capacity to 67% of peak workforce capacity

  • Daily temperature testing

  • Full personal protective equipment and social distancing measures

  • A detailed policy for handling suspected and confirmed cases

Based on lessons learned from the US experience, union reports, and media coverage, it seems there are several additional measures companies need to take in order to protect worker health, community outbreaks, and continued operations.

Companies are underreacting to the first case

DHHS guidelines state “prepare to identify close contacts and provide staff and visitor records to support contact tracing” and to consider closing parts or all of operations. In practice, this has often led to a ‘deep clean’ of the room where that person has worked, and isolating people who worked in the same shift in the same room. With a virus that has a 5-day incubation period, asymptomatic 20-50% of the time, and several days to receive test results, by the time the first case comes back positive, other staff are often infected and spreading it further. Of the 14 abattoirs with outbreaks, the average plant has 39 infections. Processors are underreacting. If we are to curb the spread early, we must understand that the virus spreads further and faster than we expect.

This involves more widespread testing than defined as close contacts in the DHHS policy, and being willing to temporarily close operations while staff await test results. A strong response was that reported at Midfield, “when the business had a coronavirus scare operations closed as a precaution for three days… and testing of all staff began first thing”.

Workers need to be at the centre of the solution

The meat industry has a history of undervaluing worker rights, especially those of casual and migrant workers, exacerbating the crisis. Workers at JBS ceased work on July 28th after the workers felt JBS had done too little to protect their safety. According to United Workers Union, “The United Workers Union, one of the two unions who represent workers at the site, wrote to JBS asking them to explain how they will keep workers safe. The company responded by telling the union they will meet with them only after workers return to work.”

DHHS suggests “Where reasonable and practical: hold consultations with workers to identify and assess the COVID-19 risks in the workplace that the employer can control.” While I appreciate the difficulty in transparent communication with potentially 1000’s of workers, people need to understand the risks they face in this pandemic.

Financial incentives cannot be ignored

I believe the most underappreciated, and least discussed risk, is the role financial incentives play in spreading the virus. DHHS states “Employers cannot require workers to work when unwell.” The Government has also provided a $1,500, 2 week ‘Pandemic Leave Disaster Payment’, available to those who have exhausted sick leave.

While this is a step in the right direction, it is insufficient. The US experience has many examples of workers who came to work while they had mild flu symptoms, but could not afford not to come to work. . This was before the $1,500 support payment scheme came in, but this is not accessible to those with sick leave entitlements, and half of industry wages, too little for many.

Pandemic leave must:

  • Not be tied to sick leave

  • Cover full-time and casual workers

  • Apply to workers when the entire plant closes, to stop workers from seeking work elsewhere in the interim (which was the case at Golden Farms during the 14 day shutdown).

Investor Action

Meat processors are not infectious disease experts. Managing the risks of a contagious and novel pandemic is incredibly challenging. Moreover, the Victorian Government has not provided adequate regulation to protect meat workers. One whistleblower discussed how the government unequivocally failed to manage a confirmed case at a meat plant.

Investors stand to lose a lot if they defer to the companies and DHHS, in terms of worker and community health, and the profound impact outbreaks have on the entire economy. These meat clusters form a sizeable proportion of the ~16,000 cases and resulting $100 billion lost to the Australian economy due to the second wave. For Australia’s institutional investors, it is difficult to overstate the impact each outbreak has across their entire portfolio. National GDP in the September quarter is expected to decline by 5.0% as a result of Victoria’s lockdown.

This lesson applies to investors Australia-wide and overseas. Strong policy is needed before the wave of infection reaches a region. With a vaccine many months away, it is unclear what the future holds for other Australian states, and indeed other countries that are currently managing the virus.

Investors, even those who hold relatively little in meat processing, must engage with processors on these key issues, to protect value and health Australia-wide.

FAIRR insights are written by FAIRR team members and occasionally co-authored with guest contributors. The authors write in their individual capacity and do not necessarily represent the FAIRR view.