Are livestock producers facing an almost perfect storm?
Recent disruptions to the global supply of livestock from an increasing variety and occurrence of threats have expanded the number of businesses looking to the insurance community for advice on ‘business interruption’ and other company, capital and people risk-transfer solutions.
The risks are arising from the spread of ASF and Avian Influenza, higher demand for meat products, breakdowns in the supply chain, rising geopolitical tensions between producing and consuming nations and other threats, such as cybercrime and the reputational issues associated with the transport of livestock and growing animal-welfare activism.
The virus-related risks risks that threaten ‘business as usual’ for global livestock producers is the worldwide spread of ASF
Atop the virus-related risks that threaten ‘business as usual’ for global livestock producers is the worldwide spread of ASF since its inception in 2007.
A recent article1 in Veterinary Science, described ASF, for which there is no vaccine, as “one of the most dangerous transboundary diseases of domestic and wild suids2 … characterised by high lethality and serious socio-economic consequences”.
China’s domestic pork production already has been disrupted by the domestic spread3 of this virus, which has recently reached the doorstep of the U.S., after affecting many countries in Europe.4
A United States Department of Agriculture report from Feb 2020 forecast5 China’s pork production was likely to fall 33% from levels in 2018 or to 36 million metric tonnes, potentially creating opportunities for exports to China from nations whose pig markets retain clean bills of health.
However, with cases recently confirmed6 in the Dominican Republic, alarm bells of concern are certainly ringing in American states such as Iowa, where hog production, slaughtering and processing contributes7 more than US$40 billion to local economies each year.
In fact, a recent study8 by Iowa State University suggested that, if the ASFV entered the U.S., it could cost the state, the country’s No. 1 producer of pigs, up to US$50bn in lost revenue and 140,000 jobs in the next decade.
European poultry producers are also keeping a close eye on the stubborn spread9 of Avian Influenza varietals, which have required quick culls of millions of chicken, ducks and geese across the continent and around the world10 this year.
The lethal H5N8 strain, which has transferred to humans in China, is one particularly worrying strain that has torn through thousands of chicken, duck and turkey flocks in almost 50 countries11, including Britain, in recent years, and shows few signs of stopping.
As worrying as those viral events may be, they have come a distant second to media and state interest in the COVID-19 epidemic. But, there too, the spotlight of public concern has turned to the people risks at the humid and close working environs of meat-processing facilities, which have been high-profile centres of outbreaks around the world.
The findings of an investigation by the U.S. House of Representatives released last month (subs: Oct 2021) revealed12 that 59,000 workers at the nation’s five biggest meat-processing companies had contracted COVID-19 since the outbreak, resulting in 269 deaths.
As of July 21, an earlier report13 by the U.S.’s National Academy of Sciences estimated the country’s meat-processing plants may have been responsible for the spread of as much as 8% of COVID-19 cases in the U.S. and 4% of deaths.
Other COVID-19-related events at packing plants have been reported across Europe14 where cluster cases occurred in countries such as Germany, Portugal, England and Wales and in non-EU nations such as China15.
With virus-related threats growing and the dependability of global food supply chains at risk, the insurance markets have been building specialist expertise.
With virus-related threats growing and the dependability of global food supply chains at risk, the insurance markets have been building specialist expertise. The London market, for example, now has recognised livestock professionals who specialise in ASFV and Avian Influenza.
The global consumer market for processed meats was estimated16 by the International Labor Organization in 2019 at US$1.7 trillion, more than half of which was produced by the U.S., China and Brazil. It is a lucrative part of the global food production.
The significant strategic and commercial values of the industry has drawn the recent attention of cyber criminals looking to extort ransom money from the world’s biggest processors.
In May this year, JBS S.A., the world’s biggest producer of beef, pork and chicken by sales, saw many of its global slaughterhouses disabled17 by a cyberattack, which impacted facilities in the U.S., Canada and Australia. Global food producers had seen 40 such cyberattacks in the 12 months preceding the JBS incident, a sign the industry is becoming an attractive target.
Although virus-related issues are dominating global headlines, for some, the fragility of the global food supply chain poses even bigger threats to ‘business as usual’.
Congestion at ports on the U.S. west coast this year and ‘sharp’ shipping practices have already cost pork producers $1.5bn in lost revenue this year and are threatening to brand American exporters as “unreliable trading partners”, according to recent testimony18 to the U.S. Congress from the country’s National Pork Producers Council.
For some U.S. feed producers, who are already struggling to keep contaminants out of their supply chains, supply chain issues will be the biggest challenge they face for the next year, according to a recent commentary19 from the head of the American Feed Industry Association (AFIA).
Disruptions in the maritime supply chain are a traditional risk for global meat exporters. Events such as this year’s blockage of the Suez Canal also impact the transportation of livestock. Delays at sea have historically cost the lives of thousands20 of livestock and, as public scrutiny of animal-welfare management grows, the reputations of the ill-equipped transport providers21 and the exporters that hire them.
Geopolitical risks also appear ready to pose bigger threats to the day-to-day businesses of global livestock producers. The imposition of international trading bans – whether in response to disease outbreaks, or just to further political agendas or protect local industries – can be expected to become more common as populist policies spread.
The impact of policies that stifle the free flow of labour are already showing their potential to disrupt22 the livestock industry in countries such as the U.K.
In the current environment of increasingly complex and connected livestock risks, it would be understandable if meat producers of all sizes were struggling to decide where to allocate their finite risk-transfer budgets. There are specific insurance products available that are designed to protect businesses against specific threats such as ASF and the Avian flu.
there are solutions that protect business owners against events that disrupt day-to-day operations
For broader responses, there are solutions that protect business owners against events that disrupt day-to-day operations, such the business-interruption coverage - in particular, coverage for supply-chain disruptions available in the London market.
For more information on how to protect your livestock businesses from the current risk environment, please contact us.
Willis Towers Watson offers insurance-related services through its appropriately licensed and authorised companies in each country in which Willis Towers Watson operates. For further authorisation and regulatory details about our Willis Towers Watson legal entities, operating in your country, please refer to our Willis Towers Watson website. It is a regulatory requirement for us to consider our local licensing requirements.
1 https://www.frontiersin.org/articles/10.3389/fvets.2021.723375/full
2 https://en.wikipedia.org/wiki/Suidae
3 https://www.fao.org/ag/AGAInfo/programmes/en/empres/ASF/Situation_update.html
4 https://ec.europa.eu/food/animals/animal-diseases/diseases-and-control-measures/african-swine-fever_en
5 https://www.ers.usda.gov/amber-waves/2020/february/african-swine-fever-shrinks-pork-production-in-china-swells-demand-for-imported-pork/
6 https://www.pigprogress.net/Health/Articles/2021/7/After-40-years-ASF-is-back-in-the-Dominican-Republic-775973E/
7 https://www.agriculture.com/news/business/iowa-secretary-of-agriculture-responds-to-asf-in-dominican-republic
8 https://www.feedstrategy.com/animal-feed-manufacturing/top-2022-us-animal-feed-industry-issues-to-watch/
9 https://www.dailysabah.com/world/europe/sharp-increase-in-bird-flu-outbreaks-worldwide-sparks-concern
10 https://www.thepoultrysite.com/articles/weekly-poultry-digest-bird-flu-culls-roil-global-poultry-industry
11 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8264784/
12 https://www.washingtonpost.com/business/2021/10/27/meatpacking-house-report/
13 https://www.pnas.org/content/117/50/31706
14 https://www.bmj.com/content/370/bmj.m2716
15 https://www.reuters.com/article/us-health-coronavirus-china-chicken-idUSKBN29R0SB
16 https://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---sector/documents/briefingnote/wcms_769864.pdf
17 https://www.bbc.com/news/business-57423008
18 https://www.nationalhogfarmer.com/farm-policy/port-congestion-issues-causing-havoc-ag-shippers
19 https://www.feedstrategy.com/animal-feed-manufacturing/top-2022-us-animal-feed-industry-issues-to-watch/
20 https://www.theguardian.com/environment/2021/mar/26/at-least-20-livestock-ships-caught-in-suez-canal-logjam
21 https://www.theguardian.com/environment/2020/jan/26/floating-feedlots-animals-spending-weeks-at-sea-on-ships-not-fit-for-purpose
22 https://www.theguardian.com/business/2021/nov/03/meat-carcasses-sent-to-eu-for-butchering-amid-uk-worker-shortage
