Eating Our Way to the Next Pandemic

July 29th, 2020 | Sofiane Belmiloud

COVID-19 has left investors in the animal protein sector not only worried about a short-term economic shock, but also the long-term systemic risks rooted in the industry’s supply chains.

The last few months have put the global meat and dairy sector at the centre of the coronavirus outbreak and the repercussions have hit the sector hard.

In the US, thousands of meat-packing plants have been forced to drastically reduce output with over 20,000 workers contracting the virus to date. Despite this, most plants controversially remain open due to an Executive Order from the President signed into law in April. The supply chain disruption has caused bottlenecks with many animal producers forced to cull a huge backlog of livestock. At least two million animals were reportedly culled on farms in the US within the first six weeks of the pandemic.

The financial fallout of this is expected to be felt by the livestock sector for a long time to come, with current industry experts predicting losses of around $20 billion for this year alone. The head of commodities at Goldman Sachs has listed livestock alongside oil as one of the two most precarious commodities for investors next year.

Avoiding the next pandemic

One of the key problems for the industry is that the factory farming model is not only vulnerable to pandemics, it is woefully unprepared to mitigate the risk of future zoonotic diseases. Indeed, current practice is shown to actually facilitate the emergence of possible future pandemics. Large numbers of animals crammed together into confined spaces, combined with unsanitary working conditions, overuse of antibiotics and sprawling global supply chains all create the ideal conditions for new zoonotic diseases to emerge and spread.

Three in four emerging infectious diseases in humans are, like COVID-19, zoonotic (i.e. they are transferred between animals and humans). Despite this, a recent report by FAIRR, entitled ‘An Industry Infected’, showed that over 70% of the meat, fish and dairy companies assessed were ill equipped to deal with a future pandemic.

And disease risk is just the latest in a long line of risk factors involved in intensive animal protein production. High emissions and water usage continue to cause concern amongst both consumers and investors, with the regulatory risks and costs of dealing with these issues likely to stack up for the meat industry in the years to come.

Alternatives rising

Against this backdrop of empty meat shelves and heightened health concerns, plant-based meat alternatives have benefitted from a boost in consumer sales during the current pandemic. Plant-based sales have rocketed in recent months, rising by nearly 200% in April compared to 2019.

This spells opportunity for meat firms such as Canada’s Maple Leaf Foods. Analysis of 60 global meat, fish and dairy firms by the Coller FAIRR Protein Producer Index found that Maple Leaf was leading its peers when it comes to diversifying into alternative proteins, and is currently the only meat producer to disclose sales from plant proteins, reporting 4.3% of total sales from its plant protein segment in Q3 2019.

The competition from plant-based proteins is hard to ignore; they are more efficient to produce, need less water and produce less greenhouse gas emissions per calorie of protein than meat. They also come without the dangerous zoonotic disease risks associated with livestock. Consumer willingness to buy alternative products appears to have transitioned from a “one off” event to a more permanent consumer purchasing habit. Growing public consciousness around the link between zoonotic disease and intensive animal agriculture, as well as the heavy environmental toll of meat production, indicates this transition to plant-based proteins is only set to increase in the future.

Costly and complex regulation

Meanwhile, animal protein producers are likely to be forced to instigate a number of disruptive measures to stop the outbreak of zoonotic pandemics becoming ‘the new normal’. An announcement in Germany in May 2020 indicated regulators will demand higher hygiene standards, improved inspection regimes as well as fines for labour rights violations by meat processes. So far, regulatory conversations have focussed on banning live exports, tackling the overuse of antibiotics, standard vaccinations and assurance checks, and implementing moratoriums on factory farms. Given the geographical nuances around regulation, multinational meat giants will need a holistic and strategic approach to meeting standards in order to safeguard global supply chains.

At best, new regulation will prove costly to the meat sector. At worst, meeting best practices will prove fundamentally incompatible with animal agriculture’s business models: the most effective long-term mitigation of pandemic risks will come through diversification into plant-based proteins.

As the world pieces itself back together in the aftermath of COVID-19, investors are already looking to the future. The strains on the meat sector during this time have been telling and perhaps most worryingly, COVID-19 was not the first and – without material changes in the intensive animal agriculture industry – will likely not be the last animal-borne disease outbreak. Investors will be looking at the lessons learned today for any future pandemics to come.

RIA Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect the view or position of the Responsible Investment Association (RIA). The RIA does not endorse, recommend, or guarantee any of the claims made by the authors. This article is intended as general information and not investment advice. We recommend consulting with a qualified advisor or investment professional prior to making any investment or investment-related decision.


author's photo

Sofiane Belmiloud

Investor Outreach Manager
FAIRR Initiative

Sofiane joined the FAIRR Initiative as Investor Outreach Manager in July 2019 and is responsible for engaging with the capital market stakeholders to raise awareness about the risks and opportunities in the global protein supply chain. He heads the FAIRR Initiative’s work in Francophone countries and collaborates on outreach in other global markets. Sofiane holds an MSc in International Strategy and Diplomacy from the London School of Economics and is a CFA Charterholder.