Coronavirus: Food Supplies Part 2

In Part 1 of my blog post on food supplies, many of my quotes came from late March and early April. Concerns have only grown throughout the rest of April and early May. Specifically, the concern is around potential shortages of meat driven by supply disruptions. But let's take a quick sidetrack away from meat.

What about non-meat food supplies?

Of course, if shortages of meat occur, that likely means that there will soon be shortages of non-meat items due to demand surges. People have to eat and if they can't eat meat, they're going to have to go to beans, grains, pastas and a variety of other foods. Of course, what about beans and beans . . . fruits and vegetables in general. Could we have supply disruptions here? You bet. CNN (April 11) via MSN wrote this:

More than a million farmworkers aren't hunkered down at home as the coronavirus pandemic paralyzes much of the country.

Their labor -- in fields, orchards and packing plants -- is keeping food on America's tables.

But workers and groups who represent them are sounding an alarm. Their warning: As the virus spreads, many farmworkers are living and working in conditions that put their health particularly at risk.

. . . Living conditions for migrant workers are "chronically and extremely overcrowded," says Asbed of the Coalition of Immokolee Workers. Sometimes, he says, 10-12 people are housed in one single-wide trailer.

We've been reading a lot about coronavirus outbreaks at meat packing plants. When will we start reading about outbreaks at farms?



Meat Shortages

The Wall Street Journal (Apr 16) via MSN has some nice statistics:

At B&R Stores Inc., a Midwestern grocery chain, meat sales have jumped 30% over the past month, while suppliers are filling only about 75% of meat orders, President Mark Griffin said.

This demand jump would likely be driven by a consumer shift from restaurants to home cooking. Yet notice that meat orders are only being filled at 75%. If I'm reading this correctly and doing my math right, they're basically getting the same amount of meat that they used to get. The short-fall of just 75% is due to the higher meat sales. At least, this is what I'm thinking. Basically, as mentioned in the below quote, suppliers can't just shift from selling to restaurants to selling to grocery chains.

It isn’t always easy for food producers to redirect restaurant-bound products to grocery stores, because the packaging and portion sizes often differ. The shutdowns and slowdowns at other plants are affecting U.S. meat production, analysts said. The number of cattle slaughtered in the week ended April 11 declined 14% from the previous week’s total, according to the USDA, while the number of hogs slaughtered fell 6%. The number of chickens processed declined by 2%.

Not only are producers unable to shift from restaurants to grocery stores, but plant shutdowns are also impacting ranchers. This really is a mess for the supply chain from beginning to end.

Reuters (May 1) writes this about meat prices:

U.S. live cattle futures closed higher on Friday after touching a three-week top, buoyed by firm cash cattle values and surging wholesale beef prices as labor shortages slow the U.S. slaughter pace, traders said.

. . . CME lean hog futures closed sharply higher, with the front two contracts settling up the daily 3.75-cent limit on rising wholesale pork prices and robust export demand.

What is causing these spikes? On the one hand, you have slaughter rates declining, which is resulting in lower cattle supplies. Then you have plant shutdowns. Also, the demand equation is in ruins. So what exactly is driving up cattle prices? How exactly are buyers of beef and pork going to get this into meat plants?

USA Today (April 30) goes further into the chaos is that is developing:

Outbreaks of the novel coronavirus have shuttered an alarming number of America’s meatpacking facilities in recent weeks, with at least 4,400 workers falling ill across 80 plants, causing 28 to close for at least one day, according to data compiled by USA TODAY and the Midwest Center for Investigative Reporting.

Let's call that interesting that COVID-19 struck 80 plants, but only 28 closed for any period of time. Should we assume that the virus is not spreading in the other 52 plants? I'd say, those other plants are high risk, as well. I've seen some photos of the working conditions at these plants. I don't know how one protects workers from spreading the virus. I saw one photo in this article showing plastic barriers between workers. Those workers were still within a foot of each other. They did appear to be wearing masks (though from what I can tell they looked like surgical masks and not N95 masks). I really doubt that's all you need to prevent the virus from spreading in such tight quarters.

And at one point do these meat plants invest in automation. I don't know the details behind how meat is packaged, but I'd have to assume this is something that could be done robots.

. . . Last week, meat production was down about 25 percent compared to the same time last year, according to the U.S. Department of Agriculture. On Wednesday, production was a full 42 percent lower than the same day last year. A decrease in the number of hogs being slaughtered is driving the drop.

That number fell to 283,000 Wednesday, down from more than 500,000 as recently as mid-March. 

. . . “We’re not going to run out of meat,” [Steve Meyer, an economist for Kerns & Associates in Iowa] said. “Buy what you need, and leave some for somebody else, and I think we’ll all get through this OK.”

Supply will depend on existing contracts between individual grocers and their suppliers. If one store has a relationship with a supplier whose plant is down, meat may go out-of-stock there. But a different grocer down the road could contract with a supplier facing no shutdowns.

So Steve Meyer is painting a rosy picture about individuals being able to buy the meat that they need. Yet, I can't help but go back to the Wall Street Journal article where a grocery chain can't get the meat deliveries that they need. That article was dated April 16th. Now fast forward 2 weeks and meat production is down by 42%? Yes, this is a complicated situation. Meat is no longer being sent to restaurants, hotels, amusement parks. But on the other hand, you have meat plants having to shut down and let's just assume that if only 28 of 80 plants shut down there is a good chance the remaining plants will need to shut down for sometime, as well.

Then I read this Business Insider (April 30) article via MSN about McDonald's:

The company confirmed to Business Insider that, while McDonald's is able to meet the system's needs at this point, distribution centers went on managed supply and restaurants on controlled allocation as of Wednesday out of an abundance of caution.

The new approach does not necessarily mean that McDonald's is facing shortages, but instead that the company is more closely monitoring and managing meat supply across the U.S. as the situation changes on a daily and hour basis.

So McDonald's is saying they aren't going to face a shortage of beef and pork, but they aren't taking any chances. That definitely feels like concern about supply.

While USA Today tries to argue that meat supplies aren't at risk, Time (Apr 30) via Yahoo takes a more negative tone:

But some meat supply issues could linger for a year or more, warns David Anderson, professor and extension economist in the Department of Agricultural Economics at Texas A&M University. That’s because meat processing facilities could struggle to keep production lines moving as workers get sick.

. . . Most likely. We could see higher meat prices for at least the rest of the year, Anderson says.

“In terms of the animals produced, we’ve got ample supplies, huge supplies,” he says. “The bottleneck is in packing and processing. What that means is higher prices for consumers.”

Now we're getting into inflation. Way more Americans are unemployed versus just a few weeks ago. Can these unemployed workers deal with food inflation? I'm thinking that Steve Meyer in the USA Today article is thinking short-term while David Anderson in the Time article is thinking more long term.

Here's what I'm thinking might need to be done if the virus continues to spread among meat packing workers: send in the military. Rotate in military units into these meat packing plants. Have them set up living quarters near the plants. Don't have them interact with the local community due to potential interaction with those infected. We need to make sure that American citizens don't go hungry.

Final note: of course, Wendy's (Bloomberg via Yahoo (May 4) might say there is a shortage.