Is the Food Supply Chain Actually Breaking?

Is the Food Supply Chain Broken 043020
A full-page ad in the New York Times this week sparked a nationwide question: Is the food supply chain actually breaking? Agricultural economists disagree. ( AgWeb )

Tyson Foods bought a full-page advertisement in the New York Times on Sunday. The overriding message by Tyson Foods board chairman John Tyson: "the food supply chain is breaking.”  

The ad sparked a nationwide question: Is the food supply chain actually breaking?

“I have a little different view,” says Jayson Lusk, a Purdue University agricultural economist. “I think by and large, throughout this crisis, the food supply chain has responded remarkably well. Yes, we had a short period for some grocery store shelves were empty, but by and large, food was available. It might have been a different variety or different brand than you're accustomed to buy. But the foods system responded remarkably well to a completely unexpected and unprecedented event. We certainly have some very serious challenges coming up in the meat sector, but that doesn't mean the entire system is broken.”

Lusk says while the chain may not be broken, there is a severe strain on it, especially when it comes to moving animals through processing plants.

“Wholesale meat prices are increasing for beef,” Lusk says. “Choice box beef prices are as high as we've seen in a couple of decades. At least for pork, we've seen dramatic increases, but we're actually still below where we were last year. Pork prices are a reflection of scarcity. So, I think there's cause for some optimism, but I think you have to be realistic and say the system is under some very severe strain at the moment.”

Lusk says as processing protein becomes under even more stress, he thinks the next week or two will be “touch and go” when it comes to the food supply chain.

As pork and beef packing plants either close or slow, President Donald Trump took action this week to keep packing plants open. However, some economists say that action may be only a piece of the overall solution needed right now.

“It may be part of the fix in the sense that we need to get resources directed to packing plants and this critical infrastructure to maintain continuity within this this supply chain,” says Lee Schulz, economist at Iowa State University. 

Schulz says any action that moves the industry in the right direction could address the immediate need to process pork and beef. However, he says order a packing plant to stay open is one thing, and ordering the packing plant to operate is a separate issue.

“We can't necessarily make those workers work, but if they are available to do work,” he adds. “I think the more attention and the more resources that we can get to help resolve the situation in the form of safety measures, in the form of testing, will allow us to potentially move to getting these packing plants either back on line or getting up to capacity level that allows us to move or hogs through this.”

Packing Plant Bottleneck

Both economists say the packing plant closures are a serious strain on the supply chain and could reveal just how much of a bottleneck there is in the processing sector.

“In good times, these large packing plants serve us well,” Lusk says. “They efficiently process animals, provide affordable meat to food consumers, but when you have 60% of all hogs going through the top 15 plants or 60% of all cattle go into the top 10 plants, that gets to be a real choke point when you start getting a one, two, three or four, these shut down. And that's what we're sort of seeing now.”

That is the critical bottleneck that right now, Schulz says. “We have a monumental challenge of getting hogs off the farm and into the packing plants at the moment.”

Schulz says the packing plant portion of the food chain isn’t the only bottleneck occurring. He says there are other ramification up and down the supply chain, which were sparked by COVID-19. However, if packing plants don’t ramp back up production quickly, pork could be in short supply at stores soon.

“We are working potentially towards a shortage,” Schulz says. “I'd like to call it more of an availability issue.”

He says the issue isn’t a shortage, because there is pork. In fact, he still expects pork production to be up overall in 2020.

The challenge is getting that livestock into a consumable product.

“I think it's important we have pork at the grocery store, but it just might not be currently in the form or products that consumers are used to buying,” Schulz says. “So it may be in larger packages. There may be certain cuts that aren't available. Prices have increased, but there isn't a shortage. Now the longer this lasts, we could move into some of that territory where we do see potential shortages in some particular places.”

Lusk thinks it’s not just product that looks differently in stores post COVID-19. He thinks the shopping experience may also change.

“We may have grocery stores that look a little different five or 10 years from now and more focused on meat and fresh fruits and vegetables,” he says. “We may have more of our packaged products coming direct to our homes. These things tend to be pretty gradual, but this event shook hings up in a hurry and we may get those changes faster than we anticipated.

Lusk says with all the strain and stress, it’s also opened up consumers eyes to just how much the food system is reliant upon a solid supply chain.

“It's opened our eyes to how much we depend on farmers and on a well-functioning food supply chain,” Lusk says. “That includes on those processors in the middle, in how much we count on the fact that we're well-fed. We've just taken food security for granted. And hopefully people will come away from this with a greater appreciation of just how intricate and how much work goes into supplying a bountiful and secure supply of food. “