Friday, April 24, 2020

Food For Thought

The disruptions in America's food supply chain caused by COVID-19 shutdowns are going to be noticed starting in a few weeks.

Americans could start to see shortages of pork, chicken and beef on grocery shelves as soon as May as major packing plants swept by the coronavirus remain shuttered and the nation’s massive stockpiles of frozen meat begin to dwindle.

Any empty shelves to date have been the result of bumps in the supply chain, with stores being unable to restock as quickly as customers are buying. But bacon, pork chops and ham could be the first to face actual shortages: The amount of frozen pork in storage nationwide — more than 621 million pounds — dropped 4 percent from March to April, the USDA reported this week. Slaughter rates are down 25 percent, and 400,000 animals are backed up in slaughterhouses.

And with meat plants of all kinds operating at 60 percent of capacity, shortages loom for beef and poultry as well. That could also lead to higher prices and a financial squeeze for farmers, who are collecting less per animal slaughtered.

“If we start to see more closures and these facilities remain offline for a prolonged period of time, it’s hard to imagine a scenario in which consumers don’t see changes at the supermarket,” said David Ortega, an agricultural economist at Michigan State University.

Multiple economists who spoke with POLITICO said May could be when consumers have fewer options when buying meat.

There is enough — for now. The Agriculture Department’s monthly tally of meat in warehouse freezers showed total pounds of beef — about 502 million — were up 2 percent. Poultry in storage went up 4 percent, to 1.3 billion pounds. The amount of chicken in storage dipped slightly to about 921 million pounds.

But the pipeline bringing meat from farms to stores is slowing. The dip in daily pork slaughter rates “is troubling, especially for producers,” said Scott Brown, a University of Missouri agricultural economist. “If these keep declining at the rate we have seen recently then we need to worry,” he added.

The shutdown of restaurants and schools have wrecked the market for both produce and for dairy products as well. Prices are going to start spiking on food pretty quickly. Having 500 million pounds of beef sounds like a lot, and it is, but in a country of 330 million people, that won't last long, even factoring in all the folks that don't eat beef. The same goes for chicken and pork.

The nation's food processing companies turn a profit by taking out as much of the slack from the system that they can, and the system's now entering week six of major disruptions in both supply and demand.  This wouldn't be an issue if it was one, two, or even a few states experiencing something like hurricanes or ice storms that knocked out power to a region for a week.  This is the entire country, for months, and no real end in sight.

We're seeing spikes now in egg prices to start, due to industry consolidation.  Costs will be passed along as the market gets smashed on both the supply side and the demand side.

I've talked about systemic cascade failures before.  You can only break so many bits of the system before the entire system collapses and no longer works.  The more complex the interactions are between the parts, the easier it is to push the entire system over the edge.  We saw it in 2008, and we're seeing it again now, only this time a lot more systems are involved.

And yet we have Trump's "leadership" at the top.


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