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What’s next for meat & milk: higher prices, odd sizes, weird packaging, rationing

On Tuesday, three agricultural economists released a report meant to guide public thinking about meat shortages and availability. In the report, these economists say that while there isn’t a shortage in livestock, we are facing some monumental issues with our supply chain.

We at The Prepared have been writing about those supply chain issues for a few weeks, so that finding doesn’t come as much of a surprise. But this information was put into new relief this week as Tyson Foods took out a full page ad in publications from the New York Times to the Washington Post, detailing the challenges the company faces and warning that the supply chain could soon be void of millions of pounds of meat.

Almost directly in response to the Tyson ad, President Trump signed an executive order that declared meat processing plants essential to American infrastructure. Then came backlash from unions and workers in processing plants where COVID-19 is spreading quickly.

As the meat supply report acknowledges, it’s difficult for even the most informed experts to predict what exactly will happen next with America’s meat and dairy supplies as the pandemic progresses. The food supply chain is a complex, opaque system, and no one person or institution has a view of the entire thing. So it’s difficult to predict exactly how it will respond to all the plant closings, re-openings, and likely absenteeism. But we have to start somewhere, so we reached out to economists to help us prepare for what could come next.

Breaking down the major problems

Reports of empty deli counters, meat lockers, and dairy aisles aren’t new. But it’s hard to know what to make of them. After we spoke with a few economists, we were able to break down the challenges into three categories that will impact our food consumption in both the short and long term.

  1. We haven’t had enough food processing labor for a long time, even before COVID-19.
  2. The food supply chain is trying to redirect from restaurants to consumers as demand shifts, and we’re seeing those effects already.
  3. Because of demand shifts and processing bottlenecks, farmers are now being forced to cull animals. But the impact of that culling won’t be felt until next year.

Basically, current reports of low stock in grocery stores have more to do with the first two issues — labor shortages and demand shifts. Even before COVID-19, labor for processing plants was in short supply. Now, thanks to illness and plant closures, the workforce is even smaller. Meanwhile, plants are trying to shift focus as demand for restaurants and businesses has plummeted while demand for individual consumers has skyrocketed.

The third issue, culling of flocks and herds, is a longer-term concern, and by far the most complex. Right now, the duration of COVID-19 is uncertain. The big meat processing companies don’t know how long they’ll have to operate with a smaller work force. They also don’t know when restaurant demand will return. All of that uncertainty is forcing farmers to cull animals and shut down their operations. The impact of farm shutdowns, however, won’t show up in stores for another 10-15 months.

In the long term, economists say the supply chain for meat and dairy is unlikely to break down completely. Even if processing plants are periodically closed due to illness and absenteeism, the larger system will stay afloat.

Rather, we may see some temporary price hikes and intermittent rationing. Consumers will certainly see changes to packaging and portion sizes (anecdotally this is already happening), as parts of the underutilized restaurant supply chain are slowly adapted for the over-subscribed consumer supply chain.

Now, let’s take a deeper dive.

Problem #1: Labor shortages meet COVID-19

To Lee Schulz, one of the authors behind the “Meat Availability and Shortages” report, it’s crucial to remember the concerns the meat processing industry was facing even before COVID-19.

“What I think is important to remember here is that you can order a packing plant to remain open, but you can’t order it to operate at a certain level. Even before this situation, labor was a constraint coming into it. This situation has only exacerbated that,” he said over the phone on Wednesday.

Essentially, these meat packing plants had a labor shortage even before COVID-19 began. Now, those plants are in crisis mode as the workers they do have are getting sick.

It’s not just the processing plants that are having problems — there are also upstream problems at the farms. On Wednesday, Michigan reporters found that 72 workers associated with a poultry ranch had tested positive for COVID-19.

Still, economists like Schulz believe the supply chain problems we’re seeing right now could be, as they put it in their report, a “short-lived situation if markets are ‘allowed to work.'” The economists seem to have faith that the market will work these problems out on its own, and the supply chain won’t be too threatened.

“I know enough [businessmen] and as an economist, I trust the private market to make things go,” said Michael Boland, an economist from the University of Minnesota, via email. “Nothing has happened to change my opinion of that. No one is starving; food distribution is happening. When things open up again, we may have some temporary issues in food service and restaurants as they build back up again but they will likely do so through reduced hours.”

Problem #1.5: Safety, labor, and the markets

If the market is ‘allowed to work,’ meat processors will be working, too. But it’s next to impossible for meat processing plants to guarantee 6 feet of space between each worker. That means meat processing workers will probably continue to get sick.

“Markets do work,” said another University of Minnesota agricultural economist, Marin Bozic. “But the way markets work is that we could lose 50% of farms and the price of milk will be sky high and in the process there will be a lot of pain and suffering and suicides in the farming sector. So, markets do work, but they’re brutal.”

“The humane approach is to smooth out and preserve market functioning.”

On Sunday, the CDC released guidelines for keeping workers safe and production running. But in a statement on Wednesday, Howard “A.V.” Roth, the National Pork Producers Council president and a producer from Wauzeka, Wisconsin said that might not be enough:

While getting pork packing plants back online is foundational, the tragic reality is that millions of hogs can’t enter the food supply. We need coordinated partnership between the industry and federal, state and local authorities to euthanize pigs in an orderly, ethical and safe way.

The economists we spoke with couldn’t speak to health, safety, and ethics issues, as their view is primarily tied to how the markets work.

“Even in the worst case scenario, it’ll be a month and a half before half of the workforce has enough herd immunity to continue work,” Bozic said. “This is not a Black Plague. Certainly there will be disruptions, but we are not going to run out of meat, temporarily or permanently. There will likely be some rationing in grocery stores for a brief period of time.”

That, Bozic said, will be similar to what we’ve seen in recent months with milk, with grocery stores limiting the number of gallons each individual can purchase. If production in milk does end up slowing down for a short amount of time, Bozic said the United States will probably be fine. We typically produce 15% more milk than we need for exports. In the worst case scenario, we can consume that milk instead of sending it away.

“Of all the countries in the world,” Bozic said, “the United States is the best prepared to ensure national food safety through this crisis.”

Problem #2: Ripple effects “up and down the supply chain”

Schulz explained that livestock is what economists refer to as a “growing inventory.” Unlike grain and corn, calves born today can’t just be stored as they are until plants are safe for processing and humans are ready to eat.

“The supply chain is a very intricate process of taking livestock from the farms, processing it into hundreds of different products, and moving that product through the supply chain through various outlets,” Schulz said. “With COVID-19 and the resulting impacts, we’ve had a monumental challenge in moving that product through the various stages of that supply chain. One bottleneck that has occurred is at the processing level.”

That’s what we’re seeing right now. But Schulz stressed that decisions farmers and large agricultural businesses made 10 to 15 months ago are what’s most impacting the processing and production we see today. That means the decisions we make now will impact production and processing 10 to 15 months down the line.

Schulz said that rather than a ‘shortage,’ he preferred to look at what might be to come as an ‘availability issue.’ In the first quarter of 2020, livestock production was up by 18 percent. “Consumers might not be able to find the same product they did a year ago,” Schulz said. “Or maybe not in the same form.” Instead, consumers could find larger packages of meat that had been destined for restaurants. The meat we’re used to buying could come in different packaging.

Problem #3: A downturn for farmers that will hit shelves later

As the supply chain works out its kinks, farmers are the ones left with excess production. “Overall, we have seen demand destruction for dairy,” said Marin Bozic, an economist and dairy expert from the University of Minnesota. “We have 9.3 million dairy cows in the country. If cows were workers, we’d furlough 1 million of them now and call them back in a few weeks. Unfortunately, we cannot furlough cows.”

So while we don’t yet have data on how milk production has been impacted by COVID-19, Bozic said he does expect production to shrink. On the whole, Bozic agreed with Schulz that we wouldn’t see major shortages. Instead, the United States will have an ‘overhang of inventory’ to deal with later, and that could make different products available than we’re used to.

For farmers, that ‘overhang of inventory’ is bad news. Take the farmer we wrote about in late April. His farm saw 61,000 chickens slaughtered unexpectedly.

“For anybody who makes food, it’s heartbreaking when you put so much effort and take care of an animal or grain for so many months and then in the end not be able to market it or see it being fed to the market,” said Bozic. He wants Americans to remember that just 2 or 3% of our population grow food for the whole rest of the country.

“So imagine you’re making dinner for your family and it took you an hour and a half. And just as you’re done with everything, you slip on the kitchen floor and everything falls.”

That’s what these farmers are feeling right now. “Some people are culling cows, some people are shipping milk to plants, and in some areas, people have changed the way they feed their cows to not optimize for milk production,” said Bozic.

It’s tragic for these farmers right now, but we aren’t really seeing the impact on grocery store shelves. Instead, it’ll appear in 10-15 months. That means we could be facing an availability issue starting in February 2021.

Producers continue to wait for concrete guidance from the USDA on how to proceed safely and responsibly. As of now, it seems like these choices are in the hands of big producers like Tyson to decide how much production will keep running, and whether farmers will continue to raise livestock. Unions and meat processing workers also get to decide how strong the workforce will be. The future is uncertain, and we probably won’t see the results of these choices for the next year or so.

What’s clear from speaking to economists is that they’re focused on keeping production up and running so the market can do its job. The President clearly wants the same thing, and so do farmers. Meat processors both big and small also want to keep operating. What’s unclear is exactly how to do that safely and sustainably.

  • 1 Comment

    • Tony

      Excellent and informative writing! Thanks!!

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