The Curious Case of Missing Food
This post was originally published for Komeeda.
In the age of COVID-19, we are witnessing firsthand the vulnerabilities of the US food supply chain. There is an unusual paradox at play: the food in our supply chain system simultaneously exists, and doesn’t. Currently, there is an abundance of food production-side, yet our grocery store shelves are empty. How did this come to be, and what does it mean for the future of our food supply chain?
How does the US supply chain function?
By simplifying our very complex food supply chain into a few key points, we can unpack the factors which make our system hyper-efficient, and understand what exactly is going wrong.
The industry which our supply chain services is broken into two major sectors: retail and food service. The retail sector largely consists of grocery stores and convenience stores; food service encompasses essentially everything else, such as restaurants, schools, hospitals, and office cafeterias. Any goods produced for the food service sector generally do not make their way to the retail sector, namely because an individual consumer’s demand for a 25lb bag of red onions typically isn’t there. There are other reasons, as well, such as regulatory guidelines, which influence packaging differences. As such, produced goods are packaged in two entirely different ways - one intended for retail, the other for food service. Supply-side, we are seeing an abundance of goods available for food service which is almost fully underutilized because that sect of the market has been gutted due to the virus. With nowhere for that food to go, and an inability of it to be re-purposed and repackaged for the retail sector, the majority of it is going to waste. Produce, dairy, and meat farmers are all feeling the effects, seeing their financial and labor investments quite literally being dumped because our system does not have the flexibility to move goods from where they are intended to be (such as a restaurant) to where they need to be (such as a grocery store). In response, businesses in the food service sector are adapting their businesses to fill this gap, such as restaurants becoming pseudo-grocery stores. Recognizing the bottleneck occurring due to certain requirements, such as nutrition labeling, the FDA has taken measures to temporarily ease such requirements to provide much-needed flexibility to the system.
After looking at the two sectors, it is important to understand how the production side of the chain functions. The production arm of the supply chain is overwhelmingly dominated by a handful of very large companies which our system relies on to meet, or exceed, market demand. These companies are able to produce an incredible amount of goods (whether done by themselves, or by contracting smaller companies), and distribute them across the country. Logistically, the fewer parties involved in the process between production and distribution, the quicker food can make it from a producer to a distribution center to a local grocery store, and ultimately, to the consumer. Since there are fewer touch points to jump between when dealing with one large producer compared to multiple smaller producers, consolidating operations to very few parties makes the most logistical sense. Under normal circumstances, this system works; however, we are seeing the very bleak pitfall to having only a few producers. When one company falls, the effect is felt throughout the entire system across the country through a drop in available supply circulating in the system, as we can see from the closure of the Smithfield factory.
Photo by Dan Gold
What else can go wrong?
The way our food supply functions is just a piece of the puzzle - there are other considerations to take into account when trying to understand what is going wrong, and what may come out of ongoing issues.
The rise of mass-produced food and the creation of highly specialized equipment to efficiently process meat and produce go hand-in-hand. This equipment is only able to handle goods with very specific, standardized qualities. On a simple level, livestock cannot go through the processing line if above or below a certain weight/size because the machinery was created to process livestock of a specific weight range. The supply is there - the problem is the supply is unable to reach the necessary sector, which is leading farmers to euthanize their livestock because they know their livestock will grow beyond the capabilities of the processing line. Again, the takeaway here is that the trade-off for a highly efficient system is that it is also extremely susceptible to disruptions because of inflexibility which exists within the system.
Additionally, human labor lies at the heart of issues in the food supply chain. Without workers, on either the production side or distribution side, there is no system. There is a crisis unfolding for workers who face a catch 22: either go into work and risk becoming sick just to get paid, or stay home and be unable to provide for themselves and their families. Workers are experiencing a lack of implemented safety measures and inadequate access to PPE while doing their already dangerous job, and some employers are actively, though indirectly, encouraging employees to continue coming into work for a pay bonus, exploiting this catch 22. Those putting their health first by not going into work, even if healthy, put a strain on the system because the labor force is subsequently reduced. This is not to say these employees are wrong for doing so - safety is a paramount issue, and the reduction in labor from a few workers staying home is negligible compared to the resulting reduction from a sick workforce on a mass level if workers do not stay home and either spread or contract the virus.
For now, we are experiencing an abundance on the supply-side; however, that will very well change if the health and safety of workers continues to be shoved aside, and it will change at an alarming rate. Having a sick employee stay home rather than go into work is the best call, not just for that individual’s well-being, but for the safety of other workers, and security of the supply chain overall. Taking a page from the Smithfield factory story, it is not unthinkable to imagine that one sick worker can, and will, spread the virus to others, resulting in a whole factory shutting down. If this happens with other companies and food producers, we will see issues in the supply-side of the chain begin to bubble up.
Eventually, we may experience a situation opposite of what we currently face, where demand returns (particularly from the food service sector), but production is unable to keep up due to a labor shortage. This will lead to food prices skyrocketing, and could go so far as to result in food shortages. Alternatively, if suppliers slash production quotas to avoid continued significant financial loss from waste due to the loss of an entire market sector’s demand, the road following those decisions will be rocky. Should this be the case, and demand from the food service sector opens back up, we will face a food supply shortage if producers are unable to rev up production to normal levels in order to meet the returned demand.
Where do we go from here?
We can gather some insights about what our supply chain future may look like by taking a peek into consumer behavior and making assumptions. As of April 17th, 2020, Google Trends shows a 180% increase in searches for “local farm delivery”, and a 190% increase in searches for “local food” as compared to March. Check out this 5-year trend line of queries for “vegetable garden.”
This dramatic spike cannot be attributed to an growing interest in the topic over time alone (the seasonality of the number of queries has stayed relatively consistent year-over-year), but is rather indicative of current consumer sentiment. The number of search queries for the topic is more than double that of the same time last year, meaning COVID-19 has had a massive impact on consumer behavior: consumers are afraid of a food supply chain collapse, and are researching alternative options in preparation.
In the long term, this may have significant implications for our supply chain system, as society begins to reconsider the trade-offs of our current system. People may flock to their local farms if able, purchasing directly from producers. Local farmers markets may see increased foot traffic if people begin to shy away from grocery stores (consumers are also searching for “local farms” heavily at this time). It is important to note that at this point, these theories are purely anecdotal due to a lack of hard data.
The question remains: do we opt to continue with the large, uber-efficient system that allows for more accessible, cheaper products which also happens to be extremely rigid and unable to adapt to disruptions, or do we begin to value a locally-based supply system which is much more flexible, but comes with higher product prices due to higher labor costs, higher distribution costs, and lower supply levels?
Further engagement:
This podcast from wbur gives a great overview of multiple elements contributing to the issues the food supply chain is facing.
The BBC put together a gut-wrentching account of the story behind the Smithfield pork factory closing.
Scientific American has an article running through the impact of the pandemic on specific crops and the effect it will have consumers.
