Nearly empty grocery store shelves; employees struggling to restock items fast enough to meet increased demand; long lines of people waiting to get inside stores; news coverage of meat plant shutdowns. All these were the initial responses as people were beginning to grasp the seriousness of Covid-19 in March. Some also saw these as signs indicating that the US food supply chain might be faltering. Thankfully, after the initial panic buying subsided, food supply stocks were restored and all initial concerns about food shortages were dispelled. However, it is worth exploring what this experience implies about the state of the food supply chain in the United States. How were the individual but interlinked components of the process affected and continue to tackle the challenges caused by the major shift in consumer habits? What does the near future of the food supply chain look like?
The food supply chain can be separated into six main stages: production, processing, packaging, transportation, market availability, and consumption. Each stage in this process is essential to ensure the balance of a system that relies heavily on human labor. Over the years, the food chain has endured supply side shocks due to bad weather or diseases that affect livestock among other factors. But the coronavirus pandemic has caused extreme demand side shocks that have disrupted each step of this process. The major interruption in the food supply chain can be attributed to a shift in demand from the food service sector (comprised of restaurants, cafeterias, catering operations, and other businesses) to the supermarket sector.
Data from the US Department of Agriculture suggest that prices received by farmers from first buyers have reduced significantly – an almost 10 percent year-over-year decline in April, and about 5 percent year-over-year decline in May and June. These statistics capture the lost income due to lower market demand from the food service sector. Moreover, due to the labor-intensive nature of farming, the safety and availability of workers continues to cause uncertainty for this link in the value chain.
Food storage and processing plants around the country have been affected by the direct impact on its workers and bottlenecks in the distribution process. Health and safety precautions have become a necessity and guaranteeing that has been costly in terms of time and resources.
The packaging arm of the value chain has also suffered due to an urgent need for repurposing. Packaging standards vary depending on the final destination of a product. On one hand, restaurants and catering operations are used to receiving products in bulk with little to no labeling. On the other hand, products that make their way to grocery store shelves need to be smaller and require detailed labeling. While quickly adjusting the packaging process may yield short-term results, it remains unclear as to whether the food packaging and distribution companies will be able to recover their investments that went into changing their assembly line processes to fit current needs.
In terms of transportation, trucking companies have had to respond to a surge in demand while tackling logistical and health safety issues. To meet increased needs, truckers and truck stops are now qualified as essential businesses to better meet consumer demand.
Restaurants have suffered most visibly due to lockdown restrictions and social distancing mandates. While store pick-up and delivery options have eased the blow to many establishments, some businesses may be unable to survive the loss in revenue. Grocery stores, on the other hand, have seen tremendous growth in sales. Availability of goods in stores was a major concern when lockdown measures first went into effect. Managing excess demand has translated into hiring more workers in stores while prioritizing the safety of employees and customers.
As consumers resort to preparing home-cooked meals in lieu of dining out, spending on groceries has increased dramatically during the pandemic despite rising prices and even few instances of price gouging. Food banks that mainly rely on food donations have also suffered due to disrupted supply chains but continue to adapt to the new environment.
With all things considered, the food supply chain has emerged to be sturdier than anticipated in face of a debilitating demand side shock. However, as long as the coronavirus pandemic continues to be a public health concern, the food supply chain is likely to bear the burden of all the challenges associated with it. While product options may not be as plentiful as usual, a food shortage does not seem apparent in the near future. In contrast, as we enter a recessionary period, factors such as rising unemployment, job losses, and lower income will directly impact consumer trends. Food insecurity might become a major issue for a big part of the population. Maneuvering through these imminent downsides efficiently, while withstanding short term losses, will be essential for the food supply chain to weather the current conditions and maintain the balance in the food system.
