COVID-19 Pandemic Effect on Food Supply Chain
COVID-19 shockwaves are reverberating throughout the food supply chain. While empty shelves at the supermarket is unsettling, it is not the only stress point in the system. From food waste to human costs, the problems are diverse.
Virus Outbreaks at Food Plants
Food processors, especially meat plants, are a vulnerable spot in the nation’s food supply chain. Meat plants are heavy on shoulder-to-shoulder manual labor in cold, wet environments – a virtual COVID playground. In Logansport, nearly 900 workers of a 2,200 meat plant workforce recently tested positive for COVID-19. Companies have undertaken a wide range of measures to keep employees safe and healthy including, taking worker temperatures, installing walkthrough temperature scanners, requiring face coverings, conducting additional daily deep cleaning and sanitizing, and implementing social distancing measures, such as installing workstation dividers and providing more breakroom space. Companies have also relaxed attendance policies to encourage workers to stay at home when they’re sick. Other incentives for frontline workers include increasing bonuses and increasing short-term disability coverage.
Reduced Processing Capability
However, due to COVID-19 workforce disruptions, U.S. pork production has lost approximately 25 percent of its processing capacity over the last 3-4 weeks. Pork production operates in a “just-in-time” fashion; at each step of the production cycle, there are pigs in line ready to move to the next stage. When pigs reach market weight, they must move to processing. Given severe processing capacity constraints, pigs are backing up on farms with nowhere to go, resulting in overcrowding and animal welfare issues. At current capacity levels, there are 700,000 pigs that cannot be processed each week and that must be humanely euthanized. Simply put, pork producers cannot operate if they can’t send their pigs to market. Failure to process livestock could force millions of pounds of meat to disappear from the market, potentially leading to long-term disruptions in our supply chain.
To bring things closer to home, Indiana pork farmers sell roughly 31,000 market weight hogs daily to 6 different meat packers in 5 different states. The two packing plants based in Indiana account for roughly 43% of the total processing needs for Indiana producers. Before the temporary closures of the Indiana plants, a lack of processing capacity across the country had already created backups of pigs severe enough that euthanasia was imminent. Now, with 43% of the state’s processing needs offline the situation much more severe. The cost to care for each pig is greater than its market value and the supply chain is backing up forcing farmers to make difficult decisions about how to handle growing animals with nowhere to go. Even if Indiana had 100% packing capacity restored immediately, widespread euthanasia will still occur.
As a result, President Donald J. Trump is using the Defense Production Act to ensure that Americans have a reliable supply of products like beef, pork, and poultry. On Tuesday President Trump issued an executive order to keep meat packers open. Under the order, the Department of Agriculture is directed to ensure America’s meat and poultry processors continue operations uninterrupted to the maximum extent possible.
Shifting Purchasing Patterns and Food Waste
We have all seen the headlines of milk dumping and plowing under of vegetables due to the lack of bulk purchasing for restaurants and schools. Even though food companies are making tremendous efforts to cope with the burden of increased product demand caused by shifting purchasing patterns, the resulting hiccups are causing massive amounts of food waste. The spikes in food sales to Americans who are now eating nearly every meal at home are not enough to absorb all of the perishable food that was planted weeks ago and intended for schools and businesses. This is because the food plants that process and package food service items for restaurants and schools can’t readily change their systems to make the consumer packaged goods for our stores. It requires a vast amount of retooling and reconfiguring of the processing lines. Due to the closures of restaurants and schools, whole segments of our supply chains have come to a standstill.
Strain on Food Banks
Demand for food assistance is rising at an extraordinary rate. Nationwide, roughly 30.3 million people have now filed for jobless aid in the six weeks since the coronavirus outbreak. Even before the current economic crisis, research from the Federal Reserve showed that four in 10 American adults did not have the savings or other resources to cover an unexpected $400 expense. Simultaneously, the nation’s food banks are being hammered by shortages of both donated food and volunteer workers. Grocery stores that would ordinarily share unsold inventory that is approaching its best-by date have less to donate because panicked customers have been stripping shelves bare. Additionally, food banks and other charitable organizations have limited refrigeration space for fresh produce. Many organizations have volunteer bases largely made up of people over 60 years old. These more vulnerable folks are likely to maintain social distance at home.
Restaurants and Bars
By far, the restaurant and hospitality industry have sustained some of the heaviest blows. According to the National Restaurant Association, more than 8 million restaurant employees have been laid off or furloughed, and the industry will lose $80 billion in sales by the end of April. Additionally, businesses that were forced to close overnight are now assessing how they can keep employees and patron safe and at ease while bringing in income. Safe and clean amid COVID-19 concerns looks different for every business.
Please contact Amy Cornell if you have any questions regarding how the COVID-19 pandemic is impacting the food supply chain.