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Editorial


Front Page - Friday, June 26, 2020

Fragile food supply chain bounces back


Beef plentiful again in time for July 4th



With a little luck – and weather permitting – many local families will fire up their backyard grills next week for a traditional July 4 cookout. Along with burgers and hot dogs, home chefs might be cooking up the kinds of meats they used to order in restaurants, thanks in part to market disruptions from the coronavirus.

COVID-19 first surfaced at the end of last year, never before seen in humans and unleashing a chain reaction of adversities around the world. About 8.8 million people worldwide have caught the disease and more than 465,000 have died, data from Johns Hopkins University reveals.

Nearly 120,000 people have died in the United States from COVID-19, including more than 500 in Tennessee. Nationally, about 21 million people are unemployed – about 13.3% – as a result of the disease.

Consumers flocked to grocery stores when the pandemic began and snapped up as much meat as they could. Coronavirus and the ensuing panic buying exposed how a finely tuned food-processing system built to serve a specific set of demands can sputter when demand suddenly changes.

In April, meat processing capacity fell to 60-70% of normal, says Dr. Jessica Carter, professor of animal science at Middle Tennessee State University and director of its School of Agriculture. By end of May, it had risen to about 80% of normal, she says, citing data in Beef magazine.

Four months into the pandemic, the food industry has reached a new balance. Grocery store shelves are better supplied with all goods, although some stores may continue to limit specific consumer purchases.

“Meat processors have adjusted to the challenges of COVID and are operating at 90 to 95% (capacity) from what I’ve been told this week. That is good news,” Rob Ikard, president and chief executive officer of the Tennessee Grocers and Convenience Store Association, said earlier this month.

“You may or may not find that particular cut of meat. But are you going home without anything at all? Probably not,” says Dr. Andrew Griffith, associate professor of agriculture and resource economics at the University of Tennessee. Barring another wave of coronavirus, the meat supply should remain plentiful over the summer, at just under pre-COVID levels, he adds.

The mix of meats in grocery stores has shifted somewhat. Before COVID, beef briskets and steaks generally were bought by restaurants, says Dr. Aaron Smith, associate professor in agricultural and resource economics and a crop marketing specialist at the University of Tennessee Institute of Agriculture. More recently, these cuts have become available in supermarkets.

What’s more, the price of steak has dropped at retail because of loss of demand from restaurants, Carter notes.

“As restaurants begin to reopen, hopefully these prices will rebound,” she says, “but this will likely be a slow process.”

It remains to be seen whether people will ask their local groceries to keep stocking cuts of beef that used to go mostly to restaurants.

“We continue to feel good about our ability to maintain a broad assortment of meat and seafood for our customers because we purchase protein from a diverse network of suppliers,” says Melissa Eads, spokesperson for the Kroger supermarket chain’s Nashville division.

“There is plenty of protein in the supply chain,” she adds. “Supply of fresh meat is close to being back to normal while we are still experiencing some supply issues in packaged and frozen meat.”

Eads says the grocery industry has continued to experience supplier cost increases on select goods, especially beef and grinds. “However, we are making every effort to keep elevated costs from being passed down to our customers.”

UT’s Smith says the food supply chain will gradually accommodate a different mix of goods with restaurants reopening gradually. There’s no good data yet on what the restaurant industry will be buying to serve customers at less than full capacity or what any long-term change in consumer spending will look like, he acknowledges.

Crucial to the meat supply are the processing facilities, where animals are slaughtered and processed into cuts of meat destined for very specific end users.

“Think about the (meat) supply chain as an hourglass,” says Dr. Andrew Griffith, associate professor of agriculture and resource economics at the University of Tennessee. The supply chain is highly specialized, with many participants scattered across the nation in large facilities. It supports a “just-in-time” system of getting food from farm to table.

At the top of the hourglass for beef are the farmers who raise livestock, starting with cow and calf operations that contributed about $550 million in farm revenue to Tennessee in 2018, data from the United States Department of Agriculture shows. Raising cows and calves is Tennessee’s second-biggest source of farm revenue behind soybeans.

The hourglass narrows as livestock operations become more specialized. Once weaned, calves are sent to stockers and feeders, usually in other states, where they continue to grow before they’re eventually slaughtered for food. The growth process for cattle takes from 16 months to two years, Griffith says.

The narrowest part of the hourglass is where the meat packing houses come in. There are no large-scale beef packing houses in Tennessee, and cattle farmers generally send their animals out of state for additional feeding and eventual slaughter.

About half of all meat, pre-coronavirus, went to the food service market, which includes restaurants and institutions such as schools. About half went to the retail market, which includes supermarkets and exports.

Then came coronavirus, and a just-in-time food supply chain went awry.

Schools closed and restaurants shut down. The market for meat and other animal products such as milk dried up. People grabbed what meat they could from supermarkets, emptying refrigerator cases.

All the while, processors had to move quickly to find markets for what would have gone to food-service buyers. Some meat was repurposed for grocery stores, some was put in cold storage and some was exported.

More importantly, the meat packing business depends on its workforce, as does agriculture in general. Employees who often worked in close quarters developed COVID-19 and were unable to work. The United Food and Commercial Workers International Union, which represents both grocery store and meat packing workers, estimated earlier this month that 225 of its members had died from coronavirus and 29,000 had either been exposed to or had contracted it.

After COVID-19 struck, the packing houses shut down for cleaning and implementing worker safety measures, Griffith says. These companies purchased protective equipment for workers and redesigned work spaces. Fewer employees now work in a given area in a plant in order to reduce the risk of spreading COVID-19.

That translates to less meat being processed, although the industry is slowly reaching pre-COVID production levels. In addition, processors cannot quickly and easily change processing lines from food-service to retail products. Employees’ skills and tools are specialized to different cuts of meat. Some packing houses are changing their lines, but it’s expensive, Griffith explains.

Meanwhile, as large-scale meat packing facilities have scrambled to adapt to COVID-19, smaller specialty processors have seen demand skyrocket for their skills. Griffith notes some are booked well into next year.

The coronavirus pandemic has affected not only the beef market, but markets for other animal proteins and for non-meat products.

“Other food suppliers have been faced with problems similar to the meat industry,” MTSU’s Carter says.

Despite the problems COVID-19 has caused with harvesting, processing, packaging and distribution of food products generally, the United States has a secure and abundant supply of food, she says.

Consumer behavior has changed enormously during the pandemic, many say.

“Since the onset of COVID-19, most every meal has been prepared in the home,” says Kroger’s Eads. “We see that changing as restaurants start to reopen and more people get back to work.”

Kroger stores throughout the chain “have definitely seen an increase in online ordering for pick up at store,” Eads adds. Kroger also saw customers “shopping for tried-and-true comfort foods as they weathered the crisis at home.”

Sales of frozen meals, cookies and hot teas have increased, she says, while sales for healthier options like salad mix and dressings have stayed flat. What Eads calls “indulgent foods” became more popular as people stayed home.

“There’s been a significant spike in sales of ice cream, frozen novelties and – as you might expect – beer and wine.”

For some, including UT’s Smith, his wife and three children, making dinner at home has turned into a family activity. The Smiths have been cooking their own pad thai and other restaurant favorites such as Korean barbecued beef, he says. “Some of that will stay,” he notes of the family cooking activities.

People also have been starting their own home gardens to the point that home-improvement stores have back-ordered some home-gardening equipment, Smith says.

Farmers markets and community supported agriculture arrangements also have gained in popularity. Direct sales, mostly of produce, from farm to customer, has gone up an estimated 400%, Smith says. This includes “you pick” farms and CSA, which compose a very small percentage of the agricultural economy.

The unemployment and economic hardships stemming from coronavirus also will affect consumer behavior.

“Households that have been impacted by unemployment are most greatly affected,” Carter says. “They will be looking at ways to lower food costs and this may include changes in how much meat is purchased or what type of meat products are purchased.”

The effect of coronavirus on the agricultural economy is very different from in past economic downturns, Smith says. It’s also not like outbreaks of infectious diseases in animals that disrupted the food supply chain, such as African swine fever, highly pathogenic avian influenza and mad cow disease. There’s nothing in the immediate past to directly compare this with, he says, adding that in past human pandemics, the food supply chain was completely different.

“This has been a tough year for America’s farmers and ranchers,” Carter says. “This industry is used to highs and lows in market prices but I don’t know that anyone expected what we have seen with the COVID-19 pandemic. We will be dealing with issues that were a direct result of the pandemic for many years.

“Some farmers and ranchers will most likely consolidate or call it quits. Other will weather the storm and come back stronger.”