Food for Thought

Farm to table is an interesting concept, more than just marketing, far less than the whole truth. Unless you are eating an organic “we grow it all here” restaurant – which is probably closed now anyway – the food supply chain is dramatically global. Out-of-season fruits and vegetables in one part of the world come into season somewhere else (like blueberries, now harvesting in the Southern Hemisphere). Food has to be grown, processed, transported, stocked and sold. Some products mostly come from “other countries.”

Avocados, mangos, bananas, papaya, coffee, tea, much of our seafood, etc. for example. Sure, there is some coffee from Hawaii, there are a few avocados grown here in the United States and lots of seafood from our own shores, but our supply chain is complex, dependent on healthy workers (from field to retail), functioning airlines, ships, railroads and trucks, docks and airports, warehouses, grocery stores, etc. Everyone working in that supply chain is a hero at some level. Many are beginning to experience infection rates that (a) impact what gets done and (b) motivates remaining workers to demand better protection. What happens if those workers are unable to provide what is needed in sufficient numbers to impact the supply chain?

So, let’s analyze how the food chain worked before the COVID-19 virus exploded, specifically within the restaurant industry. And how the food chain has now shifted almost entirely to grocery stores. The numbers below have been collected from various industry sources by the industry blog, PostTab.com, July 17, 2019. I put selected quotes in my own order, noting that for average US consumers, they spend about 12.6% of their income on food. In 2019:

·         A whopping 45% of diners go out to eat multiple times a week, with another 20% going out to eat once a week.

·         Projected annual sales in the restaurant industry are $863 billion – that’s 4% of the country’s gross domestic product.

·         In 1955, the restaurant industry comprised 25% of the family food dollar. In 2019, that number rose to 51%.

·         1 in 3 Americans have their first job experience in restaurants - 6 in 10 adults have worked in restaurants at some point.

·         There are currently 15.3 million employees in the restaurant industry.

·         More than 9 out of 10 restaurants have fewer than 50 employees.

That was then. Most restaurant workers have been furloughed or let go with a few left in “essential” services to provide take-out and home delivery. Many restaurants, facing fixed costs like rent or simply living off current cash flow without significant reserves, are closing permanently. This alone has created massive unemployment and economic disruption. I suspect ever as the virus unwinds and restaurants reopen, there will be timid consumers who may still be practicing safe distancing at some level. There are obviously long-term effects, well past any virus recovery, to all of this, and there are equally hard pressures for all of us currently.

Even taking away the obvious current pain among restaurant workers and owners, the closing of these establishments obviously put a dramatic halt/reduction in consumer retail access to food through this channel. That demand, added to the proclivity towards hording we have witnessed, shifted exceptionally quickly to grocery stores (including some online sources). People simply moved that portion of their restaurant demand to their local grocery chains. Just imagine how such a massive, literally overnight, change in consumer food spending habits hit those outlets. Shelves were rapidly laid bare, supplies at every level were challenged, and grocery stores could not possibly have anticipated or have been well-prepared to handle that deluge.

Back out at the source of food supplies, demand for the highest end seafood, meat, poultry and vegetables vaporized. David Pierson, writing for the April 10^th Los Angeles Times, provides this simple case as an example, the story of Lucas Papierniak, a father of four whose company had shipped high-end seafood to hundreds of top restaurants, particularly in New York and Los Angeles: “[A]lmost immediately after lockdowns were announced last month to slow the spread of the coronavirus, orders for his fish came to a stop. One East Coast customer canceled a purchase of two 45,000-pound containers of poke cubes valued at about half a million dollars… ‘Business just died,’ said Papierniak, whose company is based in Hawaii. ‘We had to figure out how to keep paying our fishermen.’

“The 40-year-old father of four, including a newborn, started scrambling for ways to keep 5,000 fishermen and 350 factory workers on his payroll. His distributor in downtown Los Angeles suggested tapping into the extraordinarily busy grocery industry by supplying tuna steaks. The change in business keeps him open, but each day is a struggle; tuna steaks command a fraction of the price of sashimi… Even if restaurants were to reopen in the near future, Papierniak estimates it would take three months to restart his supply chain… ‘This isn’t going to blow over once shelter-in-place is lifted,’ he said.”

You may not feel terrible over the closure of “restaurants for the rich,” but the rich aren’t the ones suffering as a result. It’s the workers. Farms have also seen huge losses, particularly in the dairy industry, as schools and colleges no longer provide school lunches or stock cafeterias. Literally, millions of gallons of milk had to be dumped! Planning for the future becomes very complex. For example, it takes 18 months to breed livestock to market, but who knows what the demand curve will be?

Globally, we face controls and economic realities in other countries that also impact availability of agricultural products. “Already Vietnam, the world’s third-largest exporter of rice, suspended sales to foreign buyers. Kazakhstan banned exports of flour. And the Russian-led Eurasian Economic Union, which includes Belarus, Armenia and Kyrgyzstan, halted exports of rye, soybeans and some flour… [Fortunately, some believe,] the bans were mostly symbolic, to ease concerns about shortages at home. Global grain stocks, he added, were high enough to weather a months-long disruption.” LA Times.

Prices are also in flux. Egg and pork belly prices have plunged, for example, while other products are not available at all. Simply put, our supply chain is not configured to handle these changes. “‘The system has evolved to be highly efficient, able to get food from Asia or South America onto the grocery store shelves within days,’ said Joseph Glauber, a senior research fellow at the International Food Policy Research Institute and the former chief economist at the U.S. Department of Agriculture. ‘Now we have all these things gone from stores in the U.S. I lived in Mali for two years in the ’70s, and the grocery stores were always that way. It’s striking if nothing else.’

“Glauber said supermarkets weren’t designed to suddenly absorb all the spending on food that normally takes place at restaurants. Whether the scenes of sparsely stocked shelves worsens into a genuine food shortage will depend on the length of the pandemic and whether nations can refrain from protectionism, he added…

“Processing plants designed to serve restaurants and other food service businesses also aren’t all equipped to prepare and package pork for grocery aisles, which require smaller portions and often different cuts.

“In another sign of how the outbreak has disrupted the food business, once-unpopular items are now back in vogue… Demand for beans is skyrocketing because their long shelf life is coveted during times of uncertainty. Goya Foods Inc., the New Jersey brand synonymous with canned beans, reported demand quadrupling at grocery stores.

“Demand for vitamin C pushed the price of frozen orange juice concentrate in commodities markets up 25% in late February — this after the beverage faced years of decline in the face of growing competition and declining interest in traditional breakfasts.

“Even canned tuna has made a big comeback. Thai Union Group, owner of Chicken of the Sea, saw a 25% surge in share value on the Thai Stock Exchange in mid-March as cans of its signature product were scooped up by shoppers.” LA Times. What does the US Department of Agriculture recommend in all of this? What is their plan? Read the opening excerpt below the title. Basically, nothing really! “Monitoring.”

            I’m Peter Dekom, and for the rest of us, dealing with the food supply issues begins with understanding the issues and planning accordingly.