Food Supply Chains Are Beginning to Shut Down April 14, 2020

The week ending April 5, 2020 saw a 39% drop in available loads in the spot market. It is hard to quantify exactly what percentage of those were in the food sector, but it is safe to say that COVID-19 is now attacking the food industry full force. While the past few months have seen Global and Domestic Supply Chains bend, crumble, or come to a screeching halt, many felt we would always be able to efficiently move food to where it is needed. This past week has given us an eye-opening look at just how devastating COVID-19 is to even our most critical infrastructure sector. Eating patterns have changed in the face of stay-at-home and social distancing orders. These changes have affected every facet of the food supply chain including the consumer, the grocery store, restaurants, and the actual farm.

Produce Season Won’t Be the Same

• We will see the uptick beginning in May for reefers associated with the unofficial beginning of Produce season.
• We are already seeing slight increases in lanes originating in California, Florida, and the Midwest.
• There are speculations that as much as 25% of produce that is grown will not be harvested or transported as the restaurant industry has been decimated. The increased demand at grocery stores has not and will not make up for the decline in restaurant sales.
• While many are struggling with unemployment and food security, food banks are trying their best to get these crops harvested and distributed. However, they don’t have the funds to purchase these crops and the farmers cannot afford the labor to pick these harvests and transport them – it makes more sense financially for the farmers to allow the crops to die in the fields.

The Meat & Dairy Industries Downshift

• In addition to the plummeting demand in the restaurant industry, the closure of schools and other large-scale customers has given farmers and food manufacturers the need to slow production.
• Beef prices are down leading ranchers to hold onto cattle until the market price rises.
• One of the most perishable items, milk, is being dumped by manufacturers because they cannot move it fast enough without the purchasing power of schools. The Wall Street Journal reported as much as 7% of all milk produced last week has been discarded.
• Poultry farmers are scaling back on the amount of eggs they intend to hatch to match the declining market for chicken.
• The pork industry has seen plants shut down as one Smithfield Foods plant was found to be the epicenter of half of the county’s positive COVID-19 case. Other pork processors are cutting their output similar to the beef and chicken industries or altering their butchering practices in ways like decreasing bacon production and rendering more lard (which has a more stable shelf life).

The Lack of Agility in a Critical Supply Chain

What we are encountering is a monstrous disruption with fatal consequences. Our response should be equally as powerful, but it so far has yet to rise to those levels. We have all the food we need for our citizens but we can’t get it to where it needs to go. Grocery store shelves are still bare at the end of the day (if not the beginning sometimes) and producers are scaling back or actively throwing out product because we cannot get it to those shelves.

What we have learned is there is no food supply chain. There are restaurant supply chains, grocery supply chains, produce supply chains, meat and dairy supply chains, and 100s more fragmented supply chains. Each of these supply chains serve a market and when one market collapses, all the points in that supply chain collapse or suffer rather than being able to shift. Regardless of how consumers shift demand, the freight industry is always going to feel the brunt of that move and be required to adjust accordingly. Hopefully there will be enough lessons learned from this pandemic to prepare supply chains to react better to the next major economic disruption.