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Answering Your Questions About Our Supply Chain | KCBS 740AM

As we continue to navigate these unprecedented times, KCBS Radio is getting the answers to your questions about the coronavirus pandemic. Every morning at 9:20 a.m. Monday-Friday we’re doing an “Ask An Expert” segment with a focus on a different aspect of this situation each day.

Today we’re looking at our supply chain and all the items that have been impacted by the pandemic with Dave Puglia, President and CEO of Western Growers, which represents family farms growing fresh produce.

Let’s talk big picture first. You know, we tend to think of agriculture as “Big Ag” and there are in fact some pretty big organizations. Can you break down for us, here in California at least, how the amount of farmland is sliced up between great big operators and mom and pops and everybody in between?

We really have a great diversity in terms of size in California. We have so many farmers in our membership who are on the smaller side of production, who supply farmers markets, local restaurants, community supported agriculture. And it ranges up to very large farming operations; family farmers, they’re usually third or fourth generation but they tend to be a little bit on the bigger side and supply grocery chains and food service restaurant chains around the country. So we really have a great diversity both in the types of food we grow in California – we have over 300 commodities in the fresh produce sector alone in California – and in the size of the farms.

I know that historically this was a remarkable place, are we still in California the place that grows the widest variety of things?

Both the widest variety of things in California and also by far the largest food production state, agricultural state in the country. California is in terms of farm gate revenue (that’s the amount paid to farmers for what they produce) easily the number one state in the country. And within that roughly $50 billion that California agriculture produces in terms of farm gate revenue, about 60% of that is the fresh produce sector.

And help me understand import/export because we always hear, “well we grow this but we send it there” or “we grow it here but it’s cheaper to get it from there.” What’s that mix look like?

Well most of our production in the fresh produce sector anyway out of California is for domestic sale here in the United States, although we have depending on the specific product I’m talking about quite a bit that’s exported. There’s a lot of demand around the world for California-grown produce, California-made wine. California products are sold at a premium in certain markets around the world and that’s something that obviously is to the advantage of California. Every dollar paid to a farmer for a product paid in California generates at least $3 in additional economic activity that benefits the state.

Let’s get to some questions then, which have been sent in by our listeners to askus@kcbsradio.com.

This one was a story a few weeks ago: where’s all the fresh garlic? When will I be able to buy it in grocery stores again? 

Yeah we’ve heard a lot of that, people miss their garlic. This pandemic resulted in, as people know, the sudden shut down of the restaurant business a couple of months ago. The same for food service suppliers who provided food to universities and school systems and hotel resorts. All of that shut down overnight and that really blew up the supply chain in the United States. That resulted in sudden shortages of certain commodities in the produce aisle, oversupply of others. So it really has been very chaotic. I can’t tell you exactly why we had a sudden shortage in garlic on the grocery store shelves, but I will tell you that California produces the best garlic in the world and our garlic harvest season is just coming up. So stand by, if it’s not already back on your shelves it will be shortly.

I’m curious as to whether I’m more likely to find a steady supply of produce at a farmer’s market or a supermarket. I’m just trying to balance being around other people with getting healthy food!

Yeah it’s a good question. I think it depends on the farmer’s market you prefer to purchase from. Some have a little bit steadier supply than others. I will say our grocery chains in this country have proven very resilient. They’ve really stepped up to the crisis and done extraordinary work with our members, with farmers and distributors to keep food coming to the grocery store shelves and keep it fresh. So I think as we’ve seen some hiccups in our supply chain as I said a moment ago, it’s a pretty resilient system and people are very dedicated to keep fresh food coming to their shelves.

I think it will be hit and miss for a little while with farmer’s markets, but we have so much that we grow in this state that is looking for another outlet, another home because the restaurant sector continues to be largely shut down or at least reduced in its throughput. So you have a lot of farmers who maybe hadn’t been looking at farmer’s markets before as a place to sell their wares who are now taking another look. I think we’ll probably see an increased supply of produce in farmer’s markets lasting for many more months, and possibly permanently. Many farmers who didn’t get into the farmer’s market channel or who haven’t thought about community supported agriculture (which is direct delivery from farmers to consumers of a box of produce) those channels are just booming. And I think many of us will stick with it if they hadn’t already used those avenues to purchase food.

Can you walk us through the economics if you’re growing say, grapes or cherries or turnips in California, whether it’s a better business decision for you to sell it off in wholesale or to set up the operation that it takes to go to the farmer’s markets or deliver them in consumer boxes?

Yeah it’s another good question. It depends a bit on your size as a farmer, how much you produce, what you produce, your seasonality of production. As a general rule, most of the food we eat goes to grocery stores. We mostly buy from grocery stores and that will still be the dominant sector by volume. But as I said, I think more and more of us are experiencing farmer’s markets and community supported agriculture.

The economics of this really still argues for farmers who produce a lot of food to stick with long-term contracts with food service and grocery store chains around the country, because they produce a lot of volume and those farmers would overwhelm farmer’s markets and simply produce too much for those smaller distribution channels. So I think there’s always been a strong niche and a growing niche for California’s smaller farmers to find a profitable outlet for their products at farmer’s markets and through community supported agriculture. It costs a little more to produce, it’s a little less efficient because you’re producing less and you don’t get that scale efficiency. But you also get a few more dollars per pound, if you will, through farmer’s markets and community supported agriculture.

So the system really has sort of evolved to accommodate consumer desires, whether you desire a box delivered to your home through community supported agriculture or you want to go to a farmer’s market or you want to keep buying from the grocery store. We’ve met those consumer preferences in a very efficient way. And again when our economy shut down in March, it blew all of that up temporarily but we’re rebuilding it. And I think the beauty of California agriculture is its resiliency and adaptability, and we’re seeing that now as we come back into marketplaces and experience new trends and meet those demands that weren’t there before.

With so many restaurants shut down shouldn’t there be more fresh produce available than normal? And as they re-open, is there currently enough food in the supply chain to go around? 

This question is asking, are we going to whipsaw back into a problem going the other way?

That is a great question. What happened when we shut down the restaurant sector in March and universities and school systems closed at the same time, is that millions and millions of pounds of fresh produce that were being grown principally in the desert regions of California and Arizona – and we’re mostly talking about vegetables here – that were destined for restaurants and universities and school systems, that product was either ready for harvest or had just been harvested and cooled and ready to ship when all of this happened. And the volume was just so huge that there was literally no place to go with all of that fresh produce when everything stopped. 

Many farmers tried to redirect their products to grocery stores and farmer’s markets. We doubled our donations to food banks almost overnight; California farmers are very generous people and had a lot of product to donate and they did, but again the volume is just so high that we unfortunately ended up losing a lot of that fresh produce and having to put it back into the ground, as we say in the industry. Caused huge economic loss.

Now, two months, three months later we’re adjusting to the demands that have changed. We’re obviously buying more of our food in grocery stores and less from restaurants – although that’s picking up again – and so we’re re-adjusting our supply chains to come back into the food service sector. 

But it’s very unpredictable. I think that’s part of the challenge here. You know, farmers have to make decisions months in advance about what product to plant, what crop to plant, how much to plant and they’re guessing that there will be a market for it in two months or three months or four months depending on what you’re growing. In this era with this pandemic, we really have a tough time making good predictions about what market demand will be in the restaurant sector versus the grocery store sector in three months or four months. Farming has always been a gamble. You gamble with weather, you gamble with diseases that can come through a field and wipe out a crop, you gamble with loss of water supply. But this is an increased risk that nobody’s really confronted before and that’s just disrupted the supply and demand equation.

Are the meat prices going to continue to rise or will they start to go down soon? 

I’m less familiar with the meat sector, I don’t represent those folks but I do keep an eye on it. My sense is that we will see prices come back down in the months to come. I think we’re in a period of continued supply and demand mismatch because of the choke points in the system there, which are the processing plants, meatpacking facilities. That’s where they’ve had a lot of COVID-19 cases sweep through those workforces and it shut down for a time until the federal government ordered them reopened. I think it’s going to take time to get the production side and the farmers who produce those animals to get that production back through those processing plants as they come back online full speed, but my sense is – and again I’m a couple steps removed from this – they’re on the way to getting back to normal.

They have the same problem we have in the produce industry, which is the restaurant industry being relatively shut down and coming back online slowly, we’re all guessing what demand in the restaurant sectors will be in the months to come and that’s a hard thing to do.

This next one wants to know about safety, not just in the plants but of the food itself. This person says, how is any potential problem addressed? So actual food safety issues.

Yeah it’s a question we get a lot. FDA has been very very clear that COVID-19, the coronavirus is not a food safety risk. It doesn’t transfer to fresh produce or other food products easily or well. But having said that, in the fresh produce industry because most of what we produce and supply to Americans is consumed raw, it’s grown outside in fields subject to weather and animals and then eaten raw, we have very high food safety standards to prevent pathogens from contaminating that produce. 

Those protocols that govern food safety in the fresh produce sector have really helped us kinda get a jump start on management of best practices to protect the workers in our fields, who of course we need to do all we can do to protect them from this virus. It’s a hard thing to do in some of our farms and processing facilities because they work fairly closely together, but we’ve already implemented changes to increase separation, to put plastic partitions between workers on harvest crews. Of course masks and PPE, much more hand washing and field sanitation. So I feel very very comfortable about the food safety question. We’re very very concerned about the workers in the fields who have continued to do their work in the midst of this crisis because they’re essential to our national economy, to our food supply and they’ve just been really heroic in showing up to work day after day when so many of us have been afraid to go out and be with each other in the middle of this crisis. But I think the industry has responded very strongly to take every step we can to protect our workforce. And as I said our food safety protocols are so strong, with this virus there’s no additional risk.

This next question touched on worker safety but also wants to know whether people are actually able to get to farms. Are there issues with labor supplies?

Workers have been able to get to our farms and to our packing facilities without a whole lot of headaches. When the pandemic first hit, when the economic shutdown and stay at home orders first hit we had some workers who were being questioned about being out on the road. Many of them leave very early in the morning and some of them were reporting that they were asked what they were doing out. So most of our employers, probably all of our members, provided letters for them to carry that just confirmed that they work in agriculture and that makes them an essential worker. That really ended any concern some weeks ago. We haven’t had any reports of problems with any workers being able to get to their places of employment and get back home again.

The concern we have there is that they often ride in buses that are provided by the employers, so we’ve had our members go from a single bus to carry their workers to the fields for work in the morning to four buses for the same number of workers, just to increase that physical separation. Obviously it costs more and it’s less efficient, but it’s just one more measure to protect them from the virus.

Can your guest talk about the flow of food to food banks? It seems like we have such an incredible need right now and so much fertile farmland in California.

We’ve obviously seen these long lines at food banks here in the Bay Area and elsewhere.

Yeah that’s a great question. When this hit, as I mentioned a little while ago we had so many farmers whose vegetable crops primarily had no place to go when the restaurant industry shut down. We doubled our donations to California food banks from 12 million pounds in March to 26 million pounds in April. So it really jumped up fast.

One of the challenges we have on an ongoing basis with that is, it costs a lot of money to harvest fresh produce and to transport it. And so a farmer who has already spent – let’s say for example he’s growing lettuce – has spent $5,000 per acre to grow the lettuce. Well if you need to harvest it and then ship it, transport it, that’s going to cost another $5,000 per acre. And if you are sending it to a food bank obviously you’re not going to be paid for the product, so you’re being asked to double your loss. You’re going to be taking your loss from $5,000 per acre to $10,000 per acre. So we’re working with the federal government, with the state government to try and find ways to keep some compensation flowing to farmers who are willing to donate that food to food banks. We’re working closely with the California Association of Food Banks and the state of California. The Newsom administration has put some funding to offset some of those harvest and transportation costs. The federal government is running a different kind of a program to purchase products from farmers and box them and provide them to food banks and other charitable institutions. So there’s a lot going on to try and continue to get that great fresh produce that has no place to go for sale over to food banks.

The other challenge will be food banks, in some cases, being strained to accommodate that much fresh produce. Fresh produce has to be kept cold, it has to be refrigerated. It doesn’t have a long shelf life and so it’s a little bit harder to manage than canned or dry, packaged goods that can sit on a shelf for a long time. So you have to have pretty big refrigeration facilities, you have to have really strong management to move the product through before it spoils. So there’s some challenge there too, but California food banks are really quite expert at all of this. So they’re a great working partner with us.

It’s planting season for later year crops. Will all of this change the food growing priorities in California? Will farmers be growing different things?

I don’t know that they’ll be growing different things. They may change their crop mix a bit based on consumer demand. I’ll give you an example of this. When the restaurant sector shut down and we all went running to the grocery store to buy food, people quickly snapped up fresh produce items that hold a little bit longer in our homes. So think of apples and citrus, potatoes, things like that. Carrots went off the shelves very very quickly. People prefer not to always handle a product that is unwrapped, so a lot of people went for bagged salads.

So we’re looking at those trends and our farmers in California are very adaptive, very responsive. They’ll pick up those consumer demands as they change coming out of this crisis or as the pandemic lessens and we go back to restaurants. And so I think because in California we have such a great diversity of crops that we grow, we have a greater ability to adapt to market demand. It’s not like Iowa where we have corn and soybeans and hogs and that’s about it. California has over 300 commodities that our farmers grow and produce. So we have the ability to adapt very quickly and it’s going to happen in ways that are numerous and probably very hard to predict. But we will adapt.

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