Surveying the empty grocery store shelves, closed processing plants, and food being destroyed on the farm, some people began to wonder this spring if the food supply chain was broken.
Christopher Wolf, an ag economist at Cornell University, believes the rocky beginning of the COVID-19 pandemic shows that the system is resilient.
“I think, actually, that the food supply chain has done an amazing job considering that this situation that we’re in is a once-in-a-hundred-year situation,” he said.
Wolf spoke on Aug. 13 during Dairy Con 2020, an online meeting of the Northeast Dairy Foods Association, Northeast Dairy Suppliers Association and Pennsylvania Association of Milk Dealers.
Resilient, of course, does not mean free of pain. At one point, 43% of the nation’s pork processing capacity was down because of virus outbreaks at major packing plants, Wolf said. Pork loins and chops were briefly unavailable in some places.
Because the plants are in the middle of the supply chain, the shutdowns depressed prices for farmers and pumped up prices for consumers.
But the packing plants reopened, and supply bounced back quickly, Wolf said.
Dairy processors didn’t see the problems that meatpackers did, perhaps because employees do not work as close together in dairy plants as they do in meatpackers.
Still, the pandemic has taken dairy markets on a wild ride.
The closure of food service businesses cut demand, especially for dairy products in containers too large for the average family.
Because of the initial oversupply, milk dumping surged to 130 million pounds in April. There’s always a little milk dumping — sometimes a truck can’t be unloaded in time because of a malfunction at the plant, for example — but April’s numbers were extraordinary, Wolf said.
Dairy prices cratered and then rebounded. The price classes are now quite far apart, with cheese unusually high relative to the other classes.
The pandemic added fuel to a goal the cooperatives have had for several years — getting away from the idea that farmers could send as much milk as they wanted and the co-ops would find an outlet for it.
The tightening policy is a response to the competitive world market and perhaps the slow growth of balancing plant capacity, particularly in the Northeast, Wolf said.
As part of this adjustment, the co-ops have instituted base programs, in which the last percentage of a farm’s milk production is penalized or not guaranteed full price.
“If you don’t have a base program as a co-op, you in fact do have a default base program, which says that these excess market adjustment costs are going to be distributed evenly across all of the member milk that gets marketed,” Wolf said.
How a farmer feels about the base program may depend on where the person is in life, Wolf said. The change might not matter too much to farms that are comfortable with their milk output, while it could frustrate farmers who were planning an expansion to accommodate a child joining the operation.
Over the past few years, there’s been a lot of press coverage of changing milk consumption habits. Wolf has gathered that many people who don’t pay attention to dairy markets think that milk consumption is falling off a cliff.
But while fluid sales have been declining for many years, sales are still quite large. Whole milk consumption has even been increasing in recent years as some research undermines support for a low-fat diet.
And thanks in part to butter and yogurt sales, total dairy consumption is increasing.
“Cheese has been the star for a long time,” increasing at 2% or more per capita for years, Wolf said.
And what the U.S. can’t consume domestically, it’s able to export at competitive, not distressed, prices, he said.
