Just over a century ago, the world saw a global outbreak of the Spanish flu. Originally seen in Europe, the United States and parts of Asia, the flu of 1918 killed approximately 50 million people worldwide.
Fast forward to March 2020, just over 102 years after the Spanish flu outbreak, and the World Health Organization declares COVID-19 a pandemic. The virus swiftly made its way through 114 countries in three months, and that was only the beginning.
Countries around the world shut down their borders, enforced stay-at-home orders and practiced social distancing. Here in the U.S., government officials closed non-essential businesses and reduced the amount of face-to-face contact in order to slow the spread of COVID-19.
This inadvertently affected the food supply chain in America and around the world. Jayson Lusk, head of the Department of Agricultural Economics at Purdue University, says the disruption of the supply chain begins with agriculture.
“Whatever hit consumers have taken, I would argue that farmers have taken an even bigger hit,” he says.
The United States Department of Agriculture (USDA) releases projections of net farm income, and the most recent report was announced in February. Farm income for this year was presumed to be fairly flat, according to the USDA. Lusk says that might not be the case anymore due to COVID-19’s damaging effects on agricultural production. He says that the net farm income will most likely decrease because of the falling commodity prices.
Food Consumption Shifts
Lusk goes on to say there were two big periods of disruption for the agricultural industry, one occurring from mid- to late March and another in early April. The first was caused by a demand shock as restaurants were reduced to a fraction of their normal operations. As restaurants closed in March and April, many consumers shifted their consumption from historically 50% at a restaurant and 50% at home to 25% and 75%, according to Will Sawyer with CoBank.
With the decrease of food away from home, consumers were flocking to grocery store shelves to snag food for their families. As the demand for food away from home started to shrink, so did the demand for a majority of agricultural products, and many farmers were forced to dump their commodities.
“There was a spike in grocery stores, but many farmers have a large percentage of their commodities destined for food away from home locations,” Lusk says. “When that demand disappears, there is nowhere else for these products to go.”
Another disruption of the food supply chain occurred in the meat processing sector. Several big plants had to slow production or close down altogether for a period of time. This was detrimental for meat processing, as the sector is very concentrated.
In order to gain perspective, consider the following. Ten of the largest beef packing plants process about 60% of all cattle. Ten to 15 of the largest pork packing plants process around 60% of all hogs. When one of these plants goes down, it has a significant impact on the industry as a whole.
Meat packing is a labor-intensive industry, and many plants can accommodate thousands of workers. With refrigerated buildings and close-quartered employees, this makes for a perfect environment for the coronavirus to spread. This was devastating to an industry that relies on this sort of atmosphere to supply safe, quality products.
“The demand for livestock products went down. The meat packing plants couldn’t support their normal numbers, so there wasn’t as much meat being put on the table. Wholesale meat prices went through the roof,” Lusk says.
Adapting to a Disrupted Supply Chain
While farmers and ranchers were finding solutions to the problems presented by COVID-19, consumers and grocery store employees were having to evaluate their own challenges.
Anath Iyer, senior associate dean of the Krannert School of Management at Purdue University, says that the biggest challenge is the connectivity of the food supply chain.
“Every element of the supply chain needs to function. This includes truck drivers, warehouse employees, and store employees. The biggest problem is that all of these roles have little to no automation,” Iyer says.
When the pandemic first made its presence known in this country, many people panicked as non-essential services ceased. Consumers stockpiled grocery items, causing shortages across the nation. Iyer identifies four key things that contributed to the shortages.
- Consumption of food in the home increased.
- Consumers were worried about price increases.
- There were several unknowns at the beginning of this ordeal, and shoppers realized they weren’t sure when their next trip to the grocery store would be.
- Patrons were anxious about stockouts.
Stores quickly turned their attention to preventing stockpiling. Measures were put in place to discourage shoppers from wiping the shelves clean of essentials. Many retailers placed a cap on purchase quantities of certain items. Several stores enabled omnichannel shopping, such as online ordering, curbside pickup and in-store pickup. Other stores simply reserved times for vulnerable customers to shop.
An aspect that most of us don’t think about is the personnel that keep the stores operating. Grocery store employees fall into the essential worker category, and, therefore, must continue their jobs to ensure Americans are fed. These workers had to protect themselves, while remaining on the job. Plenty of us noticed the stark changes that places like Kroger and Walmart instituted to give their workers that necessary protection.
“Many of these people received incentive pay. They had to wear protective gear while working, and they had to restructure their work processes. There was a tradeoff of efficiency for safety, but it was necessary,” Iyer says.
While the country is still dealing with the aftermath of the virus that continues to ravish some states, some are already starting to see a new normal. Iyer says this pandemic will assuredly affect how consumers shop for groceries in the future. He believes automation in the store will increase.
“Things like robots that check inventory levels, video tracking of social distancing, one-way aisles and the use of online ordering and pickup will surely increase in the future,” Iyer says.
There are still questions that have yet to be answered, but only time will truly tell what the total impact of this global outbreak is. The Greatest Generation was the last to see the pandemic in 1918, and Gen Z will be the ones to tell the story of the 2020 pandemic to their great grandchildren someday.
