As the country leans into a lockdown and fear intensifies, there is another side-bar conversation about the strength and/or fragility of our supply chains. Our out-sourcing of pharma and manufacturing has bitten us in profound ways but apart from ventilators and PPE, that is a step removed for many. The immediate concern for most pertains to the food supply chain, which adds yet another layer of tension to an already fearful scenario. Large numbers of people now enter the grocery store intent on finding what they can before they are potentially gob-smacked with someone’s aerosolized germs. But what is notable about this grocery scenario and can we draw inferences for moving forward?
Yes, there are.
Let me start by explaining my background. First, I have not only been the stay-at-home parent who has done the bulk of the shopping and cooking for that time, but I am also a data-driven economics geek. My wife, BH, now takes a greater role than earlier and much on the generated lists now emanate from her facile mind. But in the early years of toddlers and small children, this was predominantly my responsibility.
Where this merged with economics was in 2009-2010, in the aftermath of the Financial Crisis and deep recession. At that moment, the Federal Reserve Chairman was Benjamin Bernanke and it was clear that The Powers That Be had advance notice of problems at his 2006 start; his area of academic expertise was in the errors of the 1929 Fed in responding to that year’s Depression. Bernanke had argued that the Fed exacerbated the stock market collapse by failing to provide liquidity for the market as it struggled. His response, unproven and academic, was that the Fed should have provided as much liquidity as possible and the collapse in late 2008 provided the opportunity to test his theory by supplying liquidity via the first of multiple rounds of Quantitative Easing. The debate, loud and rancorous on Economics and Finance blogs, was whether this untested theory would work or instead spark rounds of runaway inflation. My own questions went to how this would affect my own family. Because I was involved in the establishment of a local cost-of-living survey in my distant past and had spent time conferring with its national creators, I decided to lever this experience into the creation of a kitchen table project, the PracticalDad Price Index.
The Index kicked off in November 2010 and focused upon a market basket of 47 common grocery items. My intent was to see what happened to the prices of this local basket as the QE program – and its successors – rolled through the economy. It continued monthly until personal circumstances dictated it’s ending in September 2016. An offshoot of this focus upon pricing for almost six years was a new appreciation for the food supply chain. It’s not typically notable unless something is wildly amiss, such as a run on toilet paper in a pandemic but over that span, there were distinct changes in the grocery supply chain as grocers and suppliers adjusted to the ongoing decline in purchasing power by a weakening American consumer. What is notable about the supply chain?
First, the name itself is misleading. We talk about the supply chain as though it was a singular monolithic entity with a single controller, but it isn’t. The supply chain is a dynamic – almost organic – entity, involving the input of hundreds and thousands of retailers and suppliers in a geographically and economically diverse nation. It evolves over time to respond to the data fed to it via market and economic research and the sheer volume of literally billions of transactions involving an untold number of products at different price points. It is continually changing as grocers and producers meet consumer changes in spending power, habits and trends. Some entities fail in bankruptcy or are taken over by competitors. Others offer cheaper alternatives for sale to the consumer. The point is that it can and does change in real time. Personally, I don’t envision so much of a chain as the visible sinews and tendons of the economic body working both individually and collectively at the same time. One sinew would be dairy and another produce, yet others involving meat sources and consumer non-durables such as health and beauty products. Each sinew answers to distinct inputs and trends with the collective result of an economy reliably providing needed goods to the consumers.
Second, the supply chain is built to respond reliably within a certain timeframe BUT the pandemic has shortened that ruinously. The inputs that drive the process are now wildly disordered and the processes are momentarily overwhelmed. The consumer, already declining, has had a catastrophic loss of income. Entire sectors of the economy are suddenly and completely closed. There is an immense and out-sized need for certain items, particularly related to disinfectants and cleaners, that utterly outstrips the ability of those sinews to meet those needs. There is concern that the food sinews will be compromised for fear of viral infection among those workers. This doesn’t even touch upon toilet paper, the disappearance of which suggests that most Americans believe Covid-19 will completely deforest the continental United States.
It was reported this week that dairy farmers in some regions were forced to dump raw milk, an infuriating development when millions are suddenly unemployed and food banks increasingly stressed. My original take was that it reflected a collapse in dairy pricing, as occurred during the 1929 Depression; in that period, farmers and herdsmen destroyed crops and dumped milk because it was the only way to bring supply into equilibrium with a break-even point that supported even minimal prices. Another article explained the rationale behind the decision to dump and while immensely frustrating, it makes sense. In the Great Depression, episodes of dumping only occurred after years of being mired amidst years of poverty that wouldn’t support even minimal prices. This episode is founded again upon the concept of time; the inability of dairy producers to find the packaging that would allow the product to come to market to meet the suddenly soaring demand. The supply chain is not built for and cannot adapt to a shortened time frame.
Third, the factor of time now also drives many of our shopping habits. American workers and families have felt the pinch of demands upon time and this has carried over to the grocery shelves. Many products are now processed in some way or pre-packaged with the intent of minimizing the time required to cook and serve. The cost for such products however, is driven upwards because the much of the labor for preparation has been taken up into the manufacturing process. In essence, time truly is money and it’s a trade-off that many Americans have made for decades.
Fourth, observations from recent grocery trips indicate several things.
- The scarcest items are those that either require the least amount of household labor to prepare or require a higher amount of pre-market processing or travel in order to bring to the shelves.
- The produce sections at the entrances of multiple groceries have been consistently well-stocked, except for lettuce (which is hilarious since my wife routinely reminds me that lettuce is mostly water and the least-vegetable vegetable on the planet). I have been surprised to find that bananas and citrus are still plentiful although that might change as the travel network degrades.
- Canned goods have been in persistently high demand for their long shelf life but they have remained available; this is liable to change if the virus depletes the workforce in the plants. Likewise for canned soups, pastas and sauces, peanut butters and orange juice. There are instances in which there are less popular types of canned vegetables or beans in greater quantity as people ignore them for the more commonly preferred types.
- Non-dairy and specialty milks (Lactaid/soy and almond) have been depleted but there has been a reasonable supply of locally sourced standard milk (whole, 2%, non-fat). Likewise for yogurts and cheeses. Specialty yogurts requiring greater processing are depleted while simpler yogurts have been there in sufficient amounts. Locally sourced and block cheeses are available while the shredded variety is more depleted.
- The meat cases were sporadic. I’d noted lesser amounts of ground beef and boneless/skinless chicken while there were still sufficient amounts of other meats. This observation was confirmed on the grocer’s website with the note that price was higher and availability more limited but that this should remedy itself within the near future. Eggs were in sufficient amounts but the price per dozen had almost doubled and the grocer noted that that should revert back to norm shortly.
- Breads were completely out of whack as those products requiring further processing are in short supply: Schmidt’s 647 loaves are a prime example. Other popular standards were sold out and one local grocer was replacing them with simply store baked white bread loaves. My experience with one of those was that it grew mold far more quickly than its commercial bakery opposite, indicating a lack of preservatives.
- While there’s been consistently brisk movement in canned vegetables, I noted on occasions that the 19th century predecessor, glass jars of pickled vegetables, were almost untouched.
What are the takeaways moving forward? I’m operating under the premise that this pandemic will come in waves, like it’s 1918 Spanish Flu epidemic, and is likely to last into 2021 before ending.
First, the supply chain will reassert itself and adapt to the new conditions of problematic supply/processing and fewer consumer dollars. The gist will be to save dollars by shifting the labor cost back out of the factory and into the household. For example, instead of spending money on highly specialized yogurts, consumers will opt instead to purchase the simpler variety and add their own fruit or flavoring. Instead of spending on canned beans, consumers will opt to reassert their time in the kitchen by remembering to put dry beans in a pot of water the evening before cooking. Food preparation will become a more deliberative and time intensive activity as it was for our great-grandparents and forebears.
Second, consciously or not, people will begin to expand their own food supply chains so that they aren’t reliant on a grocery store. I expect a return to gardening with the rise of the Corona Garden, much as the Second World War saw the rise of the Victory Garden. As stay-at-home orders have rolled out across the country, there has been a significant increase in seed sales as well as a near sell-out of chicks. Communities are likely to follow their 1970s predecessors and set aside lands for more community gardens for those who do not have sufficient personal space to support a garden. Another example of this would be our joining a CSA last year for produce, cheese and eggs.
Expand your supply chain within the store itself. Seek out alternative foods that are more plentiful than the standards and try them. Middle is presently back in the household for the duration. When he joined me the other week at the store, we were discussing his new appreciation for Indian and Halal and when we went to the small foreign food section, it was almost fully stocked with rices, sauces, spices and chickpeas. And yeah, the guy did a creditable job on an Indian meal. Think of it as an adventure if you’re an optimist and a you’ll eat it and you’ll like it experience if you’re a pessimist.
Third, take time to do more planning. Consider your menu choices as you walk through the next one to two weeks and buy accordingly. As a society, we will no longer have the money nor the inclination to meander through a grocery store browsing for the next great impulse buy. I suspect that lingering will be a thing of the past in stores.
Finally, be mindful of others when you are shopping. Our community’s church sponsored food bank noted a 360% increase in the number of families requesting food assistance over the course of a single week. During non-growing periods, the food banks are going to be more dependent on canned and processed foods and those able to still get to the store will be in a better position to purchase fresher foods and cook for themselves. Also consider essential workers and their families and leave the more easily prepared foods for them, because cooking isn’t likely to be on their agenda after a busy shift.