Food Supply Chain Regaining Stability, Consumer Confidence

Texas A&M AgriLife experts say the agriculture industry is adjusting to consumer needs during the COVID-19 pandemic.
By Kay Ledbetter, Texas A&M AgriLife Communications September 14, 2020

man wearing face mask stocking shelves full of vegetables in grocery store
A workers at a ShopRite supermarket stocks shelves on April 24, 2020 in Plainview, New York.

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Links of the food supply chain are regaining strength after periods of uncertainty during the early months of the COVID-19 pandemic, instilling consumer confidence, according to Texas A&M AgriLife experts.

As supplies strengthen, however, the purchasing practices of consumers could be changing as a result of the pandemic, and creating a “new normal” instead of returning to pre-pandemic practices, said David Anderson, Texas A&M AgriLife Extension Service economist in the Department of Agricultural Economics.

Anderson said prior to the COVID-19 shutdowns, consumers typically purchased about 50% of their food from grocery stores for home consumption. The other 50% was met through outside food services, such as restaurants and schools.

The food service side of that equation has not completely recovered, he said, as restaurants that reopened are still operating at a limited capacity. Schools are just now starting to open, he said, but not all the students will return to the institutions. This means the food supply chain is still adjusting to the changing markets.

There are still some concerns within the agriculture industry and getting back to the balanced marketplace will take an economic recovery that reduces unemployment and revives household incomes, said Greg Pompelli, director of the Texas A&M AgriLife-led Center of Excellence for Cross-Border Threat Screening and Supply Chain Defense Center, or CBTS.

Also, given the importance of global markets to U.S. agriculture, the focus will be on returning to pre-pandemic trade levels, Pompelli said. Trade disputes and the pandemic’s impact on the incomes of global consumers have added uncertainty about the strength of export market opportunities for U.S producers.

woman wearing face mask pushing shopping cart down grocery store aisle
Jen Valencia shops for a customer as she supplements her income working for Instacart at Acme Market on April 27, 2020 in Clark, New Jersey. Instacart experienced a surge in customer demand and employment recently due to lockdowns and other restrictions caused by COVID-19.

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Meeting Consumer Needs

Both Pompelli and Anderson agreed that consumers are finding most items they want and need at the grocery store level, although it might not include all of their favorites just yet.

“Where we see changes at the retail level boils down to human behavior,” Pompelli said. “In the early days of the pandemic with paper towels or toilet paper, people assumed they wouldn’t be able to find these products for a year, so they stocked up. Now they are settling into new routines and sometimes with new products.”

Now, he said, consumers are adapting and moving away from their initial reactions as their concerns about food availability have diminished.

“Today, for the most part, consumers who go to the grocery store might not see exactly what they want, but there are a lot of substitutes available,” Pompelli said. “There will always be some things, favorite brands, that people don’t have a willingness to sub, and some of those still might be hard to find in some areas.”

One change developing from the pandemic is that the future may include more delivery services, boxed meals and curbside grocery pickup options as consumers maintain some of their habits from when store shelves and meat cases were bare and people were asked to stay home, Anderson said.

“Another adjustment I think we are going to continue to see over time is more delivery services of groceries and food,” he said. “More and more of the shoppers in the grocery aisles are employees putting together grocery orders, either for curbside pickup or for companies that bring the order to your home.”

Understanding Food Supply Chain Impacts

“With the dramatic shutdown of restaurants and food service, it took a while for the industry to make the switch to providing the majority of their supplies to grocery stores, instead of the restaurant and food service industry,” Pompelli said.

Overall, Pompelli said the food and agriculture industries have been resilient, but the pandemic has exposed vulnerabilities in our food supply.

“Where we saw some milk dumped and crops plowed under because demand in certain institutional and food service supply chains vanished overnight, I think that is behind us,” he said. “I think we’ve learned some things. I have been impressed by how some industries were able to recover, do more to protect their workers, and shift their supply chains to meet increased retail consumer demand.”

Anderson said when restaurants closed during a prime produce market window and harvest season, there was no place for those highly perishable products to go.

Eggs and dairy also suffered oversupply and packaging issues due to restaurant and food service reductions, Anderson said. For instance, restaurants typically get eggs in 60-count flats, and those eggs needed to be repackaged and sent to the grocery store, but there weren’t enough dozen-egg containers. And then there was the question of how to divert from non-retail sale items to retail sale.

While many of the issues have been addressed, especially as more restaurants come back online and schools are back in session, that market still hasn’t been completely reestablished, he said. Consumers might not see a fully stocked department at pre-COVID-19 levels, or see a greater number of 18-pack instead of dozen-egg cartons.

Dairy faced the same issues due to school shutdowns, Anderson said. Because the industry moves a large amount of fluid milk in small cartons to schools, suddenly the industry had to deal with the packaging issue. Fluid milk prices collapsed as the industry tried to adjust.

“Looking at the data, the drinking milk they were selling actually increased, but they lost a lot through food services in the form of cheese and butter,” he said. “But this is also rebounding as production adjusted to match the market, and milk prices are working their way back up.”

woman shopping in meat and chicken aisle of grocery store
A woman shops in the meat section at a grocery store on April 28, 2020 in Washington, D.C.

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The Meat Case

When the pandemic hit, the consolidated meat packer situation was the most visible logjam in the food supply system, Anderson said.

Overall, though, the meat supply chain has adjusted during the past four months and seems to be leveling back out, Anderson said. Packing plants that had slowed down and/or closed are back online, and beef production the past eight weeks has been higher than a year ago. Pork production is following the same path as well.

“In terms of producing meat, we’re back,” he said. “We were processing fewer animals for a while, but adjustments are occurring so the total meat being produced every week is back to where it was.”

Anderson said the bottleneck in the food supply system still being worked through is with restaurants that remain closed or that are trying to operate at a reduced capacity.

“While we were not going to the restaurant, we were buying more meat from the grocery stores,” he said. “But we are not back to where we were before coronavirus on overall meat purchases, because the grocery store sales don’t fully make up for the lost restaurant sales.”

During the height of the crisis, stores limited purchases on the meat cuts most consumers were familiar with, or sometimes the meat just wasn’t there, he said. At other times, there was beef and pork coming into the stores, but people were seeing a different selection of cuts than they normally have seen, based on grocery store strategies.

Many decisions on what to stock were based on their clientele base and also reacting to the recession. Income is a factor in meat purchases, Anderson said. During the height of the pandemic, these prices surged, but wholesale prices have now dropped back down below what they were prior to the coronavirus pandemic.

“We have not seen the prices adjusted in the retail level reports, but I think we are beginning to see the grocery store prices starting to drop.”

This article by Kay Ledbetter originally appeared on AgriLife Today.

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