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Consolidated and Inflexible Food Supply Chains Drive Both Shortages and Waste
COVID-19 has upended America’s food supply. With the loss of big buyers in restaurants and school districts, farmers without a place to sell their foods are dumping milk, tilling crops back into the ground, and euthanizing egg-laying hens [[link removed]]. At the same time, people wait hours in unprecedented food pantry lines [[link removed]], consumers cannot find eggs [[link removed]] or flour [[link removed]] in grocery stores, and meat processors fear shortages as COVID-19 outbreaks among workers take plants offline.
Food resiliency experts say this tragic combination of food waste and shortages have a shared cause: rigid and consolidated supply chains. “If you pull out one little thing in that specialized, centralized, consolidated chain, then everything crashes,” says Mary Hendrickson, a rural sociology professor at University of Missouri. “Now we have an animal welfare catastrophe, an environmental catastrophe, a farmer catastrophe, and a worker catastrophe altogether, and we can trace a lot of this back to the pursuit of efficiency.”
For decades, pro-corporate policies have built a food system that puts financiers’ interests above all other outcomes. The drive for short-term profit maximization pushed businesses along the food chain to neglect infrastructure investments, cut safety measures or emergency stockpiles, and get big or get out.
Such consolidation and ruinous competition drove out a diversity of food producers, processors, and distributors and left a handful of very large buyers dealing with equally large sellers. Large economies of scale and increasingly specialized or vertically integrated production can lower costs and maximize profits, but it also creates a rigid and centralized food chain that is more vulnerable to disruption.
By contrast, a healthy mix of large and small food producers, processing plants, and distributors would have more safeguards and avenues to rechannel products if any part of the food chain were to break. Unfortunately, many mid-sized and regional players have gone out of business or been acquired by larger competitors. At the same time, public food infrastructure that also played a role in managing disruptions and supporting diverse supply chains, such as public produce terminals, has lost support and shriveled up.
“There is some basic infrastructure that used to be in place that is no longer, as the food system became privatized and vertically integrated,” says Michelle Miller, associate director of the University of Wisconsin’s Center for Integrated Agricultural Systems. “We’ve been left with these really large supply chains that don’t have a way for a more resilient, smaller scale system to undergird those big systems.”
In the meat industry, for instance, just more than 50 factories now process 98% [[link removed]] of the nation’s beef. The same holds for pork: Following industry consolidation in the late 1980s and 1990s, the portion of U.S. hogs slaughtered in massive, million-head capacity plants rose from 38% to 88% in just two decades [[link removed]].
Losing even one of these large processing plants can rattle entire livestock markets (as ranchers saw when a fire took out a Kansas beef plant this summer [[link removed]]). Larger plants also concentrate more workers in close quarters, causing some of the largest clusters of COVID-19 outbreaks among workers in the country. At least 11 [[link removed]] massive meat processing plants shut down this month, reducing production capacity by roughly 20% [[link removed]] for both pork and beef.
Hendrickson argues that a more diverse network of both small and regional meat processing may have been able to mitigate risks and absorb production from closed facilities. “What if we had regional pack facilities like we used to have? Would we have 20% of the pork processing capacity closed because of worker sickness?” asks Hendrickson. “It would just be less likely.”
Consolidation also drives specialization and inflexibility. Many food producers are locked into contracts to grow specific foods for a specific purpose, sometimes for just one dominant buyer. While highly specialized products and plants create consistency and efficiency, these rigid supply chains cannot easily redirect their products to different uses if things go awry.
Take the case of eggs. Farmers such as the Mergens [[link removed]] in Minnesota raise laying hens on contract. The Mergens’ 61,000-bird operation was specifically designed to supply eggs for pre-cracked fluid-egg mixes, used almost exclusively in food service. Most of what they produced went to one Cargill plant that temporarily shut down this week due to lost restaurant and food service customers. Even though grocery stores report egg shortages, grading eggs for retail requires special equipment and likely new contracts with a different large buyer. Instead, the corporation that the Mergens raised hens for, Daybreak Foods, decided to euthanize the Mergens’ flock and sell the birds to a rendering plant to become pet food.
To be sure, shifting entire business models built around serving restaurants or adjusting to sudden systemic labor shortages is no easy task for any system. Some foods are trapped in institutional channels because the FDA requires different labeling for consumer-facing goods. And even if all surplus foods could make it to grocery stores, it’s not clear that home cooks’ demand for fresh fruits and vegetables could match that of restaurants. When it comes to storing or donating surplus foods, government and food bank cold storage is already maxed out, in part because the USDA bought up frozen meats that would have been sold to China, as part of the agency’s trade war relief earlier this year.
All this taken into account, Miller and Hendrickson still contend that less centralized food systems with a stronger mix of public, nonprofit, and private players could more readily adapt to the COVID-19 crisis. Both scholars noted that the smallest and most local food providers, such as local farms providing CSA shares, have reacted quickly to the crisis and benefited from a spike in demand for direct food sales.
“If you look at what the small farmers are doing, they’re changing on a dime to online ordering systems and delivery,” says Hendrickson. “Those organizations that have the most flexibility and latitude to change are going to be really important in the future.”
Finally, Miller and Hendrickson stressed the role that public food infrastructure could play in supporting mid-sized producers, responding to shocks, and serving communities cut out of consolidated supply chains. Miller pointed to the role that the USDA Agriculture Marketing Service played in managing disruptions to food systems following the Dust Bowl drought and Great Depression. She also touted the benefit of public food wholesale markets, or food terminals, that provided accessible markets for producers of all sizes to sell and aggregate their products for distribution.
“We see [public food terminals] having a huge potential benefit not only for the flow of wholesale food, but also for the emergency food system,” says Miller. She has been participating in an effort to open pop-up food terminals near Native American reservations and other rural areas that are not well served by existing food supply chains.
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What We're Reading
The secretary of agriculture wants to lower wages for temporary guest workers. ( NPR [[link removed]])Antitrust enforcers continue to probe Dairy Farmers of America’s takeover of Dean Foods. ( Food Dive [[link removed]])More states are piloting programs that allow SNAP recipients to purchase groceries online in response to COVID-19. ( FERN’s Ag Insider [[link removed]]) About the Open Markets Institute
The Open Markets Institute promotes political, industrial, economic, and environmental resilience. We do so by documenting and clarifying the dangers of extreme consolidation, and by fostering discussions of ways to reestablish America’s political economy on a more stable and fair foundation.
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Written by Claire Kelloway
Edited by Michael Bluhm and Phil Longman
Open Markets Institute
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