What’s next for meat & milk: higher prices, odd sizes, weird packaging, rationing

On Tuesday, three agricultural economists published a report intended to provide insights into the ongoing issues surrounding meat shortages and availability. According to the report, although there isn't a shortage of livestock, the meat supply chain is experiencing significant challenges. Our team at *The Prepared* has been covering these supply chain disruptions for several weeks now, so this revelation wasn't entirely unexpected. However, this week, the situation gained renewed attention when Tyson Foods ran full-page ads in newspapers like the *New York Times* and the *Washington Post*, highlighting the difficulties they face and warning of potential massive meat shortages. In direct response to Tyson's ad, President Trump issued an executive order designating meat processing plants as essential infrastructure. This move sparked backlash from labor unions and workers in processing facilities, where the virus is spreading rapidly. As the meat supply report acknowledges, predicting the future of America's meat and dairy supplies amid the pandemic is extremely challenging. The food supply chain is a complex and often opaque system, with no single entity having a complete overview. It's difficult to anticipate how the system will react to plant closures, reopenings, and potential absenteeism. To better understand what lies ahead, we reached out to economists for guidance. ### Breaking Down the Major Issues Stories of empty deli counters, bare meat lockers, and depleted dairy aisles are nothing new. Yet, it’s hard to decipher the significance of these reports. After consulting with several economists, we identified three key challenges that will affect our food consumption both in the short and long term. 1. **Chronic Labor Shortages**: Even before the pandemic, meat processing plants struggled with a lack of labor. Now, with illnesses and plant closures, the workforce is even smaller. 2. **Redirecting Supply Chains**: With demand shifting from restaurants to consumers, the supply chain is struggling to adapt. We're already witnessing these changes. 3. **Animal Culling**: Due to demand shifts and processing bottlenecks, farmers are being forced to cull animals. However, the full impact of this decision won't be felt until next year. Currently, reports of low stock in grocery stores are largely due to labor shortages and changing demand patterns. The third issue, culling livestock, is a longer-term concern. Right now, the duration of the pandemic is unpredictable. Meat processing companies are unsure how long they'll have to operate with a reduced workforce, nor when restaurant demand will rebound. This uncertainty is pushing farmers to cull animals and shut down operations. The impact of these decisions, however, won't be visible in stores for another 10 to 15 months. In the long term, economists believe the meat and dairy supply chain is unlikely to collapse entirely. Even with periodic closures due to illness and absenteeism, the broader system will likely remain operational. Instead, we might experience temporary price increases and sporadic rationing. Consumers will likely notice changes in packaging and portion sizes, as parts of the underused restaurant supply chain are gradually adapted for the oversaturated consumer market. Let’s delve deeper into these issues. --- ### Problem #1: Labor Shortages Amidst COVID-19 Lee Schulz, one of the authors of the "Meat Availability and Shortages" report, emphasized the importance of recognizing the pre-existing concerns within the meat processing industry. “What’s crucial to remember is that you can order a plant to stay open, but you can’t mandate it to operate at a specific capacity,” Schulz stated during a phone interview on Wednesday. “Even before the pandemic, labor was a limiting factor. This situation has only worsened it.” Essentially, meatpacking plants were already understaffed before the pandemic. Now, they're in crisis mode as workers fall ill. It’s not just processing plants facing problems; there are also upstream issues at the farms. Recently, Michigan reporters discovered that 72 workers at a poultry ranch tested positive for COVID-19. Despite these challenges, economists like Schulz believe the current supply chain issues could be a short-term problem if markets are allowed to function properly. They seem confident that the market will resolve these issues independently without significant threat to the supply chain. “I trust the private market to handle things,” said Michael Boland, an economist from the University of Minnesota, via email. “Nothing has changed my belief in that. People aren’t starving; food is still being distributed. Once things reopen, there may be temporary issues in food services and restaurants as they recover, but they’ll likely manage through reduced hours.” --- ### Problem #1.5: Safety, Labor, and Market Dynamics If markets are allowed to function freely, meat processors will continue operating. However, ensuring six feet of distance between workers is nearly impossible in meat processing plants. This means workers will likely continue falling ill. “Markets do work,” said another University of Minnesota agricultural economist, Marin Bozic. “But they’re harsh. If 50% of farms close, milk prices would skyrocket, and many farmers would suffer immensely, even resorting to suicide. Markets function, but they’re cruel.” Bozic advocates for a humane approach to smooth out market fluctuations. On Sunday, the CDC released guidelines to keep workers safe while maintaining production. However, Howard “A.V.” Roth, president of the National Pork Producers Council, expressed doubt that these measures would suffice. “The tragic reality is that millions of hogs can’t enter the food supply,” Roth stated. “We need coordinated efforts between the industry and government to euthanize pigs ethically and safely.” Economists we spoke with couldn’t address health, safety, or ethical concerns, focusing instead on market dynamics. “Even in the worst-case scenario, it’ll take around six weeks for half the workforce to develop herd immunity,” Bozic said. “This isn’t the Black Plague. Disruptions will occur, but we won’t run out of meat. Grocery stores might ration goods temporarily, similar to what we’ve seen with milk.” Bozic noted that if milk production slows briefly, the U.S. should be okay. We typically produce 15% more milk than needed for exports, so we can consume it domestically in emergencies. “The U.S. is well-prepared to ensure food safety during this crisis,” Bozic remarked. --- ### Problem #2: Ripple Effects Across the Supply Chain Schulz explained that livestock is considered a “growing inventory” by economists. Unlike grains and corn, calves born today can’t simply be stored until processing resumes. “The supply chain involves moving livestock from farms to processing plants, turning it into hundreds of products, and distributing it through various outlets,” Schulz said. “COVID-19 has created monumental challenges in moving this product through the supply chain. One bottleneck is at the processing stage.” What we’re seeing now is the result of decisions made by farmers and large agribusinesses 10 to 15 months ago. This means the choices we make now will influence production and processing in the future. Rather than calling it a shortage, Schulz prefers to describe it as an “availability issue.” In the first quarter of 2020, livestock production increased by 18%. “Consumers might not find the same products as last year,” Schulz said. “Or perhaps not in the same forms.” Consumers might encounter larger packages of meat originally intended for restaurants. --- ### Problem #3: A Farmer's Downturn Impacting Shelves Later As the supply chain adjusts, farmers are left with surplus production. “We’ve seen significant demand destruction for dairy,” Bozic said. “If cows were workers, we’d furlough 1 million of them now and recall them later. Unfortunately, cows can’t be furloughed.” Although there’s no definitive data on how COVID-19 has affected milk production, Bozic expects a decrease. He agrees with Schulz that major shortages won’t occur, but the U.S. will face an “overhang of inventory” later, leading to changes in available products. For farmers, this excess inventory is devastating. One farmer we profiled in late April had 61,000 chickens culled unexpectedly. “It’s heartbreaking for anyone producing food,” Bozic said. “Just 2% of Americans grow food for everyone else.” Farmers are waiting for USDA guidance on safe and responsible practices. For now, decisions rest with large producers like Tyson, who must decide how much production to maintain. Unions and workers also play a role in determining workforce strength. The future remains uncertain, and the impact of these decisions won’t be clear for another year. From speaking with economists, it’s evident they prioritize keeping production running so markets can stabilize. The President shares this goal, as do farmers and processors. What remains unclear is how to achieve this safely and sustainably.

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