April 14, 2020

The pandemic is pushing the ag value chain into a sudden state of recalibration—what are the strange new realities, and what will be waiting on the other side?

By Barney Bernstein, Senior Associate  

Every industry is grappling with the perpetual chain reaction set off by the COVID-19 pandemic—agriculture most certainly is no exception. 

Every single link along the chain—from farmers who grow the crops to the markets that receive the end products—is in some state of unexpected upheaval as every sector scrambles to work out the kinks.

That perfect balance of supply and demand that keeps our food system moving is encountering challenges never seen before. The abrupt closure of restaurants and huge food service markets like schools, sports and entertainment venues created massive craters in food markets. Plant workers are afraid to go to work for fear of getting sick. While West Coast produce farmers deal with an overabundant harvest and markets suddenly vanished, Midwestern growers are entering planting season with great uncertainty. All of these surprise variables are making our food systems feel a little unhinged.

America is relying on the ag supply chain to keep moving, despite the many obstacles threatening to throw it off course, so we need to do our part to keep the chain stabilized. That means we need healthy people to grow and harvest the crops, factories running at full capacity, freight that’s moving and not sitting idle, and restaurants and food service markets back open for business.

This virus has us chasing moving targets as we try to restore balance with supply and demand. Here are some of the harsh realities we’re now facing:

The labor shortage is an even bigger headache now

It was an obstacle before the pandemic, but labor could become even more problematic if a worker gets sick and exposes others—then suddenly you’ve lost an entire crew. In California, produce growers have implemented more aggressive policies and procedures to keep workers healthy, making changes like spreading them further apart in the fields, staggering lunch breaks, and adding extra handwashing stations. In many cases they’re offering extended sick leave so any worker who does become ill has incentive to stay home longer to keep other workers safe.

Furloughs and closures in other sectors of the economy mean there are more people looking for work, so growers can look to secondary labor pools even for temporary help…if the people in those pools are willing to take the jobs.

Food production facilities are being forced to shut down

Keeping the workforce healthy to keep plants running is proving to be a big challenge. The close quarters of these work environments—where many of the jobs deemed essential by federal standards are located —are highly susceptible to outbreaks.

A scan of the headlines shows numerous meat production closures due to illness outbreaks—big names like Tyson, Smithfield and Cargill have closed plants in several different states. Many that are still operational, like Harim Allen Poultry in Delaware, are struggling to reach capacity as employees get sickened, or decide it’s too risky to go to work. Harim Allen is sacrificing flocks in the barns because they don’t have the staff to process their normal flow.

Food processors and manufacturers are implementing policies to keep workers at a safe distance from one another, even in break rooms like at this Kraft Foods plant that allows just one employee per table. Some plants are taking extreme measures like installing infrared body temperature scanners for anyone entering the facility.

Fresh produce is ripe and ready with nowhere to go

It’s a devastating scene that’s playing out again and again: Dairies are dumping milk. Growers are forced to plow down fields of unharvested produce because they have nowhere to go. Truckloads of fresh produce are going to waste as supermarkets clear space for the panic buying occurring with paper goods and cleaning supplies.

Supply is not the issue—it’s the abrupt drop in demand and impossible logistics as companies try to keep up with moving targets.

The widespread closures of restaurants, schools and hospital cafeterias has virtually eliminated the demand for bulk food products, forcing suppliers to look for alternative markets. Sysco, U.S. Foods and others, for example, are changing gears to push produce to consumers through grocery chains.

This Idaho onion farm had to destroy millions of pounds of onions because there’s just no place to take them. We’re hearing many heartbreaking stories about perishable food going to waste—all because markets are being eliminated and prices are plummeting so far that growers are finding it’s not worth the cost to harvest.

Connecting growers with new markets requires creativity. In Florida, for example, the Department of Agriculture and Consumer Services is helping growers sell directly to consumers by publishing a list of products available so consumers can search for what they want and where to get them straight from the grower.

Transportation and storage disruptions are preventing timely delivery

In the above examples with perishables, we all know shifting from a food service to retail market doesn’t happen with the flip of a switch. Products have to be repackaged to be repurposed for a new market. Bottlenecks occur because plants don’t have space to store the excess, and all of this redirection (along with reduced staff) means trucks have longer waits at loading docks.

Generally speaking, growers in the Plains states gearing up for planting seem confident they’ll get through the season without any supply issues. Even though the virus hasn’t spread as viciously in most rural areas, that could change quickly and cause problems as planting ramps up. The issue won’t be with having the supplies, though, it will be with getting supplies where they need to go.

Transportation has run into its own obstacles as drivers aren’t able to get their annual required physicals, some have gotten sick, and some have simply chosen to take time off to avoid getting sick. Trucks are packed and ready to go, they have the orders—they just can’t get them to the field. If this continues, it could impact the inbound movement of supplies AND the outbound movement of harvested crops and animals.

Things also could change quickly if a warehouse suddenly has to shut down. If a worker becomes ill, the facility would have to close for cleaning and anyone exposed would have to quarantine. Even a two-week delay could negate a whole year’s worth of work.

What’s Next?

What exactly does the future have in store?

In some ways we’re in a mode of “wait and see” because everything is changing so quickly, but there are certainly things all businesses should be doing now.

If your business hasn’t been directly impacted by COVID-19, you are among the fortunate. But this situation is very fluid, and it’s important to plan for the worst case scenario and put together a battle plan for how you will respond to potential infections. Here are just a few things you need to consider:

• What is the threshold of infection that will elicit a facility closing?
• What does the cleaning schedule look like?
• How long will it take?
• How quickly can you reopen a retail location or warehouse? 
• Where will you pull staff from, assuming that all infected and exposed staff will have a 14-day quarantine?
• How will you re-route deliveries for that facility while the it’s closed?
• How will you service clients while the facility is closed? 
• How will you manage inventory piles and the logistics to replace inventory used from supporting locations?

This pandemic is bringing new and unexpected realities to our industry. Parts of the chain may be slowed down, paused or forced to make detours, but it will not be completely derailed. While there’s a lot of recalibration going on right now, the ag value chain will survive.

How is this pandemic impacting your business? We’d love to hear from you. Contact Barney Bernstein at bbernstein@entira.net or 919.830.6527.

Read more about what you should be doing now and what’s on the other side of the pandemic.

 

In the midst of this global health crisis, we are hunkered down and staying informed like you; but Entira is still open for business. The best we can do for each other and our country is to continue the business of supporting the farmers who feed our nation and the world.