All of Our Eggs Are in One Basket- the Agricultural Industry Amidst a Pandemic
By Emily BoldtPublished June 8, 2020
Just three months ago, the United States was reaching new levels of economic prosperity, with the stock market hitting a record high in February, and unemployment at just 3.5%. Enter: the coronavirus. Unemployment rates have soared to their highest levels since the Great Depression, and investors have lost trillions of dollars in the stock market.
There is no denying that the coronavirus situation has had a great effect on every industry. Many companies have implemented new measures to protect employee health, while others have made the switch to working from home. However, the agricultural industry does not have the luxury of working from home, and its rigid framework has rendered it unable to adjust with the drastic changes in the market.
Our nation’s food supply is reliant on massive corporations with just a handful of meat packing companies accounting for over half of the market share in the U.S, which has worked effectively in the past. Large firms exist because they have succeeded in creating economies of scale and are able to process products with extremely high speed. During a period of normalcy, it makes sense for our nation’s agricultural products to be sent to these large plants to be made into finished goods and sold to the public, as it is the most cost effective method.
However, the pandemic has created massive shifts in demand for products, and it has become painstakingly clear that these huge plants have flaws. Factoring in the highly contagious coronavirus to a plant with thousands of workers in very close proximity to each other, has created a very dangerous situation. As of early May, nearly 5,000 meat plant workers have been infected by the coronavirus, and many plants have been shut down. This has created a devastating ripple effect in the industry. On one hand, grocery stores are being forced to limit the amount of meat and dairy products each customer buys, while on the other hand, farmers are being faced with having to euthanize their livestock rather than send them for slaughter. The impact of the coronavirus extends well beyond just meat, as dairy farmers are dumping as many as 3.7 million gallons of milk every day.
So, why is an industry that has experienced rapid growth and innovation in recent years suddenly unable to adapt to the changing demand? The answer lies in the extremely siloed structure of our nation’s food supply chains. Almost every player in the agricultural industry has become highly specialized. Growers produce certain crops that have end destinations like schools and restaurants, with specialized infrastructure to get it from farm to table. Dairy farmers have strict production contracts with cooperatives. Chickens have been bred to be ready for slaughter at around 45 days old. The specialization that has allowed agriculture to become more efficient and profitable, is the very thing now causing enormous losses. If just one little thing goes wrong at a processing plant, the implications are serious, as evidenced by a 50% drop in U.S. hog processing.
In the short-term, government aid may suffice to keep farmers and other agricultural business afloat. However, in order to ensure longevity for this industry, it needs to learn from this crisis and make changes. The consolidation of processing plants greatly improved efficiency- but at what cost? Investing in smaller operations may sacrifice some of this efficiency, but more importantly, it will ensure a steady food supply for America. Take the current situation for instance- dairy farmers are being asked to reduce their herds, but there is no market for beef, with giant plants shut down, and the nearest butcher shop 3 hours away booked several months out. An increase in small creameries and ‘mom and pop’ butcher shops would make the industry more resilient to fluctuations in the market. In addition, there should be more independent grocery stores that source a majority of their products locally, rather than chains that use one distributor for each of their numerous locations.
The coronavirus situation has brought to light some flaws of the ag industry. Our reliance on giant corporations combined with a pandemic has left us with great uncertainty in our food supply. The investment required to move away from this highly specialized and consolidated environment in order to have a reliable food supply is well worth the potential loss of efficiency.