The Round Barn: Is Food in Short Supply?
Sonny Perdue: This is Sonny Perdue, Secretary of Agriculture USDA. And I know it's a little anxious when we see those barren store shelves and grocery shelves there, but I want to assure you that our food supply chain is sound. It's healthy. People are on the job stocking those stores, processing that food. Our inspectors are safely guarding that food and inspecting them day by day. You can count on it, your food's going to be there. But just let me remind you, use what you need. It's like a buffet -- don't take more than you use in a week or two, and don't try to hoard so your neighbors and other communities can have what they need. Thank you. You're going to have enough.
Jim Lowe: That was Secretary of Agriculture Sonny Perdue speaking from the White House. In addition to the global public health threat, the effects of the coronavirus pandemic has disrupted vital sectors of the economy. What about our food supply chains? Is food in short supply? Or are our supply chain systems simply adapting to the new reality and how we deliver and access food?
Joining me is Dan Thomson from Iowa State University, an expert in agribusiness and in food production. And I'm Jim Lowe from the University of Illinois. And this is The Round Barn.
Thanks for joining me, Dan. And I think we ought to start this conversation today with, are we running out of food?
Dan Thomson: Well, no, I don't think we're completely running out of food. We're really good at producing it, we just stink at distributing it. That's the bottom line. And as we have changed our tastes, as we've changed our travel habits, our dining habits, we're just seeing a change in the types of food that people are wanting to access. So there's not a shortage. It's there. We got it out to distribution and Sysco and going to quick-service restaurants, and now everybody wants to buy it at the grocery store, so we're trying to figure out how to get it back there and get it to people's homes.
Lowe: Yeah, I think the interesting bit, right, you have a good relationship with McDonald's, and I saw that their sales in March were down 22%, even though they're still open. So supposedly, they're open, because they've got drive thru up, but they're down 22%. If McDonald's is down, that must mean we're all eating very differently.
Thomson: Yeah. And, you know that whenever you talk about sustainability, or you talk about the food supply chain, we take animals and we break them into the parts that consumers want. And until we had this disruption with COVID, and people changing the way that they interact in public and where they eat, it really changed the cuts, it changed the process, and it changed what people want.
Lowe: Give me some examples of that, Dan, on the beef side. On the pork side, right, bacon was the most commonly served thing on menus. And we had bacon prices -- belly prices, so, green belly prices; uncured belly prices -- that were in the $2 a pound range here not that long ago. And today, they're $0.41 or something. So, as we've gone away from putting bacon on every sandwich known to mankind and every other thing at restaurants, right, and we've come home, we apparently don't eat as much bacon at home. What's that mean on the beef side? Because beef prices are just terrible. The farm gate price for beef is just terrible today. So, what's that meant on the beef side?
Thomson: The first thing that happened with COVID is, people stopped going out to eat. So, needing the steaks for the white tablecloth restaurants and things that we serve in restaurants decreased. And what really shot up was our want or our dependence on hamburger. So then, we bought all the hamburger out of the stores, and people started to panic. Well, we still had plenty of hamburger. The problem was, it was going to quick-service restaurants and going out to Sysco.
And remember, the other one that's huge is that our school lunches shut down. We already had this stuff distributed. And now, we've spent the time bringing it back off the trucks and coming back to the grocery stores to get it to where people want it. It's a real simple thing. It seems really confusing, but we were sending it to where everybody was going to be. We had plans for it. And then they weren't there. So now, it's like, OK, now how do we get it back to the place where people are going to go and need it? So, we're bringing it back to the grocery stores. It changed where we're eating, it changed what we're eating, and just so many things go with hamburger. That's what people were wanting.
Lowe: How does that change packaging? As I think about it, if I'm selling to Sysco, I'm probably going to sell either premade patties, right, or big chubs -- 20lb, 30lb, 40lb chubs -- instead of selling two-pound packages or one-pound packages, right? You've worked in the meat business a lot. How long is it from a time I take a cow to the plant, it walks out of the feed yard and it shows up at the restaurant or the grocery store? Is that two days? Six weeks? How long does that chain last?
Thomson: It's within a week to 10 days. So it's a fresh product going out the door, and we're then getting it to distributors and things of that nature. But the packaging is going to change. And then, what may be happening is, some of the bigger packages are going out to some of the butcher shops to be broken down into smaller packages, that are people coming in buying one, two pounds of hamburger at a time. I think that we're going to see, people are going to want smaller quantities at a time. They want it broken down into packages that are usable, so when I take it out, I can use it at one time. And we're going to see less of the bulk stuff going out, for the time being. So it's going to increase packaging. It's probably going to lengthen the time a little bit of getting it there, as we redistribute it. But other than that, it's already shifting.
But then, there's been other ... once we got through that, then we have, on the other end of it, since we aren't getting the premiums for the steaks and the things like that, now our beef prices dropped on the other end. So, another potential pitfall is, cattle feeders are holding onto cattle longer in anticipation that the prices might go up. So, we're getting a little bit of it. We're pretty current right now with our marketings, but there's a chance, if people start holding hogs or holding cattle back, that we wouldn't be very current, which would not be good for prices. Especially if we're holding cattle back waiting for a better price, and all of a sudden, one of our packing plants goes down because of workers getting COVID ... we could see a really black day of holding all these cattle, and having prices go even lower. So, people need to keep eating it, we need to get it distributed, and we need to keep the marketings -- no matter how hard it hurts right now -- we need to keep them current so that when we come out of this, we make money on the back end.
Lowe: I've seen little bit in the news -- I spend a lot of time with the pig business, and we've got a plant down this week, a Tyson plant in Columbus Junction closed because of COVID. Rumor on the street, a couple of pork plants in Canada are down for a week or two because of coronavirus issues. And now we've got some discussions, they're thinning out people in plants to try to slow down lines speed, and then have to slow down line speed on the cut side so that they have less risk of coronavirus. That's all fantastic, but that's really going to back up our pig business. I've seen a little bit on the cattle side, what's happening in the cattle business? I thought I saw something in Pennsylvania, what's going on there?
Thomson: We had one plant that went down in Pennsylvania. They closed for a week. And we've slowed down our chain speed a little bit. We're doing things like taking temperatures of the workers as they come in in the morning, and if they're running the fever, they're sent home. Just pretty typical biosecurity-type things. We're just not used to being the pig or the cow, right? We're used to population medicine; we're just not used to being the one that gets sick. And so now, we're sending people home, and we're spreading things out. But I just got a notification last night of one of our major packing plants that is starting to see workers with COVID-positive cases. I think that everything we can do to keep those plants open, keep them running, even at a decreased speed of the chain because of decreased workers and increased social distancing, I think we need it so we can stay as current as possible.
Lowe: But I don't think we have to worry about, right, like, Joe Bob consumer here, we've got a lot of meat in the supply. We're awash in red meat right now, and we're awash in chicken as well. So, I mean, if we slow down a few plants, that impact's really going to be at the live side of the producer side and probably not at the consumer side. Or, it looks to me like, at least in the pig business, we've got way more pigs than we've got slaughter capacity. And so, we've got this difference between carcass value and live animal value that's pretty extreme right now. Is that the same thing that's happening in beef? In my cursory looks, it is.
Thomson: Absolutely. You see this. And the thing have to remember is that it's nobody's fault. We get this point in the beef industry where the cow/calf man's pointing at the feedlot, and the feedlot operator's pointing at the packer. Nobody wanted to have COVID. And nobody wanted to see this change. And I think that that's something that's really important. The consumer needs to understand what an unbelievable system we have, and how safe our food is, and how we can redistribute and repackage and get it to them and really not miss a beat. Understanding that we have farmers and ranchers that are just ... they aren't mad of the situation, they're scared of losing their business. There's a big difference in that, and the tone of "Why aren't they sharing these profits back with me if meat's being sold at a high rate," and here I am taking a financial bloodbath, and I don't know that my farm is going to survive.
Lowe: The thing I found interesting years ago when we were starting to do some retail work was -- and this was pork chops -- they wanted to sell two pork chops for $3.79, or whatever it was at the time, and it kind of didn't depend on what the price of the meat was coming in. The consumer was willing to pay $3.79 for two portions, or whatever the magic number was. So we tend to think about, right, everybody's making a killing right now because we've made way too many pigs and calves and chickens for what the market is going to bear; but the flip side comes around when we're not producing nearly enough. When we had $100 to 100-weight, $1 a pound live pigs, in 2014, you went to the grocery, well, guess what? Pork chops were still $3.79. So, I think we forget that we live in a commodity business on the farm, with a fixed number of hooks. The price goes up and down depending upon availability, but yet we want to sell things at a fairly fixed price because we don't want to change that to our consumer. And so, I think in ag, it'd be really helpful if we started to understand that chain a bit more.
Thomson: Yeah, and I think you're going to see in the beef industry, like you've seen in the pork industry, we're going to see more integration. These dips and swings, where one side's making money and the other one's not, I think you're either going to see feedlots go together and build a packing plant, or the packing plants are going to figure out ways to do some price insurance or something to share profits, so when one side's making money they share back, and vice versa. I think you're going to see some of those strategic partnerships. And you know what that meant sometimes to our smaller farmer, right?
Lowe: Yeah, that's really been a huge change in the pig business. We haven't vertically aligned like the chicken guys, but we've certainly virtually aligned. The good is that, I think it was the end of last week, most of the producers are still getting paid about $0.65 a pound for the carcasses at the time of harvest, and the futures at the board said it was $0.40 a pound. So, that was an interesting discordance, because we're getting paid off of virtual alignment there, we're getting paid off of carcass price. The problem is that you don't get the upside, and it takes size and scale to integrate. So that alignment is good because it takes the bumps out, but it's also rough because smaller producers have really taken a knock in that arrangement, because they can't always meet the specifications that that more aligned chain requires.
Thomson: I think some of the smaller producers, they just need to see that coming. 10 2,000-head feedlots equals a 20,000-head yard. Doing some strategic alignments within our rural communities, especially on marketing, can be pretty important.
Lowe: And we've seen that in the pig business, right? You've seen these three or four big swine practices that are kind of maybe not swine veterinary practices anymore, but really management companies, because they've gone in and managed pigs for their clients, and allowed them to pool those resources to compete. So I think there are some upsides there.
But maybe if we twist the conversation a little bit into the vegetable business, which is interesting to me, because that one's really kind of a bunch of small growers get aligned through packers -- and if you've seen the pictures, they're throwing stuff out. I think the dairy business is not that much different. They're dumping milk. How much food waste do we think is going on today? Have we increased it with this change in the deal? Does integration help? On the dairy side, they'd say integration's made it worse because of where they're at. There's some number that one in nine Americans is food insecure. Is that food waste contributing to that? I mean, what do you think about that? That's a really interesting area to me, because I think you and I got in this business to feed people and make sure that people had food to eat; and yet, what's happened with this is, we've gotten all these other permutations of this outbreak.
Thomson: I think, the big thing is, we hear people, whether it's liquid eggs being overproduced right now because we don't need them in cake batters; we're not selling cake batters; egg production; milk production; there's a lot of examples of how tastes, how alternative products and that have changed the landscapes of these industries. The one thing we have to remember is, everybody's trying to get to this point of food security. And 14.5% of Americans suffer from food insecurity, meaning they're not able to put food on the table to sustain their family. The one thing that we measure poverty on in our country is the cost to feed people. And poverty is set, has been set since 1963, based on the price of food and inflation over the years. And so, if you have a household of four people, and that household makes $25,000 or less, that's considered a poverty home. And so, if we do things in the industry that increase the price of food without increasing wages or without increasing the amount of money that people make, we then increase poverty. And as we've discussed, we didn't sign up to feed the rich and the famous; we signed up to feed our neighbors.
What's been really funny to me, Jim, during this COVID outbreak, is I see people now coming back to the realization of, we have great, wholesome, safe, nutritious food animal products. I don't see people running around trying to find the tofu or the fake meat or the alternative protein or whatever you want to call it. They're like, "Give me some hamburger. Give me some sausage. Give me some whole eggs. I'm going to have hard boiled eggs." They're going back to things that are comfortable, things they know are right. They know that if I sit down and I give Junior a hamburger, Junior's going to get the protein, the energy, the vitamins, the minerals, a well-balanced diet. You ripped the scab off of it when you asked me that question. I knew you were going to. But it's a great, great opportunity for everybody to get back to their roots.
Lowe: It's always shocking to me -- in a bad way, not shocking in a good way, shocking in a bad way -- that number of people that rely on food banks to continue to get food. And you just hear these stories now, we're pouring milk down the drain and throwing out eggs. There's, I don't know, a quarter-million pounds of beef that can't get sold today because it's premium, it was supposed to go to a restaurant. And they're throwing away vegetables and everything else. How do we solve that? I mean, can we do anything in ag to fix that? I mean, it's bothersome to me, looking at us throwing out stuff that's perfectly good food. I grew up in a house where you ate, cleaned up your plate, and you didn't throw stuff away; I think most of us did. And now, now we're in this spot that we're wealthy and we get rid of stuff, and we're plowing zucchini under the ground because we can't get it through the supply chain. Can we fix that? I mean, what's the best model?
Thomson: It's funny to me, we live in a country where we have 14% food insecurity and 34% obesity. It really is this social inequality. So, let's go back to the restaurant model. I'll just start real quick. The restaurants don't feed the poor. Restaurants feed the rich. Even the quick-service restaurants. I'm sorry, regardless of which one it is, they feed people who can afford to have someone else plan the meal, cook the meal, and do the dishes. They're selling a service. They call them a quick-service or they call them restaurants. They don't call them your kitchen. And they don't take food stamps at restaurants. So, when they come out and make outlandish claims on the food that they're serving, whether it's antibiotic-free, hormone-free, whatever it is; or make decisions, they're making decisions for people who have money. And when they waste food out the back of the restaurant, they can do so because they're charging X number of dollars.
Now, when we look at grocery stores, grocery stores take food stamps, and they are the ones that are feeding the masses, all people. And then you back it up one step further to the overproduction. And, again, it goes back to, we do a great job of producing; we do a terrible job of distributing. And getting back to that understanding of these food deserts within urban areas, places where we can't get vegetables.
And I think the one way we change it -- we've done it the wrong way in agriculture. We've taken it on in agriculture as, this is our problem, right? That we have to fix it, and we have to solve it. And really, this is a societal problem. This is an if-you-eat problem. And so, when I look at food insecurity numbers, and I want to make sure that we keep food affordable, we keep food safe, and we keep it in places where people can have access to it, I'm partnering with the NAACP; I'm partnering with the Hispanic Chamber of Commerce; I'm going to these mayors and governors of urban areas. Because food insecurity occurs at the same rate in the country as it does in an urban areas -- I misspoke. It's not necessarily that Champaign, Illinois has higher food insecurity than Clearfield, Iowa, a town of 300 people. It's all about 14.5%. But our highest risk of food insecurity in this country are single women with children, 35% food insecurity; African Americans and Hispanic Americans run higher than Caucasians.
And so, when we start to think about food distribution in that, we need to be working on the ground with the people outside of agriculture -- including the Teamsters. When we start to get into issues of how we get this distribution system rolling, it's going to take a lot of different groups working together. And what agriculture has to do is, we have to remember -- it's kind of like when I started working with McDonald's. They said, "All's we really want to do is sell hamburgers and French fries. OK? That's our job." And in agriculture, our job is to raise pigs, slaughter pigs, and provide a safe, wholesome product. From that point on, we really need to get people involved in this country to help us get this distribution system worked out.
Lowe: Dan, I think that's a different pitch for us, right? I mean, in ag, we just think about, how do we make more and make it cheap? And yet, now we've really got to say, how do we think bigger? And maybe COVID will help us bring that around the corner.
Maybe, just as a wrap-up, we've got this huge federal stimulus bill coming down the pike, and it sounds like we're going to come up with other things with T's after it today. I can't comprehend a billion, so I don't even understand the idea of a trillion. Do you think it's going to have any impact on that distribution? Are we going to do anything fundamentally different? Or are we just going to keep doing what we're doing wrong, with all this money flooding into the food system?
Thomson: Well, whenever government gets involved, there's always a risk of it really getting screwed up. And I hate to say it that way, but, you know the old saying of, good people don't need laws and bad people break them? You're going to have people that take advantage of the system with this stimulus package. And so be it. I think, at the end of the day, fundamentally, what we have found is that there's 99% good and 1% bad. And we can't police the bad apples. We just have to keep promoting the good people, the good neighbors.
I think one thing is that this COVID has taught us that a virus does not discriminate against anybody for any reason. I'm kind of in the thought process of, oxygen, water, food, those types of things, those are things we have to provide for each other. And if agriculture wants to come through riding on their white horse -- or in their bibbed overalls, whatever -- of going back to being the person that produces vegetables and meat and dairy for their neighbors, this is the time for us to realign and rethink of our values. And I always just end meetings with this is -- it's time for us to become neighbors again.
Lowe: Dan, I think that's a great way to end. Thanks for joining us.
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