Consumer response to COVID-19 drives grocery demand/prices – expected to be short-lived
Escalated consumer purchases of many basic grocery items — in response to COVID-19 emergency orders temporarily closing Michigan restaurants for dining in — has taxed the logistical food supply chain throughout the state.
Gov. Gretchen Whitmer’s Executive Order closing restaurants to on-premise consumption as a COVID-19 risk mitigation effort, means 51% of the meals normally consumed outside of the home, will need to be prepared at home. Supply chains have felt the ripple effect, as the state’s food processing industry has expanded hours of operation and redirected product processing and production, such as eggs, to consumer-friendly packaged products. (Photo, courtesy USDA)
Gov. Gretchen Whitmer’s Executive Order issued earlier this week required all places of public accommodation, including restaurants, closed to the public for on-premises consumption until March 30 to mitigate the spread of COVID-19, protect the public health, and provide essential protections to vulnerable Michiganders.
It’s also forced the food processing industry to expand hours of operation and redirect product processing and packaging that would have normally been destined to food service establishments as bulk goods to consumer-friendly packaged products, according to Michigan Farm Bureau President Carl Bednarski. That’s no small task.
According to Michigan Restaurant and Lodging Association Vice President of Government Affairs John McNamara, restaurants normally provide 51% of the meals consumed on a daily basis. Based on 2018 figures, Michigan is home to 16,543 eating and drinking establishments, with $17.9 billion in estimated sales, according to the National Restaurant Association.
“It’s important Michigan take the necessary steps to protect public health, but we also realize the importance of supporting local retail, eateries and stores,” said Gary McDowell, director of Michigan Department of Agriculture and Rural Development (MDARD).
“You can still get your favorite foods, just in a different way than before, as we work together to reduce the spread,” McDowell continued. “I urge you to continue to support your area businesses, who are often the foundation of our local communities, by buying gift certificates for later use, getting take-out or delivery.”
MDARD advises that this is a time to prepare, not panic. Flooding the grocery and convenience stores doesn’t allow them time to properly restock items consumers are looking to buy. While the supply chain is intact, and the food and items are available, giving grocery stores time to replenish inventory is critical to ensure everyone has access to what they need at the store.
Michigan Retailers Association’s Meegan Holland said the organization is monitoring and interpreting the latest state and federal aid packages for their 5,000 member businesses — some of which are struggling during the COVID-19 spread.
“But some stores are doing well — like grocery stores,” she said, noting that Michigan Retailers is encouraging shoppers not to hoard items like toilet paper, milk and produce.
“Grocers are working really hard to keep the stores clean and shelves stocked,” Holland continued. “I am told a family of four can get by with 17 rolls of toilet paper in a couple of weeks. Just buy what you need and there will be enough for everyone.”
Bednarski said the dramatic shift in consumer food-purchasing habits and consumption has caused a temporary price increase at the retail level for many basic household grocery staples, including eggs, dairy, and meats.
Longer-term Bednarski expects the price pendulum to swing in the opposite direction, at least at the farm-level.
“We’re already hearing market forecasts calling for significant price declines in literally every major commodity sector of U.S. agriculture,” Bednarski said. “Market analysts are predicting that a COVID-19-induced recession will cause producer pay-price declines of 20% in dairy and 30% to 40% declines in pork and beef products, for example.”
Michigan Beef Industry Commission (MBIC)
One of the commodities affected is Michigan’s beef industry, where consumers’ purchasing power remains strong, said George Quackenbush, executive director of the Michigan Cattlemen’s Association and MBIC.
“Producers across the industry remain ready to provide the safe, delicious, high-quality protein that’s required and desired around the globe,” Quackenbush said. “We are seeing retail demand and boxed beef prices increasing, yet the COVID-19 panic has resulted in a free-fall for cattle markets with cash prices steadily decreasing.”
Due to this disparity, Quackenbush said that the organization is requesting that the packing industry “act in good faith” and participate in the cash market with “bids based on the increased cutout value rather than the futures, as well as increased participation in the Fed Cattle Exchange to provide further confidence to the producer segment of our industry.”
“Beef demand will be supported as long as the consumer remains optimistic,” he said. “With the volatile global landscape, we find ourselves in, forecasting long-term demand and pricing is nearly impossible. Presently, the industry is focused on ensuring markets remain open and product continues flowing to the channels.”
National Milk Producers Federation (NMPF)
Clay Detlefsen, senior vice president of regulatory and environmental affairs for NMPF, said shortages of consumer staples in grocery stores strained by responses to coronavirus-related restrictions should begin easing, as soon as within a week.
“There is plenty of food in this country. There is no food shortage,” said Detlefsen in an NMPF podcast. “We have a bit of a distribution problem caused largely by consumers, in essence, over-consuming.”
NMPF President and CEO Jim Mulhern said U.S. dairy farmers continue operating, and they understand the importance of steady production.
“Dairy supplies aren’t experiencing production interruptions at this time, and dairy farmers and processors will continue to do what they do best: produce safe, quality products every day for consumers,” Mulhern said. “We’re working with all aspects of the dairy supply chain to ensure dairy products get to everyone who needs them and that — as has always been true — dairy will remain something consumers can count on.”
Michigan Allied Poultry Industries (MAPI)
Michigan’s poultry industry is improvising amid the spread of the virus, according to Allison Brink, executive director of the West Michigan-based MAPI.
“Many farms are seeing increased orders from retailers, as grocery stores struggle to keep eggs, turkey and chicken on their shelves, while others who serve mainly foodservice and restaurants are seeing decreased orders,” Brink said.
“Regardless of the situation, our farmers are still farming,” she continued. “Hens are still laying eggs, turkeys and broilers need to be fed, and every day Michigan’s family poultry farmers are working together to supply consumers with healthy, locally-produced proteins.”
Michigan Pork Producers Association (MPPA)
While current demand for pork product continues to be good, MPPA Chief Executive Officer Mary Kelpinski said producers and processors alike are on high alert to make sure essential functions across the pork supply chain are maintained.
“Pigs and basic ingredients for feed supplies are shipped on a daily basis — any disruptions could really compromise the pork industry,” Kelpinski said. “We need to make sure feed trucks, livestock haulers, supply deliveries aren’t disrupted.”
Labor availability, both on-farm and in the pork processing industry, is a major concern, according to Kelpinski, noting that employees throughout the industry are also parents contending with school and daycare closures.
“We also have a long-standing dependence on foreign workers to care for our animals and help run our processing plants,” Kelpinski added. “So, we have concerns that the COVID-19 situation will only exacerbate what is already a major industry challenge.”
Michigan Potato Industry Commission (MPIC)
According to MPIC Executive Director Kelly Turner, the Covid-19 pandemic has put U.S. potato markets in a state of flux. Chip companies are adding to orders to keep pace with retail demand. Grocery stores are having trouble keeping stocked with table potatoes and chips.
In contrast, fryers are no longer interested in purchasing contract overages, due to reduced movement of french fries to offshore markets and to domestic foodservice customers. A supply crunch for Russet, red, and yellow variety table potatoes is intensifying.
Unsettled conditions are likely to continue for several weeks.
“Packing operations have added shifts, hours and employees to keep up with increased demands from grocers,” Turner said. “In several cases, packers who have ran out of inventory, are networking with operations that have potato inventory in stock but lack the packing capacity to meet the increased demand.”
Michigan Blueberry Commission (MBC)
MBC reports that demand for fresh blueberries is up 20-25%, and supplies can’t keep up, according to MBC Executive Director Kevin Robson. While this is normally welcomed news that benefits growers with higher prices, questions remain on how long higher consumer demand and prices will continue.
“Marketing experts from around the globe see the current volatility as not long-lasting,” Robson said. “Given the ongoing changes surrounding the COVID-19 pandemic, blueberry growers are optimistic but concerned with labor availability needed to actually harvest what appears to be a promising crop.”
So far, Robson reports 2020 blueberry production looks favorable due to favorable weather conditions throughout the winter and early spring.