Walk with me for a few minutes to learn a little bit about how beef and other proteins make it to your plate. Beef and other protein products flow primarily through three channels.
1. Retail grocery: 42% of beef sold in the U.S. is sold in the retail grocery market. This market is also known as “Food at Home.”
2. Food service: Known as HRI (hotels, restaurants, and institutions), it accounts for 45.1% of the beef sold in the U.S. This market is also known as “Food Away.”
3. Exports: about 12.9% of beef produced in the U.S. is exported to other countries.
Each one of these channels packages and sells products very differently from the other channels. And that is where the problem lies. As of April 7th, 2020, 45 states have issued shelter in place orders, which has caused the demand for beef products that are normally served through the food service channel to drop dramatically. However, that doesn’t mean that the demand for beef is any less. It has simply switched the channel though which Americans are placing the demand. While hotels and restaurants are closing, grocery stores are having trouble keeping up with the demand placed on meat products. You have likely seen signs limiting the purchase of ground beef, eggs, and other meat products to just one per transaction or one per household. Under normal circumstances, an increase in demand should be good for everyone from the farmer to the consumer. But that is not the case here. The total demand for beef is not actually greater; it has simply shifted, and that is breaking down the supply chain.
The demand for beef placed through retail grocery is so much higher that Amazon said its online grocery demand is up by 60%, and new Whole Foods online grocery customers are currently being placed on wait lists to ensure that the company can prioritize orders placed by existing customers.
Beef and Pork-Producing Plants are Closing
Because of the Covid-19 pandemic, Cargill and Tyson Foods closed beef-producing plants in Pennsylvania and Iowa. JBS USA closed a beef-producing plant in Pennsylvania and reduced production in its Colorado plant. Moreover, Smithfield Foods closed one of the largest pork-producing plants in the U.S. These closures have dramatically reduced the amount of meat proteins available to consumers at grocery retail. While we are all looking forward to the end of the Covid-19 pandemic, the next month or two will likely get more difficult for the consumer. The meat-producing plants that remain open are running at full capacity and are forced to give raises and pay overtime to their employees. Of course, those pay raises and overtime pay will trickle down to the consumer in the form of higher beef prices.
What’s the Answer to This Dilemma?
The answer is multi-faceted. Let me explain.
1. Food service conversion: If the food service channel converts their plants to produce for the retail grocery channel, the grocery store shortage is solved. This is, however, very unlikely to happen anytime soon because the cost of converting to retail grocery production will not be worth the investment, especially if after converting to grocery, they have to reconvert back to food service again in the future. If necessary, the President may invoke the Defense Production Act to force these plants to reopen and convert. But it will still take months for plants to convert.
2. Eat more take-out: Restaurants are not experiencing shortages. Many restaurants have remained open and sell take-out or delivery. That is a solution for some; but for many, it is not affordable. the cost is simply too high. With looming job losses, many employees are concerned about whether or not they are next.
3. Buy from a local farmer: Many farms across America have a USDA food label that allows them to sell beef to their customers. This is often known as “Farm to Table,” “Farm to Plate,” or “Farm to Fork.” Whatever name you have called it in the past, your relationship with a farmer could prove to be a great solution. We at Callidora produce our own beef, which is USDA approved and humanely harvested. We also have it vacuum sealed and flash frozen. While home freezers are designed to keep foods frozen, commercial freezers that keep air circulating actually freeze foods so quickly that ice crystals are prevented from forming between the meat fibers when they freeze. This allows for long-term storage in any home freezer, without loss of quality or taste.
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