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Shoppers 'Meat' Supply and Demand Issues at Stores
New York Ag Connection - 05/22/2020

These days a trip to the supermarket can be an adventure. Along with breathing through masks and trying to practice social distancing etiquette while pushing carts, shoppers face shelves emptied of favorite products and daily staples, as well as rising prices.

In recent weeks, the COVID-19 pandemic ratcheted up consumer trepidation even more as it added meat-processing workers to the victim list. A number of large-scale commercial plants were forced to temporarily close, leading to a significant drop in beef, pork and chicken production. In turn, grocery store meat cases have taken on a hit-or-miss look--barren of some products but bountiful with others--leaving some shoppers in a quandary.

"We're all a little anxious at the grocery store," says Julie Niederhoff, associate professor of supply chain management at Syracuse University's Martin J. Whitman School of Management. "We're all trying to just get in and get out."

Niederhoff specializes in how human factors affect supply chains, including the role of consumer behavior. While decreased production has had an impact on getting meat into stores, Niederhoff cites another pandemic-driven factor in limiting what's available: Since people are trying to stay safe and minimize their time in public, they are making fewer trips to the grocery store, but purchasing more than they normally would. "We don't have a true supply shortage to meet true demand," she says. "Any problem we see is because of this sort of falsely inflated anxious purchasing behavior. The amount of time it will take to respond to that depends on how many people have this behavior and how severely they exhibit it."

In response to a series of questions, Niederhoff shares more insights on the meat industry supply chain, consumer behavior and the pandemic's influence.

What makes the meat industry supply chain challenging?

In most supply chains, we're trying to balance some amount of efficiency without sacrificing all of our flexibility, resiliency and ability to adapt to changes. But when we look at food supply chains, for example with eggs, raw milk or animals, they have to go through some sort of FDA or USDA certification process and preparation. From there they can go to wholesalers that distribute these products to grocery stores, restaurants, hotels and institutions, such as universities.

This particular supply chain is challenging because the raw materials are time sensitive--they're not easily stored and shifted into a different use. In particular, the meat supply chain is set up for normal patterns of purchase and consumption. The animals available for market right now were born somewhere between six months and a year ago, depending on whether we're looking at pork or cattle. So what's available right now was designed to meet projected needs back last fall.

How has the pandemic affected the supply chain?

During the COVID-19 changes, especially in March and April, a lot of the consumer demand shifted from the commercial food service industry--restaurants, dormitories and everything else--into retail, so we saw a huge increase in retail purchasing at grocery stores because of the decrease in restaurant purchasing.

Much of the meat going into those commercial lines is packaged in big quantities and labeled "not for individual sale," so it can't be easily thrown into the meat case at the grocery store. When the demand all shifted over to retail, the packaging had to shift as well. This caused some trouble in production, but the amount of meat going into that commercial supply chain is starting to be repackaged and made available in the retail chain.

Now, of course, we have the issue with the processing centers going offline for days, weeks, months. We don't know how long some of these will be down, so that has also affected the supply availability. When restaurants started shutting down and retail became the primary source, some experts predicted there would potentially be more meat than we could consume. But once some production facilities started going offline, that surplus has been taken out. However, it shouldn't make it impossible for people to find meat, because there's still a lot coming in.

What's been the impact on farmers and their livestock?

When we look at the production capacity that's currently offline, it's about 10 percent of beef and 25 percent of pork. That is not ideal--and it's certainly a huge problem for the farmers. They're trying to do all kinds of direct sales of their animals to move them without having to euthanize them.

How have consumers affected the process?

Part of the shortages is simply a result of people trying to purchase their normal consumable amount, but they're batching it into a two-week purchase instead of doing a batch purchase for the next several days. That package of meat I just put in my cart is not the same package of meat I would have bought three weeks from now. It's the meat that someone else was going to buy today. This does create a shortage--and the perception that there isn't enough meat, which then triggers more people to be worried. We know that consumer behavior can signal--and falsely signal--that there's a problem. We don't have a massive supply problem, and we don't truly have more demand. But if people artificially inflate their demand, which then drains the supply, it will look like we have a really bad match between supply and demand.

Will fluctuations at the supermarket continue?

There's something in the supply chain called the bullwhip effect. What happens with this is if people over-purchase now, then basically next week nobody will make purchases because they're working through their supply and then they come back and over-purchase again. As people start aggregating those purchases, we get this very lumpy pattern and it's much more difficult to match any given day's supply to any given day's demand.

This is similar to the toilet paper situation. As people start to think, "Oh, I've definitely got enough at home," they'll either purchase their normal amounts or less, so they can use up what they have--and everything will stabilize. It takes time to rebalance the system, but the less we shock the system, the more we can stay stable.

Should stores be imposing limits on certain products?

The challenge with limits is when you make them simple they're not fair. And to make them fair, they would be really complex. If I'm feeding a family of six and you tell me I can only buy three packages of meat, that's a very different restriction for me than for a single person, a family of two or someone who eats meat less often. The effect of the limits will be very different for each household.

While I completely understand the grocery stores trying to keep that anxious consumer population from creating a problem where there's not one, these blanket purchase limits can be tough. They're really trying to shift the demand, and another way to do that is just to jack up the price, right? We know from economics that works. But again, that penalizes some people, especially because the increased demand is on lower-cost items like ground beef.

We don't really have a drastic supply issue--we have a moderate decrease in the availability of meat in general. At grocery stores, we have more demand for the lower-cost cuts of meat, and we have greater availability than usual for higher-cost cuts of meat. There's a little bit of a mismatch, but we don't have an emergency.

Is this a good time to support local farmers and meat producers?

In Central New York, we have a strong agricultural community, so we have access to that market in a way that other parts of the country or even other parts of New York state might not. If some processor is able to offer the farmers a fair price for their animals and safely convert that into consumer products, then that's a great option.

What will happen when restaurants re-open?

The wholesale market will start to reclaim access to some of the food service industry. Packaging will start to be shifted around again, but the demand will shift, too, when people can go back to ordering some of their favorite products at restaurants. We'll definitely see shifts in the supply and the demand again, and it's a question of whether that can happen in a good, predictable way--or if we end up with a weird mismatch for some time while we try to figure out what the next version of normal looks like.

As consumers, should we be flexible and consider alternatives?

There are many different kinds of alternative proteins, whether they're plant-based like some of these new burgers or animal-based like fish and other seafood. Again, there are potential mismatches on a day-to-day basis between what locations have and what consumers are looking for. When specific ingredients or products aren't there, that definitely creates frustration. But if consumers go to the grocery store with some flexibility in how they choose to get their protein, they can adapt to what's available.


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