You’d have to have been living under a rock to have missed this week’s news that John Tyson, Chairman of the Board at meat processing giant Tyson Foods, declared in a letter published last Sunday as a full-page ad in The New York Times, The Washington Post and the Arkansas Democrat-Gazette that America’s “food supply chain is breaking.” But he’s wrong. The food supply chain, and all our supply chains, are adapting, slowly and with understandable fits and starts sometimes, to shifts in demand of a magnitude only those old enough to remember WWII have seen before in their lifetimes.
Was Tyson not aware that his words risked kicking off an unnecessary national anxiety attack, and yet another spate of grocery panic-buying and hoarding? When he speaks, people listen, and with good reason. Tyson (NYSE: TSN) is the second-largest food company in the U.S., with 2018 sales of over $40 billion spread across such well-known brands as Hillshire Farm, Jimmy Dean, Ball Park and Sara Lee. They employ over 100,000 people. They’re a big part of our food supply chain.
But big is relative. For overall U.S. packaged food sales, Tyson constitutes less than five percent of the total. Add the big three meat processors together (including JBS USA and Smithfield Foods, Inc., in the mix), and they combine to total about ten percent of the country’s packaged food sales.
That’s important, because problems within the meat industry, while substantial, won’t necessarily be crippling. It’s critical to understand the particular challenges in meat plants: they’re heavy on manual labor, and much of the work is done in cold, wet environments, with workers literally shoulder to shoulder. It’s a uniquely difficult industry when it comes to the potential for spread of coronavirus, and the challenges of keeping workers safe. So there will be temporary disruptions, with possible tighter supplies for meat, along with higher prices – and dramatic culling of herds at the same time. Agriculturist Damian Mason, author of Food Fear: How Fear is Ruining Your Dinner & Why You Should Celebrate Eating, explains why: with even temporary and short-term plant shutdowns, “…that puts a crimp on the food supply chain.” But with respect to the animals being culled, “Right behind them is another young pig… another young chicken… another young steer or calf that’s coming into the supply. That’s why we have such abundant food here in the United States of America and Canada.”
Other types of food production are a far cry from that difficult meat plant reality. Most packaged food plants are heavily automated, meaning workers are naturally separated as they tend large pieces of processing and packaging machinery. Walk through a soda bottling facility or a cereal plant, and you simply won’t see that many people. That doesn’t insulate those workers from any risk at all – after all, unlike many people, they’ve been coming to work day in and day out for the month and a half that lockdowns have been in effect. The fact that human interactions have been taking place at all means the risk is elevated.
“Other types of food production are a far cry from that difficult meat plant reality. Most packaged food plants are heavily automated, meaning workers are naturally separated as they tend large pieces of processing and packaging machinery.”
But toward that end, all producers have steadily ramped up efforts to keep their workers safe. John Tyson, in his letter (which, other than those few unfortunate words, was a fine outline of the company’s challenges and their efforts to get ahead of them), gave an excellent summary of some of the kinds of things producers everywhere have been doing, based on guidelines from the U.S. Centers for Disease Control: “The company’s efforts have included taking worker temperatures and installing more than 150 infrared walkthrough temperature scanners in our facilities; securing a supply of face coverings before the CDC recommended their use – and now, requiring them in all company facilities; and conducting additional daily deep cleaning and sanitizing. We’ve implemented social distancing measures, such as installing workstation dividers and providing more breakroom space. We’ve also relaxed our attendance policy to encourage workers to stay at home when they’re sick or feel uneasy about coming to work.” It should be obvious that no manufacturing company wants its valuable employees sick, particularly the packaged food companies that are making tremendous efforts to cope with the burden of increased product demand caused by shifting purchasing patterns.
Those market changes, too, are critical to understand. The news sites are filled with stories bemoaning the dumping of milk and the plowing under of vegetables, and are now tying those reports to Tyson’s words. But those problems have nothing to do with a breaking supply chain – they’re because of huge changes in where food is and isn’t going now. Restaurants, schools and grocery stores are served by some of the same food production “superhighways” as our supermarkets, but their “exits” are completely different. The plants that process and package food service items for restaurants and schools can’t readily change their systems to make the consumer packaged goods for our stores. Nor do they have to in normal times, since other plants do that. But with nobody eating out (and pre-coronavirus, more than half of Americans’ food dollars were spent on dining out), and no kids in school, there are whole segments of our supply chains that have come to a standstill. The reality is that we don’t eat as much at home as we do at restaurants, and nor do we use the same quantities of heavy ingredients like cheese and cream. And our kids drink less milk when they aren’t in school, so a lot of the milk that went into single-serve cartons and bottles is being dumped, even as the factories filling gallon and half-gallon bottles are experiencing extra-heavy demand right now because of an overall increase in at-home consumption.
So yes, there’s a lot of waste. Is that a tremendous shame? Certainly. Does it mean our food supply is running out? No, quite the opposite. Our supply chains aren’t broken – they’re adapting to those new realities.
It’s telling that some of our biggest grocery providers, including industry stalwarts Kraft Heinz, Danone North America, and Gerber, are donating huge amounts of their finished products to food banks. That indicates quite the opposite of a breakdown of our food supply. It also highlights another problem – charities being overwhelmed because people forced out of work can’t afford groceries, and kids who got their meals at now-shuttered schools are going without. That’s also a tremendous shame, and should get more focus. But again, it’s an irresponsible leap to claim it’s the fault of our supply chains.
“It also highlights another problem – charities being overwhelmed because people forced out of work can’t afford groceries, and kids who got their meals at now-shuttered schools are going without. That’s also a tremendous shame, and should get more focus.”
Dave McLennan, CEO of Cargill, struck a much better note than Tyson did. He’s another guy we should listen to. Cargill is the largest privately-held company in the U.S. based on revenue, producing and distributing agricultural products such as sugar, refined oil, chocolate and turkey, and providing risk management, commodities trading and transportation services. They have sales of $115 billion annually, with $8.9 billion of that in food, and they employ 160,000 people. Appearing on “Leadership Live With David Rubenstein,” he said, “I think I would characterize it as the food supply chain is under strain. But there’s a lot of supply chains that are under strain due to what’s happening… I think basically, the ability of us to produce food is still there… The food industry and the food supply chain is resilient. I think the people that work in it every day are resilient. So I think it’s under strain, but I don’t think it’s broken.”