The Department of Agriculture announced this week that it will spend $470 million to purchase and reallocate surplus food. This comes on top of a new plan unveiled last month to give $19 billion in aid to struggling food producers. ‘America’s farmers and ranchers have experienced a dislocated supply chain caused by the coronavirus,’ Agriculture Secretary Sonny Perdue said in a statement. ‘USDA is in the unique position to purchase these foods and deliver them to the hungry Americans who need it most.’
The move is intended to hopefully provide relief to the overloaded food supply chain and reallocate food where it is most needed. Since the advent of stay at home orders, consumer spending has shifted dramatically away from restaurants (previously about 50% of the American food budget), to grocery stores. Food processing plants, tailored to meet pre-pandemic levels of demand for restaurants, are now attempting to repurpose for individual consumption. Often, this is a costly or logistically difficult switch to make, requiring new equipment, new relationships with grocery stores, or both. As the coronavirus wreaks havoc on the food supply chain, farmers have had to dump milk, euthanize their herds, and leave produce out to rot.
Meanwhile, meat processing plants have had their own difficulties. Reports abound of Covid-19 spreading between employees working closely together in ‘elbow to elbow’ conditions. To date, at least 5,000 workers have been infected, and twenty have died, according to the CDC. Many plants have idled or reduced capacity as they attempt to deal with the fallout.
This is, of course, causing production to slow. Earlier this week, the CEO of Tyson (the largest meat supplier in the United States) announced that its pork processing capabilities had been cut in half. After the company issued a warning one week ago that the food supply chain is ‘breaking’, the president announced that meat supplies are an essential service, and therefore must stay open.
The result is meat shortages and quotas on certain foods at the grocery store, and even at some restaurants. Costco and Kroger are two stores that are removing or limiting beef. Wendy’s, which uses fresh, never-frozen beef patties has had to take beef off of the menu at nearly 20% of their locations. McDonald’s is limiting allocation of its meat distribution based on demand.
The USDA program will begin in Q3. Roughly $120 million will be spent on dairy purchases, and another $110 million will be spent on meat products, with the remaining going to seafood and produce.