Farmers are panic-buying to keep America’s 95 millions cows fed as fear of feed mill closures and trucking delays mount.
— QuickTake by Bloomberg (@QuickTake) April 11, 2020
There’s been discussion, on other threads, of how or why farmers are being affected by the national (and global) lockdowns. American farms, even the ‘family’ ones, are as much a part of the just-in-time supply chains as any other business:
… Just as virus-spooked consumers have rushed to grocery stores to stockpile everything from toilet paper to pasta, farmers raising America’s cattle, hogs, and chickens have filled their bins with feed, fearing the spread of the coronavirus would disrupt their supply chains. “I’ve had some calls from customers of mine looking for feed because the mills are out,” says the Fayetteville, Ark.-based Beaver. “There’s a rush to buy just because of the uncertainty in the market. They just don’t want to be caught without.”
Keeping America’s 95 million cows, 77 million pigs, and 9 billion chickens fed isn’t as simple as it may seem. Farmers are worried their feed mills could close as employees get sick or that their slaughterhouses could slow production, forcing them to keep animals for longer. They’re also concerned that a shortage of trucks, which are being waylaid to supply supermarkets, could make it harder for farm supplies to reach them.
Even the plunge in gasoline demand affects the feed supply. As ethanol plants shut down—because the fuel additive isn’t needed when gas isn’t selling—the animal feed market is being starved of an important ingredient called dried distillers grains (DDGs) that are a byproduct of ethanol production. Distillers grain is a key ingredient in rations for beef cattle and dairy cows.
The rush to fill bins hasn’t happened only in the U.S. French feedmakers stepped up ingredient purchases at the start of the lockdown, and demand jumped as plants that produce biofuels started to slow down. A similar trend occurred in Germany last month. “This is a new phenomenon,” says David Webster, head of animal nutrition and health at Cargill Inc., adding that the agribusiness giant has seen its global feed sales volume climb 10% or more in the past month. “We saw a bit of this in China in February, but now we are seeing globally, in every geography that we operate in, so it’s testing the system, so to speak.”…
Still, because farmers’ bin space is limited, they can’t really hoard the same way that consumers are doing, says David Hoogmoed, president of the Purina Animal Nutrition unit of Land O’ Lakes Inc. (The Purina that makes the dog and cat food is owned by Nestlé SA.) “What we are seeing isn’t a run on feed, but a keep-everything-full scenario,” he says. “While the producer [in the past] may have run things down to the last minute and ordered feed for tomorrow, they are building in, in their inventory management, more of a safety stock.”…
Another complication for the meat producers — if the processing plants aren’t open, nobody’s selling livestock:
There’s been a spike in coronavirus cases at meat plants in the U.S. https://t.co/ATVFMdMQ5Z
— Bloomberg (@business) April 12, 2020
Here’s an explanation from a (Canadian) farmer about the other side of the demand/supply chain. I’ve stripped out some of the twitter framing to save space:
In case you are wondering, it’s not a fun thing to do. We are proud of the work we do & the nutrition we provide. We don’t want to see that wasted.
— Andrew Campbell (@FreshAirFarmer) April 8, 2020
Of course the question comes to why. First off it has nothing to do with price. Milk in Canada has a fixed price coming from the farm, depending on what it’s used for. Whether it’s a big order or a small one, whether it’s today or the first of March – the price is set.
Second has to do with shelf life. Of course milk doesn’t last forever and this is especially true of raw, unpasteurized milk. It’s required to be picked up from our farm within 72 hours. And then would need to be processed within a day or two. It can’t just sit and wait.
Third challenge is storage. I said it’s required to be picked up within 72 hours, but our farm & most others only have 48 hours worth of milk storage on farm. That’s because milk is picked up every 48 hours. It would be an extra cost that would have to be accounted for.
The same is with tanker trucks. There are enough milk trucks to pick up every farm every 48 hours. But there isn’t a fleet waiting for more. That would be an extra cost that no one has wanted to pay. So once it’s picked up, it has to be unloaded within the day.
That brings us to processors. And I feel for all of them right now.
Before this started, demand was pretty constant. Tim Hortons would need a pretty steady amount of cream week to week. My Loblaws store would need a pretty steady amount of 2%.
Processors would be able to adapt to small increases or decreases. But what’s happened over the last few weeks is nothing short of a absolute shock to the system. Plus, many are working with new rules of physical distancing for employees to make sure they stay healthy & operating
Figures out of the US (Cdn #’s should come soon) show increases through retail of 53% in milk, 84% in cheese, 127% for butter. All while food service demand collapsed.
Keep in mind food service wants buckets of sour cream, not tubs, or 10lb bags of shredded cheese, not packets. Think even cream where Tim’s uses a big bag of cream through a SureShot machine, while you want 500ml at a time.