Re 1: The existence of perishable, refrigerated, and frozen food, which can only be hoarded to a very limited extent, puts a ceiling on how bad a run on food can get, right?

[ Parent Question — What will the economic effects of COVID-19 be? ]

What will happen to supply chains in the era of COVID-19?

by Elizabeth 1 min read31st Mar 202027 comments

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Bucky and skybian both asked questions about how COVID-19 and associated shutdowns will affect supply chains. This is a question just to discuss that. I'm interested anything from "observations of very concrete things that have already happened in China" to "speculation about weird counterintuitive effects" to "here are some facts about supply chains in general".

Like the parent question, this is intended to provoke more babble than prune. But even the babbliest thing should be presented such that other people can build on it. So if you have an idea, please share the reasoning or data behind it as well.

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Produce will have trouble being picked because farms frequently rely on temporary immigrant workers, and the necessary immigration is banned. This is already happening in Europe, and seems likely to affect the US shortly. Even if it were not, migrant worker conditions seem pretty rife for disease transfer, so I'd expect a big hit to productivity even if they did show up.

Long term I expect this to shift consumption to things that require less human touch in harvesting, like grains and legumes.

ETA: Apparently Canada thought to exempt migrant farmworkers from the travel ban, but with air travel shut down is having much the same problem.

ETA 4/2: This paper words things in a confusing way, but: in 1997, 75-80% of vegetable-acres and 55-60% of fruits-acres grew a type of produce that has at least a 50% chance of being harvested mechanically. That's helpful for knowing what could be mechanically harvested in a labor shortage, but I assume it's too late for farmers to change plans this year. So the actual range (in 1997) was somewhere between 37.5-80% and 37.5-60% of vegetables and fruits, respectively, and has presumably gone up since.

Reasons this number could be wrong:

  • Mechanization likely to have increased in the last 20 years
  • Mechanical harvesting doesn't actually mean zero labor, someone has to run the machine.
  • It's likely that some amount of labor will be found, one way or another

My conclusion is that in the US, if labor shortage is the only problem this year variety will fall, prices will rise, and there will be more emphasis on processed produce, but it's not likely to be a crisis.

I would expect a pronounced policy push towards national self-sufficiency wherever possible for drugs, medical equipment, and probably other strategically-important things. I would also suspect major pushback against just-in-time supply chains with little in the way of warehoused inventory.


Very positive developments to my mind! Nothing biological operates on such slim margins and such high efficiencies as much of industrial civilization. Because everything that did died, and those with more in reserve and with more distributed capacity were more robust and survived.

A journalist suggests (and I find credible) that some shortages are due to demand moving from business-to-business to business-to-consumer supply chains much faster than supply can. E.g.,

  • Business toilet paper has different fiber content, the rolls are much larger, and many more rolls are sold at a time.
  • Restaurant/cafeteria bananas are small and sold in units of 150, consumer bananas are larger and sold in bunches of < 10.

Presumably these could be retooled eventually, but whether that's even a good idea depends on how long the shut down lasts.


EDIT 4/6 : At least one B2B provider is retooling to allow consumers to purchase from them (not an endorsement, I have not used the service).

Article claims beer and soda are endangered by the reduction in driving. CO2 comes mostly from ethanol production, which is on the decline.

https://www.foxbusiness.com/markets/beer-may-lose-its-fizz-as-co2-supplies-go-flat-during-pandemic.amp

I've done a little research about the food supply chain specifically. Presumably certain supply chains will be similar, certain ones will be different. Also note I am very much not an expert. The basic fact is that there is "enough food" but prices may rise and getting food may be worse. I think there are three key parameters, which could go either way:

(1) Hoarding/instability. Worst case scenario: people panic. People stockpile giant supplies of food. Food goes bad. People buy more food. Food gets prohibitively expensive. Best case scenario: supermarket situation stabilizes, panicky people feel like they have enough non-perishables stockpiled, most last-mile (grocery store) product shortages stop.

(2) Protectionism. This will be less dangerous in the US which exports more food than it imports. But certain countries, especially poorer countries that rely significantly on imports, will suffer if a global panic causes protectionist policies about food (e.g. wheat exporter Kazakhstan apparently stopped exporting grain because of coronavirus fears, see this article ). This is understandable, but probably bad. Here the best case according to this article is if big markets actively work to stabilize the market and punish protectionism (but the economics here is above my pay grade).

(3) Worker/driver issues. This mostly depends on "how freaked out blue-collar workers get". Currently most truck drivers, clerks, etc., are risking infection in exchange for a steady job. If things get bad (for example if there are wide-spread hospital bed shortages and fatality goes through the roof) *and younger people become afraid* (a big if), a big proportion of chain workers will take losing their job over getting infected. This would probably raise prices.

It's important to stress that it's *very unlikely* that anything catastrophic happens in developed countries like the US, and the worst-case scenario is government rationing. The example to keep in mind is WW2 Britain (I originally linked the wrong article here, which is also an interesting read ). Nevertheless, with rationing people survived basically healthy for several years of war.

I'm more concerned with developing countries, particularly if they depend on international trade for food. Also, their goods are mainly transported by truck drivers travelling long distances, who may opportunistically demand better working conditions. In Brazil, they threatened to stop working, thus reminding everyone of a strike in 2018 that caused supply problems in major cities. Fortunately, they reconsidered it after the government started a mediatic campaign to make them feel valued.

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