Dan Sumner is a Distinguished professor in the Department of Agricultural and Resource Economics at UC Davis, as well as the Director of the UC Agricultural Issues Center at UC Davis.
“Of course, we’ve seen this coming for a decade. So, we’ve known that the bearings acreage was going to continue to go up because we’ve got the non-bearing acreage, and that’ always coming up,” Sumner said. “We don’t know for sure how many acres will be pulled, but nobody’s surprised that we have a massive crop.”
“The question is long-term demand. Do we get used to lower prices? There’s a million-dollar question. Actually, that’s a billion-dollar question, isn’t it? And nobody really knows the answer and I’m not going to pretend like I do either,” said Sumner.
“And we do know as well that even though you can’t grow almonds, very many places everybody’s trying to figure out whether the can expand outside of California. So,we know it’s a world crop and California dominates the world,” Sumner said. “It’s not just our additional size of crop, but it’s the rest of the world as well. And you can do a few almonds in Australia and you can do a few almonds here and there, and everybody’s going to try to figure out they can expand,” he said.
“And so, I don’t see any long-term disaster going on and almonds that is to say demand will continue to grow. But the real question is can demand keep up with the very rapid production increases. And the answer is maybe,” explained Sumner.
Why Are Farmers Destroying Crops While Store Shelves Are Empty?
By Pam Kan-Rice UCANR Assistant Director, News and Information Outreach
Empty grocery store shelves are troubling enough to California consumers who are accustomed to abundant supplies. To hear about farmers dumping milk, crushing eggs and plowing under crops when demand for food is strong just doesn’t make sense to most consumers.
Although the new coronavirus crisis has currently derailed the connection between supply and demand, “the food system in the United States is resilient and there is little reason for alarm about food availability,” write University of California agricultural economists.
Overall, neither food consumption nor the amount of food supplied by farms have changed much, they write in a new article published by UC’s Giannini Foundation of Agricultural Economics. The authors explain that the sudden closure of schools, restaurants and other institutions, coupled with residents in many states sheltering in place to reduce the spread of COVID-19, has disrupted normal patterns of where people buy food.
“Price changes, surpluses and shortages along the food supply chain are likely the result of recent and temporary shocks to supply, demand or both,” said co-author Ellen Bruno, UC Cooperative Extension specialist in the Department of Agricultural and Resource Economics at UC Berkeley.
“On the demand side, we have seen customers shift to buying more food at the grocery store as restaurants and other food service businesses have closed. Plus, consumers have changed what they consume and stockpile during these times,” she said.
Initially, worried consumers stocked up on staples such as rice and pasta that store well. Then, with more free time, they started cooking at home and baking their own bread and pastries, buying up eggs, flour, sugar and other baking supplies.
“On the supply side, there are challenges in trying to rearrange production and packaging to service grocery stores, as opposed to restaurants, schools, etc. which often purchase items in different quantities,” Bruno said. “Plus, there are the obvious health concerns and potential disruptions due to the impact of the virus on the workers themselves.”
How quickly the food supply system will adapt to changing demand depends on the product, according to Bruno and her co-authors Richard J. Sexton, UC Davis professor, and Daniel A. Sumner, director of the UC Agricultural Issues Center and UC Davis professor, both in the Department of Agricultural & Resource Economics.
Canned fruits and vegetables are often processed shortly after harvest and can be moved from storage to retail fairly quickly. To increase egg production, farmers have to add to the number of laying hens, which takes months. Many perishable produce items are planted, harvested, packed and shipped according to a precise schedule to replenish grocery store inventories “just in time” so farmers can’t quickly increase the amount of fresh fruit and vegetables they supply.
Produce wholesalers who sell to food service have products and packaging specifically designed for that market. For example, packing plants that prepare large bulk salad packages for restaurants aren’t set up to pack salad into retail-ready bags that require consumer labels. While adjustments were made, some fresh produce rotted or was plowed under.
After the COVID-19 disruption ends, the authors expect the food supply chain to evolve as the economy gradually recovers.
“In the longer term, even after restaurants and the food service industry are back and running, reduced incomes due to the recession will change our consumption patterns,” Bruno said. “Demand for food consumed at home doesn’t change much with income, but demand for food at restaurants does. In many ways, food service and the growers that supply directly to food service will be hardest hit by all of this because they suffer both in the short run with mandatory closures and in the long run with an economic recession.”
Although it’s uncertain how long the pandemic will last, the authors say Americans will have an adequate supply of safe, healthy food.
“Despite these disruptions, overall our food supply chain is robust and adaptable,” Bruno said. “Nothing in the underlying economics suggests that there will be a lack of food available.”
How will food supply and demand change as a result of the Corona virus? Consumers in uncertain economic times will adjust their purchasing habits, even for essentials like food. This according to UC Davis Economist Dr. Daniel Sumner, who says different agricultural products will be effected in different ways.
“You do have to think about it commodity by commodity. Which ones are most sensitive to income. Which ones aren’t,” noted Sumner.
“Let me just give you a quick example from the wine industry. The premium wine industry here in California, which means the grapes that are grown along the coast. Higher proportion is sold in restaurants. Higher proportion is income sensitive. And people that still want to drink wine, they now drink it at home,” explained Sumner.
“They’re a little worried about their job. They say, ‘gee am I going to get laid off?’ whatever. ‘My company’s not making any money’. ‘I don’t get my bonus’, whatever.,” said Sumner. “They move down and move in the direction of Central Valley wines. So you could have the Central Valley wine industry be better off at the same time, the coastal wine industry is hurt. And we saw that in a recession 10 years ago,” Sumner said.
Dr. Sumner says staple goods are more likely to see strong demand while those perceived as luxury items may struggle. This is especially true for products that are sold through restaurant or food service channels.