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Published in Food/Agribusiness

Farmers navigate shifting supply and demand equation

BY Sunday, November 08, 2020 04:13pm

Jeff VanderWerff is one of the rare professionals whose day-to-day operations have remained virtually unchanged throughout the COVID-19 pandemic.

VanderWerff and his brother operate a 50-acre fruit orchard in Sparta. He also works with his father and uncle on a several-thousand-acre cash grain operation.

“COVID or not, we still have to put a crop in the ground,” said VanderWerff, founder of Gold Coast Sales LLC.

Life on the farm might be business as usual, but the greater agricultural ecosystem VanderWerff’s farm feeds into has undergone a major shift to meet the morphing food demands brought on by the pandemic.

Adjusting to the new normal of the pandemic is just one of the many dynamics that has emerged in Michigan’s agriculture economy, 

Shift in demand

The pandemic’s biggest effect on the food industry is drastically shifting consumer demands. A drop in demand from institutional clients — such as schools and restaurants — and surging demand from retail clients changed the way food is supplied. 

During this adjustment, consumers have encountered empty shelves at grocery stores, but it was not because supply was insufficient.

“The point I kept trying to make to people all spring was there was never a shortage of food — there was a shortage of food in the way that you wanted to consume it,” VanderWerff said. “I had to remind people that when you go to the store and buy eggs, you buy them a dozen at a time. When iHop buys eggs, they buy them by the case of 144 eggs. If you wanted to buy 144 eggs at a time, there were more cases than you could shake a stick at, but you weren’t going to buy them that way.”

This has left the food system balancing between temporary or permanent changes to the ways in which they package and deliver food while farmers continue to chug out their usual supply.

“We as growers are looking at the processors saying, ‘Hey, we need to change the model here — this is how people want to get our product,’” VanderWerff said. “But you have to view it from the processors’ perspective, too. … Do I want to spend $10 million re-tooling my line for a situation that might only last a couple months?”

Captive consumers

Even through the murkiness of the pandemic, Michigan State University’s Department of Agricultural, Food and Resource Economics recently released a report called “Envisioning the Future for Michigan’s Agricultural Economy.” 

In the report, 10 different agricultural economists responded to a series survey of questions to highlight emerging issues and trends in the industry.

MSU Assistant Professor Trey Malone, who helped prepare the final report, admitted that “any crystal ball will be flawed.” But immediate effects of the pandemic show significant losses in output, which were primarily offset by federal financial relief.

“We found that the losses in total output have been substantial but record amounts of agricultural support from federal dollars has buoyed and supported much of the industry, especially on the row crop side,” he said.

Malone said those losses were tied to the huge blow to restaurant sales and other institutional buyers. However, the MSU report highlights plenty of reasons for optimism among industry members.

Rising global population and income, farms adopting more advanced technology, access to alternative markets, and the uniqueness of Michigan’s agricultural resources were four positive trends the economists identified that create growth opportunities.

Michigan’s diverse agricultural output has been put on full display. Most agricultural economists agree that the pandemic has made many consumers much more food conscious, which gives farms and food businesses the chance to tell their stories and speak to a captivated audience that is looking for safe, sustainably produced, family-farmed Michigan products.

“Trying to create these opportunities for consumers to engage with your agribusiness is something I’ve been sounding the marching orders on for quite some time,” Malone said. “I think everybody out there right now wants to know what’s going on at farms — people are asking questions they may have never asked before. The industry itself has this opportunity to show people where their food comes from and how hard it is for someone to grow their own food.”

This phenomena has been seen in the fact that U-Pick farms and businesses saw a major increase in sales, according to Malone, and hope to continue the momentum as they enter the Christmas tree season.

Hurdles ahead

That said, the industry will have to reckon with a variety of issues that threaten its vitality.

The MSU report identified declining profitability for small and medium sized farms as one key trend that could dog the industry. Michigan’s food industry is seeing consolidation as small and medium sized farms find it increasingly difficult to sustain themselves.

Also, an increase in regulations involving the environment, food safety and labor top the list of negative trends, in addition to such hindrances as climate change and trade conflicts.

Workforce shortages have also seemed to perpetually plague the industry, and the problem worsened with the pandemic.

“We saw a major workforce challenge in the food processing areas and some meat processing industries,” said Ernie Birchmeier, livestock and dairy specialist at the Michigan Farm Bureau.

“(Nationwide) there were times when about 50 percent of our core processing capacity was shut down and you had about 35 to 40 percent of the beef processing capacity shut down,” he said.

“When you have a break in the chain, which we had, that has an impact,” he added. “Food processing labor was a challenge. We also had a challenge in our fruit and vegetable area because a lot of that is a hand harvested crop. There were some challenges with some (government-mandated safety) orders put in place with how many people could work where.”

A big part of the industry’s rebound can be attributed to the demand for corn, soybeans and other products from around the world. For instance, China has seen an epidemic of African swine fever, which has greatly affected its swine population. The country is in great need of corn and soybeans to restore that population, which is driving up commodity prices there.

That’s why Birchmeier advised farmers to watch for traditional marketing opportunities while still trying to seize on new, local opportunities.

Still, Birchmeier could not discount the fact that the consistency of farmers like VanderWerff is what has ultimately kept the industry marching forward through this uncertain time.

“The consistent part about all of this is that our farmers are still farming and are able to do so everyday,” Birchmeier said.

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