Trade restrictions are the wrong way to address food supply issues in the COVID-19 crisis
The COVID-19 pandemic has caused many disruptions in the food distribution systems, ranging from health issues in meat and other food processing plants to impacts of lockdown procedures that have disrupted food chain flows.
The resulting disruptions to the food supply chain are borne by consumers in the form of shortages and higher retail prices. They are also affecting many farmers and ranchers who are facing lower farm gate prices and must manage increasing inventories of animals and some crops because of sharply curtailed access to food away from home marketing channels that serve restaurants and institutional buyers such as schools.
To ameliorate some of these problems, trade restrictions such as export bans and import restrictions have been proposed. This approach would be a mistake and could create more problems for farmers in the near term and both consumers and farmers over the long run.
To date, the direct health impacts of COVIS-19 on farmers and ranchers have been relatively small, in part because population densities in rural areas are low and in the United States agricultural production is heavily mechanized. The exceptions are in labor intensive operations such as fruit and vegetable production and large-scale dairy operations. There have also been substantial health related disruptions in downstream industries where workers do their jobs in close proximity to one another and often live in tight knit social communities outside of work.
Meat processing has been rocked by COVID-19 outbreaks where some industry observers estimate that as much as 50 percent of processing capacity has been affected. As a result, some analysts forecast meat shortages over the next few weeks and large retailers like Costco and Krogers have reportedly been restricting the amounts individual customers can purchase. President Trump has invoked the Defense Protection Act, ostensibly to encourage companies to get their meat processing back on line. Once plants do reopen, partly because of shortages of trained workers and lower line speeds that will be required for worker safety reasons, less meat will be processed, at least in the short term. That means higher prices for consumers and continued relatively low prices at the farm gate for hog, poultry and cattle producers .
Cattle producers may have some limited options to prolong cattle on pasture, but hog and poultry producers are faced with far more limited options to manage their inventories and many are facing the hard choices of depopulating herds and flocks.
Lockdown procedures to prevent the spread of COVID-19 are also taking their toll. Restaurant and school closures, along with restrictions on access to other food away-from-home venues, means that more people are shopping for food to prepare at home. Further, because food destined for restaurants and schools tends to be distributed in much larger volumes and different packaging than food sold in groceries, diverting those supplies away from food service industries to grocery stores involves substantial costs. As such, many processors have struggled to make the adjustments that are needed, especially because of uncertainties about how long the closures and reductions in demand from food away from home venues will last. The short term result has been that some farmers in Florida and other areas that traditionally deliver fresh produce to market in March and April have ended up destroying their crops in the field. Some dairy producers are pouring raw milk down the drain because their buyers do not have access to the markets for which that milk would be destined in normal times.
To address the problem of higher retail prices for products like hamburger and sausage and lower farm gate prices for fruits and vegetables, some commenters and policymakers have proposed restricting exports for commodities like hogs and imports of fruits and vegetables such as tomatoes, grapes and cucumbers. In effect, they are arguing that, with respect to agricultural commodities, the U.S. should withdraw from engagement in international markets.
While the impacts of trade restrictions may bring short-term benefits to some groups, they are far outweighed by the long term costs and even by adverse short run impacts. A ban on fruit and vegetable imports would raise prices for consumers while benefiting only a relatively small number of farmers. Imports of those commodities enable consumers to enjoy fresh fruits and vegetables year round from countries where most of the imported produce is raised counter-seasonally to U.S. production (coming to market in the late fall, winter and early spring while most U.S. production is harvested in the later spring, summer and early fall. A ban on imports, if prolonged, could lead to sharp decreases in per-capita consumption of fresh fruits and vegetables, which would adversely affect nutrition, particularly for lower income families whose spend a disproportionate amount of their budget on food.
Bans on meat exports to mitigate shortages on supermarket shelves would further lower farm gate prices for hogs, poultry and cattle, at a time when those prices have already been hit hard by processing plant closures. A considerable volume of meat and poultry exports are composed of less-desirable cuts of meat (for example, dark meat of chicken, fatty cuts of pork and specialty beef products like liver and heart), so the impact on U.S. consumers would be small. Export restrictions would also have the long run consequence of adversely affecting the competitive position of the United States in world markets by damaging its reputation as a reliable supplier of meats and other products.
Last, but by no means least, there is a real danger that once they are imposed export and import restrictions will remain in place long after the temporary disruptions in the food supply chain are resolved. The long history of agricultural programs suggest that once they have been introduced, they are very difficult to remove because of the political support they enjoy from the special interest groups that they benefit. Far better for efforts to be directed as addressing the underlying problems caused by COVID-19 through improved safety protocols and wide-scale testing than by creating new problems in the form of trade restrictions.
Joseph Glauber is a senior research fellow, International Food Policy Research Institute and a visiting scholar American Enterprise Institute and former chief Economist at the U.S. Department of Agriculture. You can follow him on Twitter @JoeGlauber1.