Understanding supply & demand and food shortages?

Are there food shortages & are we going to run out of food. Are food companies closing proof that food shortages are true? It’s complicated. The answer to any of the questions about food shortages, supply and demand, and prices cannot be answered by one person or one company. First and foremost the reason for shortages on store shelves is directly related to customers hoarding. Second, the companies that make the food items have been operating for years on a Just in Time inventory basis– meaning they create supply based on demand forecasting. Once the demand for products increased mid-2020 companies were faced with demands higher than they could supply. Every item we buy has a supply chain. Almost no item we buy is entirely made in one place. Each item has several components and requires several companies to fulfill their part in order for said item to be produced. On a mass scale this meant everything from small to massive companies here and worldwide plus shipping all had to change the way they had been doing business (most since the mid-90’s).

Add to that a ship getting stuck or not enough space at ports for ships to dock and unload and the supply of all the things we need gets backed up. It also goes without saying that there are several companies that have shut their doors due to the pandemic, costs, lack of customers, rules/regulations and shortages of workers.

Supply is what a company has on hand. Demand is the quantity of any one good customers are willing to purchase and at various prices. When supply is low prices go up–this is done in part to stop overwhelming demand. When supply is high prices may go down some to insure products are sold before expiry or to keep demand for it alive.

Many companies stood back and took a look at their product lines and decided to cut products that were less profitable for them. Companies began to prioritize the goods they had been producing–which is why you don’t see certain soda flavors, cookies, or pizza’s or cat food and many other things on shelves anymore.

It isn’t because we are running out of food. It’s profit margins. It’s shortage of workers. It’s less companies making the item. It’s components made in other countries that there is a shortage of–like microchips.

Are there going to be meat shortages. Maybe. It takes 18 months to 2 years to get a cow to market weight. So when there is a shortage of cows this is how long it will take for the shortage to end. Right now the biggest shortage we have and many continue to have are workers at meat plants. Truthfully, I don’t know the reason behind prices being so high for so long. In my part of the world prices have been out of this world high since June of 2020. I’m guessing it has to do with some of the inputs in meat such as higher wages and higher prices for grain. Also, droughts in 11 states in 2021. Which amounted to 36% of the U.S.being too dry and another 4% too wet.

I would confidently say that the major reason some long-term food companies (survival food companies) are going out of or pausing their business is because of the influx of new prepper’s and their demands. Common sense always dictated that if you could, you should always have 6 months-1 year of food on hand. Many thousands of prepper’s decided that they wanted to have several years worth of product on hand. Also, there been a huge increase in the number of people wanting to become homesteader’s. As each and every one of them started buying up “all the things”–supply issues became an issue. Suppliers of long-term food, kits, and equipment could not keep up. Also remember that many of these kinds of companies may supply products to the military and likely to other government organizations that supply areas that experience inclement weather/loss of power on a regular basis. I have seen via YT videos people ordering hundreds of #10 cans of food “just in case.”

One of the biggest reasons companies like Amazon, Walmart, Target, and other grocer’s can’t keep up with demand is a shortage of workers and current workers quitting (overworked). Just today a company that I plan on ordering dairy and dry goods from has cancelled next week’s pickup until the week after due to overworked staff, truck drivers, and stress on suppliers. This country’s supply chain is broken and that is a fact–broken due to low inventories for years, broken due to a pandemic, broken due to climate change, natural disasters, overworked employee’s, not enough employee’s for the demanding work, fuel costs, outsourced components, and really a total lack of preparedness in the manufacturing/ retail industry.

Also, despite shortages, the waste of excess buying/hoarding. Here’s an interesting report on the rise of food waste. As if the problem wasn’t enormous before –well, it’s out of control now. Here’s another article about food waste in the U.S.

In summary, should we all be concerned with shortages? The answer is to a certain degree for some time we have and may still experience shortages. All of the reasons I’ve listed above and more are the reason items are higher priced or some shelves are bare. Still, the single biggest reason for shortages, especially food/toiletry products in store or online, is panic buying. Until panic buying settles down, until people on the internet stop feeding the frenzy, food, appliances, readiness/camping gear, and toiletry items are going to remain limited in some markets.

My experience over the course of the last eighteen months is that initially toilet paper, sanitizers, personal care products, and canned goods were the products that disappeared the fastest. Then, limits were placed upon these products and not too long after toilet paper and canned good reappeared. I never heard of or witnessed produce shortages, but there were cookies, chips, t.v. dinner, and soda shortages. Recently we’ve experienced not being able to source our cat’s food. This has been going on for several years and mainly due to two reasons: manufacturer replacing flavor/brand with new flavor or profitability. We noticed a shortage of the soda we drink–and we discovered that is because of the aluminum shortage in the U.S. What we’ve noticed in the past year, more than anything else, are increasing prices. Are prices increasing to curb demand? I’m not sure? I’m more apt to believe prices are going up due to all of the incentives being offered to workers due to the shortage of workers. When input costs are higher — the cost to produce a good is higher which then leads to higher prices. I think the worker shortage problem is going to take a while to get straightened out–I’m guessing close to another year. Add to everything I’ve said, climate change, and we all have plenty of things to be concerned about regarding our future and if and when any of us will experience food shortages. Climate change is the number one reason for world hunger–not worker shortages, not politics, not overcrowded ports, or people clearing the shelves off. .

Finally, before you empty your bank accounts to stock your pantry for the next 10 years–double check your news sources. For this blog post alone, I found one discrepancy after another discrepancy. Most alarming I found articles where people were stating that already we had bread lines similar to those in Russia at one time –due to food shortages. No where in this country since the pandemic began have we had bread lines. For years and years we have had hungry people in this country due to poverty. The long lines shown on television in 2020 in Texas were due to unemployed people (most due to Covid) needing food.

If you can afford to buy extra’s of what your family eats and needs–you should. If you do I wouldn’t tell anyone about what you are doing. This I say just out of pure common sense and caution. I’ve watched a lot of YT videos of prepper’s showing their stockpiles etc. and I find that extremely careless on their part. Even if they are fortified with guns and ammo–nothing will stop a hungry crowd, if things ever come to that, from trying to take what you’ve stockpiled. Also, don’t put all your eggs in one basket. Buy items from several different entities.

Of course, everything that I’ve written in this blog post is just my opinion. That said I am quite familiar with the subject matter…By day I work as a corporate tax accountant and also commodity forecasts/analysis.

Until next time–be safe and be well!