Shortages in household items, like toilet paper and flour, might be diverting attention away from the glut building up among bulk suppliers. This is only a domestic example. I don't want to think about the tightly coupled industries that allows me to buy an electronic product that had its thousands of parts assembled 3,000+ miles away in as little as 3 weeks. Food goes to waste amid coronavirus crisis The coronavirus pandemic is leading the food industry and regulators to change policies as they grapple with empty shelves, a glut of fresh produce and milk, and sudden shifts in consumer buying habits. The problem isn’t a shortage of food and commodities. If anything, food waste is becoming a bigger issue as traditionally big, bulk buyers — like college dorms and restaurant chains — suddenly stop receiving deliveries. As a result, millions of gallons of milk are being dumped, and farmers have no alternative but to turn fresh vegetables into mulch. Federal agencies are scrambling to keep up with the altering landscape by easing rules governing trucking, imports, agricultural visas and labeling requirements for restaurants and manufacturers. “The way a client described it is they’re seeing a tsunami of demand shift from foodservice to food retail,” said Bahige El-Rayes, a partner in the consumer and retail practice at Kearney, a consulting firm. “If you’re a manufacturer today of food, it’s basically how do you adapt? How do you actually take what you sent to restaurants then sell it now to retail?” New alliances are being formed as demand from restaurants dry up and consumers look for new ways of delivery. Kroger, the largest U.S. supermarket chain, has partnered with foodservice giants Sysco and U.S. Foods, which normally supply the restaurant industry and large institutions, to share labor and keep store shelves stocked. The partnerships offer employment to foodservice workers that would otherwise be furloughed or laid off as a result of a near shutdown of the restaurant sector. It also provides much needed manpower to the overwhelmed food retail industry. Rewiring the U.S. food network, however, comes with logistical headaches. “Since we’re buying more at the grocery store, it means [food items] have to be in that form,” said Pat Westhoff, director of the University of Missouri’s Food and Agricultural Policy Research Institute. “We have a bunch of stuff that’s still stuck with restaurants, and they’re trying to decide what to do with it at this point.” Farmers are also scrambling to recalibrate their production. Richard Guebert Jr., Illinois Farm Bureau president, said his state’s meatpacking companies have fewer employees showing up because of concerns of being too close to other workers. “The industry is backing up on bacon and other products that they put together as cut-outs, so they’re slowing down and not doing the volume that they had,” Guebert said. “There’s a concern for pork producers because they just can’t turn their buildings on or off like you can an assembly line,” he added. From the time sows give birth to slaughter, “it’s a nine-month process that started nine months ago. Pigs continue to be born every day, whether they keep the whole capacity.” In the meantime, major food distributors including U.S. Foods and Performance Food Group are begging the Treasury Department to prioritize loan applications from their sector as companies shift operations to supply retailers. “This kind of transition, even if temporary, takes time and investment as we adjust our warehousing, logistics and purchasing processes to meet a consumer-facing market,” they wrote in a letter to the Trump administration. A group of food worker associations also made an appeal to congressional leaders that any future aid package should “include support for America’s essential critical industry workers” through tax exemptions or direct payments. In the U.S., an excess supply of food production is forcing some sectors to take extreme measures and ask for extra creative solutions from the government. “Clearly we’re in a time of crisis,” said Gordon Speirs, owner of Shiloh Dairy in Brillion, Wis. “We’ve lost 25 percent of our income just through the crashed market. Now we face the reality of having to dump milk on top of that.”
The Feds need to take care of the food industry. It's one thing to not find hand sanitizers and clorox wipes, quite another if consumers can't buy food items due to disruptions in the supply chain.
Anything that have a short lifespan or that is needed in “just in time” manuf will be hugely impacted. Many small part maker are also being squeezed with drastic drop in income and debt... I know some larger companies are already doing creative financing to keep smaller critical manuf afloat as bigger manuf sometime depends on parts that only these smaller manufacturers provide. It’s a big shock to the system. Many lessons will be learn from this - busn and supply continuity plan, reserve to absorb shock, less choke points and more diverse and local manuf and factory, multiple source for critical parts and so on... Ironically, the trump China disruptive trade war had some company better prepared for this shock as they put their plan in place during 2019, from buying up supplies and keeping them in local warehouse before the 25% tariff kick in to bringing up multiple suppliers outside of China and reducing dependencies to one country.
Good post and I agree with a lot of it. The farming sector needs to really be reformed. It seems like every economic shock farmers always get hit hard. We could have people starving in the streets yet there are still stories of farmers dumping milk. As a farmer you're trying to predict what the market will be 8 months from now when you harvest your crops and in this fast paced economy a lot can change in 8 months. That is on top of the traditional banes of weather and pest that farmers have to deal with. Milk producers have gotten very successful making milk and big dairy is always pushing for things like prices support. As more milk is being made taste are changing and I think we need to consider whether we really need that much milk, or corn either. This isn't a popular opinion in MN as this state has both Big Dairy and Big Corn. There's been a lot of talk about decoupling from the PRC and while we might see some of that I don't think we will see a major decoupling. We are so intertwined economically with the PRC that it will be very difficult to just cut off the PRC. As noted during the trade war connections aren't just manufacturing of small goods but also agriculture, banking and capital. Just saying we aren't going to source from the PRC we first have to address where will the rest of that capacity come from? The US is still years if not decades away from making up for manufacturing capacity from the PRC. The PRC also isn't just going to sit by while the US quits buying manufactured goods. They won't continue to buy US agriculture and possibly more dangerous finance US debt. We saw a taste of what can happen when we had to spend billions to bail farmers out. If we lose investment and capital from the PRC we're going to see steps taken that make the bailout of farmers look like pocket change. I think the best and most likely result will be what txtony says. A change in the on demand supply chain. This crisis is really showing the importance of maintaining adequate stores of everything from toilet paper to ventilators. We might see a return of keeping good stock and reserves.
Posted in another thread, but fits well here too... Behind closed doors, Trump's coronavirus task force boosts industry and sows confusion "Jared and his friends decided they were going to do their thing," one official said, referring to the president's son-in-law. "It cost weeks." https://www.nbcnews.com/politics/wh...ce-amassed-power-it-boosted-industry-n1180786
China had been content with supplying us with assembled goods and ruining their environment in the process in exchange for us handing them our manufacturing capacity and IOUs. None of that made any common sense...until now. And even when their grand plan has been laid bare, we still have people saying we can't/shouldn't decouple from China? Decoupling is inevitable, but don't take my word for it. Hear from someone who made a career out of helping U.S. companies establish supply chains in China: https://www.chinalawblog.com/2019/12/china-and-the-west-are-decoupling-please-act-accordingly.html https://www.chinalawblog.com/2020/04/its-time-for-conscious-uncoupling-with-china.html For better or worse, anyone who speaks up for China from here on out will be like publicly defending USSR/communism in the 1950s. There's a ton of public anger about the whole episode.
I read both pieces and have heard of Dan Harris. I agree with a lot of what the articles say and they actually don't differ completely from what I'm saying. I didn't say decoupling was impossible but it is going to be very difficult and the I don't think that we will see a major decoupling. Harris' writes this in the second article you cite: "I love the term “conscious decoupling”, even though I do not know exactly what it means. I don’t think it means an immediate severing of all commercial ties with China as that would be both suicidal and impossible. Literally suicidal, as the world desperately needs PPE and China produces something like 88 percent of it. So decoupling there must be gradual. It also does not mean immediately blocking all other transactions with China as that too would be unwise and impossible. There are just too many made in China products that will take years to be made elsewhere at anything approaching the same costs." The emphasis is exactly what I was saying it will take years or maybe decades to replace what the PRC manufactures. My own view is that most companies don't like to make things more difficult than need be. So while there certainly are arguments for decoupling and there are and likely more steps to decoupling we will not see a major one, barring something like an actual war, because companies aren't going to be willing to spend money for something that long term and difficult. The other part that I think both pieces ignore is the financial side of things. While the PRC investment in the US has plummeted in the US as a result of the trade war they still invest billions in the US every year. They also hold more than a trillion of US debt. That is about 16% of the total US debt (note this figure is before the current round of deficit spending to fight COVID 19. ) That is a significant part of the US Debt. and one that the PRC could use as a weapon against us. It would hurt them a lot but in the case of a real conflict this would be MAD strategy. Also the pieces recommends companies moving manufacturing and other operations from the PRC to countries like Vietnam, Malaysia and Singapore. Those countries are also partners of the PRC and the PRC has a lot of investments in those countries too. The PRC is still the world's largest manufacture but as they've developed the PRC isn't the cheapest manufacturer anymore. The PRC has itself outsourced many jobs to countries like Bangladesh and increasingly African countries. As the first article notes the PRC themselves have been aware of pending decoupling and have taken some major steps to address that. If the idea is to hurt the PRC by decoupling they might've already beaten the US to that. They might also be beating the US to establishing trade and manufacturing ties with countries that the US would like to replace the PRC with. What very well could happen is even if US countries move a lot of manufacturing out of the PRC they will be dealing with PRC built factories, paid for by PRC money, and run by PRC management in other countries. Regarding the last line "For better or worse, anyone who speaks up for China from here on out will be like publicly defending USSR/communism in the 1950s. There's a ton of public anger about the whole episode." I'm sure there is but anger isn't a good basis to make long term policy on. For me personally I've been told by people from the PRC before that I wouldn't be welcome in the country because I've been sympathetic to the Tibetans, believe that Taiwan can be an independent country completely separate from the PRC. I've been called a "Chinese apologist" before too. That's not going to prevent me from discussing the topic with my own POV.
https://www.census.gov/foreign-trade/statistics/highlights/toppartners.html There’s an obvious cancerous growth in those charts in the link, and the answer is aggressive removal rather than keep going down the same road, which is lunacy.
Even the black market be hurting. They should make the hustles described into movies. Dirty money piling up in L.A. as coronavirus cripples international money laundering Dirty money is piling up in Los Angeles. In the last three weeks, federal agents made three seizures that each netted more than $1 million in suspected drug proceeds. The reason, according to the city’s top drug enforcement official: The coronavirus pandemic has slowed trade-based money laundering systems that drug trafficking groups use to repatriate profits and move Chinese capital into Southern California. With storefronts closed, supply chains in disarray and the global economy in peril, these complex schemes are hobbled and cash is backing up in Los Angeles, Bill Bodner, special agent in charge of the Drug Enforcement Administration’s Los Angeles field division, said in an interview. The recent million-dollar interceptions were reminiscent of seizures the DEA made before drug traffickers embraced trade-based money laundering, said Bodner, a 28-year agent. The shuttering of nonessential businesses has made a “tremendous impact” on a money laundering system dubbed the black market peso exchange, he said. In the fashion district in downtown Los Angeles — the exchange’s epicenter — drug trafficking groups from throughout the country use wholesalers to remit profits to Mexico, according to cases filed in federal courts in Los Angeles and elsewhere. Steven Mygrant, a federal prosecutor in Oregon who charged six people with laundering heroin proceeds through Los Angeles businesses, said two primary factors drive the exchange: Drug trafficking groups need to convert dollars to pesos, which is expensive to do legitimately, and they need to move money from the United States to Mexico, which is risky to transport in cash. To accomplish this, Mygrant said, a broker pays pesos for the drug traffickers’ dollars. The traffickers deliver cash to an exporter in Los Angeles, who ships goods — commonly clothing, cosmetics, jewelry or sportswear — to a retailer in Mexico. The retailer sells the goods for pesos and pays the broker. Developed by Colombian cocaine traffickers, Mexican cartels initially did not embrace the black market peso exchange, Bodner said, finding it easier to simply smuggle bulk cash across the border and launder it in Mexico. That changed about 10 years ago, he said, when the Mexican government tightened financial regulations and restricted the flow of dollars into its banks. Recently, with storefronts closed and agents seizing millions in cash packaged for transport, it appears drug trafficking groups are resorting to older, riskier ways of repatriating profits, Bodner said. The coronavirus has also cooled Chinese capital flight, he said, which before the pandemic was the primary driver of international money laundering. With the Chinese government curtailing the amount of money its citizens can shift overseas, drug traffickers and money brokers set up the following system, Bodner said: A Chinese national who wants to convert yuan to dollars and stash it in the United States will contact a broker. The broker instructs this person to pay a factory that produces chemicals used to make methamphetamine or fentanyl. The factory ships the precursors to Mexico, where they’re converted into narcotics, smuggled into the United States and sold for dollars. The broker directs the drug trafficking group to deliver cash to a relative or an associate of the Chinese national whose money initiated the entire sequence. The money is now in the United States and in dollars, without ever entering the global financial system.“The more money that wants to leave China, the more chemicals go to Mexico and the more synthetic drugs end up in L.A.,” Bodner said. But the pandemic has slowed the cycle significantly, he said. Most narcotics precursors from China are made in Wuhan, the epicenter of the coronavirus outbreak, and factories there are shuttered or operating at a reduced capacity. “When chemicals aren’t flowing from China, there’s no churn in the money laundering system,” Bodner said. Further, with global markets in upheaval, many of the Chinese nationals who were moving money through the system are now hesitant to stash funds overseas, he said. Slowdowns in Los Angeles’ money laundering systems come as drug prices rise in the city. With supply chains in disarray, Bodner said, the wholesale price of methamphetamine has soared to about $1,800 a pound, compared with about $900 a pound five months ago.
