NERCRD COVID-19 Issues Brief No. 2020-9, by S.J. Goetz, C. Schmidt, L. Chase and J. Kolodinsky NERCRD/AESE, Penn State University and the University of Vermont. May 1, 2020. This brief is also published as a commentary in the Journal of Agriculture, Food Systems and Community Development.

The USDA-ERS' Food Expenditures by Outlet data provides insight as to why the COVID-19-related lockdowns have been so devastating for U.S. farmers. In 2018, American consumers bought a total of $628bn worth of food at grocery stores ($460bn) and warehouse clubs and supercenters ($168bn) (see table and graph). But expenditures on food away from home exceeded that amount - $680bn were spent at full-service ($337.8bn) and limited-service ($340.2bn) restaurants.[1] The COVID-19 pandemic-related social distancing and stay-at-home orders forced many restaurants to close and those remaining in business to switch to pick-up or delivery only options. Because restaurant supply chains are highly specialized and time sensitive, reallocation of these supply chains has not come quickly enough to accommodate the shifts in consumption toward at home eating patterns.

While mail order and home delivery volumes, valued at $24.8bn likely increased markedly in the last month, they represented only 1.5% of expenditures in 2018. On the other hand, Schools and colleges, Hotels and motels, Drinking places and Recreational places, accounting for an additional 12.6% of food expenditures, also have experienced dramatic reductions in demand. Perhaps most remarkable is the fact that Americans devoted only 0.3% of all expenditures on food to direct selling (these include farmers, manufacturers, and wholesalers[2]). Along with mail order and home delivery, direct sales by farmers are one of the few sectors that appear to be growing rapidly in the evolving COVID-19 pandemic despite social distancing-related constraints.

Graph showing different ways Americans spend money on food (e.g., at grocery stores, restaurants, at school, etc.).

Source: https://www.ers.usda.gov/data-products/food-expenditure-series/interactive-charts-food-expenditures/#outlet, Accessed April 29, 2020.

The COVID-19 pandemic has resulted in historically unprecedented shocks to the U.S. economy and by extension to the food system. Never before have entire sectors of the economy been shut down, let alone on such short notice. While the implications for supply chains everywhere are profound, the food system may be disproportionately impacted. People will continue to eat, but where they obtain their food has changed dramatically. This has contributed to logistical bottlenecks in the supply chain, from not having enough workers in the field for processing or trucks on the roads, to problems of redirecting transportation contracts to get food to the right place at the right time, and bottlenecks in processing because of packaging and labeling requirements.[3],[4] These factors are compounded by the time-sensitive and perishable nature of food products and reproduction cycles of agricultural commodities, as well the vulnerability of workers within the foods system to COVID-19 infections.

About the Authors

Goetz is Director of NERCRD and Penn State Professor of Agricultural and Regional Economics. Contact: sgoetz@psu.edu; Schmidt is Assistant Professor of Agricultural Economics, also AESE/Penn State. Chase is Extension Professor at the University of Vermont; and Kolodinsky is Professor in and Chair of CDAE and Director of the Center for Rural Studies at the University of Vermont.

About this series

These issues briefs are designed to provide information quickly or stimulate discussion, and they have not undergone regular peer review. NERCRD receives core funds from the U.S. Department of Agriculture's National Institute of Food and Agriculture (award #2018-51150-28696) as well as from Multistate/Regional Research and/or Extension Appropriations (project #NE1749), the Northeastern Regional Association of State Agricultural Experiment Station Directors, and the Pennsylvania State University, College of Agricultural Sciences. Any opinions are solely those of the authors.

[1] Not all of this represents the value of agricultural products (a large share of this would be value-added in the form of rents and wages).