Quick Bites: Shifting Dynamics

  • Shutdowns, lockdowns, and quarantines are altering the way people eat in the U.S…and in a hurry.
  • In the fourth quarter of 2019, Americans spent just about as much money at restaurants as they did in grocery stores – $65.3 billion monthly eating out, $65.4 billion pushing carts down the aisle.
  • Today, grocery stores are slammed. Slammed during senior hours first thing in the morning. Slammed all the way through close. Shelves are picked over – even with item limits in place – and supply chains are striving to keep up.
  • Restaurants, meanwhile, are closing their doors to diners, though many are trying to gain additional business with takeout and delivery.  Those efforts will help, but the industry is likely losing billions in sales every week.
  • This sudden swing between food service and retail creates dislocation. But, overall, the dairy industry may fare well enough. Consumption will obviously slip in the food service arena. People will not be eating as many cheesy potato skins and nachos now. But it seems likely that retail will pick up a good portion of that lost demand. Plus, the pizza delivery person is still making the rounds and the drive-thru cheeseburger joints are still open. Other products will do well at retail, too. Fluid milk sales are surging as people fill fridges to feed families eating at home. While there will be distruption in where people are buying food, aggregate dairy demand – especially for cheese – will not likely collapse.

Today's Special

  • Whether it’s moving medical supplies or hand sanitizer or fluid milk, the U.S. trucking industry has the monumental task of keeping commerce flowing. In an effort to speed up the product movement, the U.S. government relaxed hours-of-service regulations for trucks carrying “essential” goods – including food. But carriers continue to face hurdles as the COVID-19 pandemic leads to service station closures and as companies ratchet up safety precautions within their receiving bays.

  • Strong restocking demand into retail is driving spot rates higher. For the week of March 15, data from DAT Solutions points to a 7.5% increase in reefer and 5.6% gain in dry van rates. Rising rates may not hold, though. Once retailers and distribution centers restock their shelves and finish fulfilling backlogged orders of non-essential products, it seems likely the freight market will calm down some. At the same time, falling crude oil prices – down nearly 70% from the beginning of the year – will provide some cost-side relief to carriers. U.S. diesel costs fell to $2.66 for the week ending March 23 – down 23-cents a gallon in the past month. And, prices could move lower yet in the weeks ahead.
  • But… the dairy industry faces unique challenges. Tanker rates remain firm, due in part to its specialty nature and the strong pull from fluid milk plants. This is putting more pressure on trucking companies as a result. 
  • IDFA is working diligently to keep milk flowing by encouraging Congress to direct the U.S. Department of Transportation to allow heavier trucks on the interstate highway system. This would help food and food products move more efficiently and effectively across the country. For more information on IDFA’s efforts, please reach out to Donald Grady at DGrady@idfa.org.

Something Sweet: U.S. Economy with Phil Plourd

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