COVID 19 and the ‘Ripple Effect’ of Decisions

Inside D.C.

COVID 19 and the ‘Ripple Effect’ of Decisions

You can bet silent and/or out-loud prayers go up each time some media outlet interviews a health care pundit who declares “there’s no evidence” of novel coronavirus (COVID 19) transmission via foods from plants or animals.  

However, food production hasn’t dodged the COVID 19 bullet.

Local, state and federal governments are increasingly screwing down restrictions on the general population when it comes to “social distancing” – I hate that phrase only slightly more than “out of an abundance of caution” –  and everyone is getting a lesson in what I’ve come to call “ripple-effect” economics, whether they want it or not.

Here’s how ripple-effect works: 

When the goal was just “social distancing,” and folks were voluntarily staying home, OpenTable, the online reservation service, reported diners were down approximately 45% in Seattle, 40% in San Francisco, 30% in New York, and 25% in Los Angeles and Chicago.  However, when the goal became keeping all folks with indeterminate travel histories from congregating in groups of 50 or more and potentially infecting one another, mayors and governors effectively shut down the restaurant and bar businesses – the impact on fast food is unclear – in several cities, including New York, Boston, Chicago, Los Angeles and Washington, DC. 

Shutting down those businesses takes an economic baseball bat to the heads of small, independent restaurant and bar owners.  Let’s not forget their hourly employees, many of whom rely on tips to keep their heads above water, most now unemployed.

But in a macro sense, all the suppliers of all the ingredients needed to produce a restaurant meal are immediately impacted as well, because folks who can’t sell ‘em don’t buy the stuff to make ‘em.  This is an equal opportunity meltdown for food producers hitting crop and animal producers, fruit and vegetable farmers, processors and retailers. 

On the back end of the chain, it hits renderers who aren’t buying used cooking oil, greases and animal remnants because cooking per se is down to nearly zero.  If renderers aren’t buying animal byproduct as they normally do, then they aren’t processing as much meat and bone meal for use as an animal feed/pet food ingredient.  This increases feed costs to producers, further cutting even deeper into the cash they take home.  It’s a classic vicious circle, and very much insult to injury.

The federal government, from Congress to President Trump on down, is playing catch-up on COVID 19.  Congress has approved two bills to pump over $16 billion into stemming economic hemorrhage that’s inevitable, keeping as many folks in business as possible.  So fast did Congress move last week, leaders now acknowledge they’ll need to rework at least one of the already-approved bills to make it more small business friendly.  A third bill is expected even as the Senate gets ready to vote on the second bill. 

Actions that should have been taken a month ago – public/private partnerships on accelerated testing; vaccine development fast-tracks; school meal guarantees; “social distancing,” etc. – are only now being implemented.  Daily, if not hourly, the White House or the Centers for Disease Control (CDC) – “out of an abundance of caution” – share “recommendations” further disrupting the lives of the general population.  Then some of the aforementioned mayors and governors turn those recommendations into mandates.  

I often find myself at odds with McDonalds Corp.’s handling of industry issues. However, when it comes to broad food chain challenge that is COVID 19, I heartily agree with McDonald’s CEO Chris Kempczinski when he says, “One day, we will be on the other side of this. Life will normalize again. Communities will be back to normal. And that’s where we need to keep our focus. The decisions we do, or don’t make, in the coming weeks will reverberate for years.”

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