A Dire Coronavirus Economic Scenario: US Grocery Shortfall

The everyday consumer impact of the new coronavirus is relatively mild in the US thus far, compared to places such as China, South Korea, Japan, and Italy. But that doesn’t mean Americans are free and clear should the contagion spread. The most immediate sign would be a panic-driven stockpiling of groceries.

Hoarding has hit Washington state, where 10 virus deaths, the most in the country, have occurred. (Another was just confirmed in California.) Powdered milk sales have almost quadrupled in Washington, according to marketing data firm Catalina. Dried beans, grains, and rice buying has risen 84%. Plus, hand sanitizer purchases have spiraled 836% and chlorine bleach sales have more than doubled.

What products are most at risk of disruption? Anything imported from overseas, especially from the hardest-hit regions. That means consumer packaged goods and frozen meat and fish, said Elena Belavina, associate professor of applied economics at Cornell University SC Johnson College of Business, who studies grocery retail and supply chains.

If the products are domestically originated, there’s less of a problem. “Fruit and vegetable supply chains are largely American,” she said, “and mostly span areas that are, so far, less affected by the virus.” Should COVID-19 become really entrenched in the US, she added, that could choke off delivery of farm products. Travel bans, imposed in China and now in parts of Italy, could impede delivery of fresh fruit and vegetables to the Northeast, where they largely aren’t grown, she noted.

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“But that seems unlikely,” she added, “based on what we have seen in terms of the containment efforts in China,” where delivery of supplies has not been much of a problem.

A weakness during a civil emergency is the modern supply chain arrangement, where inventories are lean and products are sped to distribution points when ordered. This just-in-time inventory approach, Belavina pointed out, is very efficient when things are normal, she said, but this system has “surprisingly little slack to deal with panic buying.” Throughout the nation, people have swept store shelves clean of face masks and hand sanitizers.

One distasteful side effect of hysteria-induced purchases, said her Cornell colleague, Dana Radcliffe, senior lecturer in business ethics, is price gouging. Defenders of jacking up prices among such frenzies say that retailers are only obeying the laws of supply and demand.

“The problem, however,” Radcliffe argued, “is that, in emergencies where critical supplies are scarce, the conditions of a ‘free and fair market’ don’t exist—since the buyers don’t have options.”

As Americans watch the coronavirus saga unfold, the fervent hope is that none of these dire supply situations appears on US soil. And especially not any more virus-related deaths in the US.