Food Makers Get Shot of Reality Now that Panic Buying Has Waned
Some of America’s largest food companies are finally feeling the pinch with restaurants across the U.S. remaining closed for weeks as a result of the coronavirus pandemic.
After weeks of consumer hoarding, panic buying is abating and the lack of demand from shuttered restaurants, schools and coffee shops is starting to set in. Sanderson Farms Inc., the U.S.’s third-largest chicken producer, is slowing production at plants that supply restaurants, and protein giant Cargill Inc. has idled an egg facility due to the lack of demand from the food services industry.
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Americans spend more than half of their food budget eating out, and an increase in retail among grocery stores can’t fully compensate for the lack of demand from restaurants. Every 10% decline in out-of-home food spending translates into a gain of just 3% in the retail channel, according to Rabobank, one of the largest lenders to the food and agriculture industry. Nowhere is the effect of restaurant shutdowns more obvious than in the dairy industry, with almost 50% of American cheese production going to food services. Farmers in top-producing Wisconsin are being asked to dump milk to boost low prices with overall demand for dairy products expected to drop 10% to 15% in the second quarter, according to Mary Ledman, a global diary strategist at Rabobank.