Washington Insider-- Thursday

Pandemic Changed Food Market

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Reuters: Trump Orders EPA To Deny Gap-Year RFS Waiver Requests

President Donald Trump reportedly has instructed EPA to deny so-called gap-year small refinery exemptions (SREs) under the Renewable Fuel Standard (RFS) in a bid to bolster his support in farm country, according to a report from Reuters. The action would take the form of a direction from the White House, the report noted, and comes as Sen. Joni Ernst, R-Iowa, is facing a challenge in her bid for reelection to the US Senate in November.

When Trump visited Iowa in August to learn more about the derecho storm impacts, Ernst repeatedly pressed Trump on the SRE issue, extracting a promise that he would talk to EPA on about the situation.

EPA was flooded with gap-year SREs in the wake of the 10th Circuit Court of Appeals ruling in January that three SREs issued for the 2016 compliance year were invalid as they did not amount to extensions of prior SREs. That prompted multiple requests for SREs to be filed going back to the 2011 compliance year.

Meanwhile, Politico is reporting that the Department of Justice has decided not to appeal the 10th Circuit Court ruling to the U.S. Supreme Court, another sign the administration has opted to side with biofuel backers on the issue.


Final Rule For Coronavirus Food Assistance Program 2 (CFAP 2) Is At OMB For Review

The coming Coronavirus Food Assistance Program (CFAP) expansion by USDA is closer to be being announced as the final rule was sent to the Office of Management and Budget (OMB) for review on September 4.

This rule likely covers what has been touted as CFAP 2 which would address conditions since the April 15 date referenced in the initial CFAP effort that has seen $9.4 billion paid out as of August 31.

The program targeted providing some $16 billion in payments using funds from the CARES Act and Commodity Credit Corporation (CCC) borrowing authority.

Expectations are the CFAP 2 effort will be announced soon as OMB review of the plan is not expected to take a long time.

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Washington Insider: Pandemic Changed Food Market

When the coronavirus hit, the food business found itself in a whole new ballgame, the New York Times is reporting this week. “Even the most enthusiastic cooks had to adjust to a new, more complicated relationship with their kitchens," the article said.

For the first time in a generation, Americans began spending more money at the supermarket than at places where someone else cooked. Grocers saw eight years of projected sales growth packed into one month. Shopping trends that were in their infancy were turbocharged.

The NYT says it is focusing on the “six-month shift” and calls it a “behavioral scientist's dream.” Shoppers began by building bomb-shelter pantries. Then came a nostalgia phase, with bowls of Lucky Charms and boxes of Little Debbies offering throwback comfort. Soon, days were defined by elaborate culinary stunts, sourdough starter and kombucha clubs. Now, NYT thinks that “although kitchen fatigue is setting in for many, a new set of habits have been set.”

The report says that quite a few companies agree. “People are moving on to more complex cooking, and we don't see that going away,” said Rodney McMullen, the chairman and chief executive of Kroger — where sales rose 30% at the onset of the pandemic, including big jumps in the pasta aisles, the beer and wine department and baking supplies, and “including a 600% jump in sales of yeast.”

He and others in the business say the COVID-driven return to the kitchen could change grocery shopping forever. “This is a pivotal time in our history,” Anna Nagurney, a professor in the Isenberg School of Management at the University of Massachusetts who studies supply chains, said. “Not all of what we've seen will stick, but a lot of it will.”

The Times report goes on to list ways the pandemic has already changed the way Americans shop for food.

For example, it concludes that “shopping is more efficient now.” Trips are fewer and lists are better. “People now go to the store with purpose,” said John Owen, the associate director for food and retail with Mintel, the market analysis group. “The number of trips went way down, and the size of the basket went way up in April. We have eased back on that, but not by much.”

Before the coronavirus, 19% of Americans shopped for food more than three times a week, according to McKinsey & Company. That number had dropped to 10% by June, according to Lizzie Bowman, a marketing director at American Public Media who lives in Minneapolis.

She has streamlined her shopping to once a week. “It has made me a better planner and more aware of what I like to buy where,” she said. “I am so much more purposeful about where I choose to shop.”

There's more. A year ago, 81% of shoppers surveyed by Gallup said they never turned to the internet for groceries and online shopping accounted for about 3% of all grocery sales. In June online grocery sales in the United States hit $7.2 billion.

The race for on line dollars is intense. In a challenge to Amazon Prime, Walmart last week announced a new $98-a-year subscription service that offers same-day delivery on 160,000 items. Instacart is more than doubling its work force and new services are popping up.

Curbside pickup, delivery's sibling, has also exploded. Stores are converting parking lots to better handle traffic from shoppers who drive by to pick up orders. Companies including Kroger and Whole Foods Market are opening what are becoming known as “dark stores,'' designed solely for picking up or delivering orders placed online.

Also, the Times thinks that many shoppers consider themselves permanent converts to online shopping.

Other changes include shifts in consumption patterns — produce sales have been riding high since March and are still up 11% from a year earlier, said Joe Watson, a vice president at the Produce Marketing Association. In May, grocers sold 73% more oranges than during the same month in 2019. Sales in the category that grocers call “natural” were growing before the pandemic but they blew up when it arrived. By mid-March, they were up 78% over the year before, according to the market research firm IRI.

And, grocers have found that they can grow with fewer choices. Displays at the end of aisles are more likely now to hold bulk packages of staples, NYT said. And, shoppers are being more economical while interest in house brands has grown. Frozen food is another surprise breakout. Sales initially jumped by 94% in March, according to the American Frozen Food Institute. That initial rush abated but even in August, sales remained up almost 18%.

So, we will see. Our food consumption preferences are as varied as our population and are sensitive to many influences. The virus, with its enormous impacts on our way of life will certainly change many basic things, too — even for systems as large and diverse as food. These are trends that are central for producers and should be watched closely as changes appear, Washington Insider believes.


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