Several folks have asked me about food thoughts lately. I'll be posting my replies here, in this thread, and we can add other pertinent links to this chain of thought here. Best, cynthia

-- cynthia beal (cabeal@efn.org), September 18, 1999

Answers

On the Listserv Y2k Forum, Dave Hunter of Illinois asked me about food.

Here is my reply:

Hi Dave;

You ask about the food industry's readiness for y2k. We (business people, investors, citizens) have been so thoroughly discouraged from speculating about what might or might now happen that the inferences I have to make are not as good as they might have been if the public dialogue between us all had been more supported. But here, in about the most competitive business in the world, we have strong evidence for the dictum "Knowledge is Power."

Why should businesses give away their power? If they're vulnerable, why should they say so? If they've managed to corner a market (say, reserved a certain percentage of a transportation company's operational flights and routes, or a certain percentage of a financial company's available liquid portfolio for credit lines) why should they share that information? That's private, it's a corporate asset, and it's a card that will be played to stockholders' advantage if the time ever arrives. It's no different than what they do every day of every year.

I could make plenty of arguments in support of information sharing, and co-operation in creating co-opportunity but I've got my cynic hat on now, because I really was looking for a lot more group work by now. The latest trade show of the National Nutritional Foods Association didn't have a single workshop on Y2k problems for inventory, manufacturing, point-of-sale, ordering, or book-keeping systems.

In their "preparing for the millennium" conference not one mention was made of y2k. Since I happen to know there are plenty of machines in use that have date routines (we're dealing with perishable, highly regulated foods and vitamins), I can only assume it's a gross oversight on their part, and I also assume there will be consequences.

I presume you're wondering out of personal curiosity - perhaps just to know my "take". It's really no different than it has been all along, and Mitchell Barnes, Bill Dale and I seem to have covered most of its potential unfoldings pretty thoroughly last year.

If you're wondering whether or not to stock up, I always say "yes". I'm a grocer. I also believe in having a full pantry. I believe in buying in bulk and saving money with the quantity purchase. I believe in cutting down on transportation and packaging and environmental costs.

And if you're wondering whether or not food companies are going to manage to keep it together in spite of those nasty global infrastructure testimonies about interconnected systems of commerce being poorly understood and impossible to manage externally (in a free society) I'd have to tell you I don't know.

But here are a couple of observations:

1. Renewed my business insurance last month. My insurer is offering a rider (they've formally excluded y2k) that adds back business interruption coverage, 25,000.00 maximum, for $750.00. They've got clients in 31 states (they're big) and have not sold one of the riders.

2. The USDA's statistics service did a y2k review of farmers and food processors and determined that dairies didn't have a problem because less than 2% of them reported any dependence on computers. Since dairy products are some of the most highly monitored foods, due to their perishability and vulnerability to poisonous spoilage in transit, I take this to mean that the dairy folk simply do not comprehend their reliance on date-dependent equipment on the road between their suppliers (used to feed/care for their animals) all the way down to me, the grocer. Non-comprehension of computer dependence is probably the biggest indicator of potential failure.

3. My health department inspector hadn't heard anything from her organization about Y2k vulnerabilities in date-stamped products. This could lead to expired products being sold throughout the course of a year, or expired products making their way in from other countries. Who knows? All I know is product recalls are a pain.

4. I did a food trade org. presentation last year on Y2k. It received strong interest and requests for followup, so I'm doing two next month. Interestingly enough, in the interim between then and now, almost no food businesses interested in the issue have contacted me, so I think we're looking at the same phenomena you and I went through when we first encountered the challenge - we stood back, looked at it, wondered about it, talked about it, but took our time getting into it.

5. Early issues I brought up - things like having food manufacturers check out vulnerabilities in their supply chain (do you have a key supplier in one of the areas where power or other services may be disrupted? etc.), having cash flow and staff well managed, having solid contingency plans in place - remain key issues.

6. One of my distributors had a y2k upgrade done to their phone system a couple of weeks ago. The voice mail and call routing have stopped working. Sales reps, customers, warehouse people and truckers are having trouble connecting in this high volume, high perishable wholesaler. The programmer is "looking puzzled", according to my rep. A sales call that used to take 5 minutes may now take 20-30, with call backs, missed opportunities to connect, missed orders, missed product, etc. At least they've got the programmer right now - what if it had been the 3rd of January?

7. Since September 1, our electronic food stamp transfer process has not been working smoothly. I dread to see the bank reconciliation, when I'll have to match everything up. Add another 5% to the cost of taking a food stamp and, in a 1% net world, you'll wonder how I can afford to pay 4% to take food stamps, too. Hmmmm

I've been at this for over two years, now. I'm still not ready. How do you get ready for volatility when your competition has you thinly stretched to your maximum? Y2k is not only about emergency potential/prep. In fact, the most likely scenarios have always been primarily social and economic interruption.

The majority opinion I've heard (from those who seem rational and aware of Y2k) is that the devolving economics due to supply chain disruptions will begin sometime around the 3rd or 4th weeks of January - this matches a bit of the order chain process - you place an order, get the item in, sell the item, bill for the item, collect for the item, and pay for the item.

Each one of those systems has to work well enough to connect the customer with the goods and create satisfaction at a cost that doesn't exceed the profit made on the sale. All sellers in the transaction have to accurately determine when to make an investment in satisfaction vs. when to avoid costs exceeding profits. Right out the gate, if there are problems, sellers may opt to overspend or underspend on satisfaction, guided by their business philosophy. Depending upon the severity of the glitches in their particular supply chains, they may or may not make the right call.

If they spend heavily on satisfaction (ie.lots of bucks into workarounds to keep the customer happy, but there wasn't any market share to gain) and they short themselves the capital they need to stay in business, they made a poor investment in keeping their customer happy - there wasn't any competition that could have done it better than they, and having customers stand in long lines or wait for refunds or service would be cheaper than offering them the same old service when they don't really have to. Monopolies and oligopolies (4 companies control 50% or more of a market) will be in this boat. Expect service levels from this sector to fall fastest and farthest, first.

If the glitch is light to medium in their sector, and there are still plenty of places for customers to turn to for satisfaction, they'll possibly gain by not losing customers. This is more true for the small business - in a light glitch, they'll have to expend a lot of money on customer satisfaction in order to avoid losing those customers to the big suppliers who will have more clout in the supply chain, more insulation from increased transportation costs, etc.

It's a very hard call, and it's why information of the sort that Jim Lord felt was pertinent might make a difference to some folks' risk analysis. But we won't be allowed to have that info in time, unless we have an inside track with folks who feel it's wrong to keep this information private.

Anyhow, I know what it means if my distributor can't take an order from me when I need it. I know what it means if my phones don't work, or I can't take VISA. I know what it means when a vendor messes up invoices, or ships the wrong product, or is out for a long time, or charges me the wrong price. Fixing each of these costs a huge amount of money, and the administration cost of error repair is something that few I've met really comprehend.

I think that's because they (owners, managers or general workers in companies) don't personally do it anymore. There's a reason why bookkeepers and programmers get "that look" during crunch times. It's the look of struggle and deadline in an environment that really doesn't get how hard their jobs are.

I'd say keep your eyes out for a number cruncher's revolution.

Personally, I've moved solidly into the camp of changing the world by shopping a few times a year. It should make my pantry resilient, my checkbook fatter, my gas tank fuller, my time budget larger, and the world a rather different place than it is now. I do not plan to shop for groceries in December, January, or February. It's not necessary, everything I need is produced now with the fall harvests, so why do I need to pay corporate warehouses to store my food till I need it?

I'm sure our collective economy - for it is an agreement between us all - can find a better use for my extra money and time.

Best,

Cynthia

-- Cynthia Beal (cabeal@efn.org), September 18, 1999.

Thanks Cynthia for your update.

In light of the pharmaceutical industy unease I question the uninterupted availability of the various kinds and types of antibiotics used as food supplements, boluses, suppositories, and injections in the animal industry.

On a mundane level, all poultry feed other than scratch has antibiotics included. If you raise cattle, horses, swine, sheep, or goats, you will be more than familiar with the need for antibiotics, and for the injectables used in preferring relative immunity to the various diseases within each subject herd type. Some of these diseases are cross transferable to humans - diseases none of us would want to get.

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There are about one million cattle slaughtered daily for human consumption. Given the various overseas y2k assessments, and the NorthAmerican domestic possibilities for water interruption I immediately recognized that this huge daily cattle slaughter will be interrupted wherever the water is interrupted.

Some cattle are raised on local farms. However the farmer or rancher generally sells the animal prior to slaughter and not necessarily to a slaughterhouse. Most beef will spend time in at least one major stockyard (100,000 cattle) prior to slaughter, & during residence there will gain considerable size. Watering the cattle is imperative. Cattle, while gaining 2 to 4 pounds of weight a day need considerable water just to dampen the dry food just so it can be digested.

A gaining steer can conservatively eat 15 pounds of dry food a day, and drink conservatively 30 gallons of water

100,000 cattle equals 1.5 million pounds of food a day, 3 million gallons of water a day.

1 million head of cattle - 15 million pounds of food a day, 30 million gallons of water a day.

Recent writings have continued to highlight the SNAFU'd state of the US rail system, especially the network East of the Mississippi River. I would surmise that at least part of the cattle feed is transported by rail. I surmise that at least part of the daily flux of live cattle transported to slaughterhouse is transported by rail. I surmise that at least part of the slaughtered animals' parts are transported by rail to human food distribution warehouses. (Whether by piggy back in truck container or by rail car).

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Recently I've been making my own cheese from goat milk milked by my own hands. Not only do I find it relaxing to do this but gratifying in a way uncommon to experience these days, but probably very common prior to WWII. I could, but won't, wax rhapsodic about my little goat herd. ;-)

In making this goat cheese I find several y2k potential problems. First being the cooling of the milk for refrigerated storage until I have enough milk accumulated for cheesemaking - this generally takes about a week given my particular circumstances. After the milk has been accumulated, usually about 2 and a half gallons I pasteurize the milk - 145 degrees for one hour. The milk is again cooled. At about 80 degrees rennett or vinegar (home made from last year's apple crop) is used to curd the milk. Then that resultant curd and whey is brought up to 115 degrees and kept there for over another hour.

It is very apparent to me that without electricity, or reliable electricity, both for cooling, storage, and controlled heating my cheesemaking in a post y2k world could be a much more involved process than I now traverse. And so it will be for a commercial cheese factory.

Commercial cheesemaking will require considerable amounts of clean water, specialized soaps, cheesecloth, paraffin, olive oil, colorants, etc. Whey is the liquid left over after the solids have been curded. The whey probably has further use, whether in-house or sold to a 3rd party, or possibly the whey is discarded or used as animal feed. Regardless, one gallon of milk weighs a bit more than 8 pounds, and the general rule of thumb is one pound of curd per gallon. Whey is suddenly, in that light a major component, necessary to handle, in order for our local grocery store to have two or three hundred pounds of cheeses all nicely blocked up in transparent plastic shrink wrap.

y2k related? I don't know enough about the industry, but I would suggest that certainly between the udder and teat, and the half-gallon of 2% milk and your fave yellow or white cheese there must be literally hundreds of steps, many to most of which will be exposed to the possibility of y2k SNAFU.

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My views on the Food Chain have not changed much over this past year. I still understand that the Food Chain is the focal point of more computerized diverse systems than probably _any other_ major daily factor in our lives.

Not only are the usual, telecommunications, electricity, and banking of total importance, but so are a host of other major systems: petroleum, biocides, fertilizers, chemicals, plastics, seed banks, genetic enhanced seeds, futures markets, transportation of all types, ports, import&export computers, food mills, slaughterhouses, freezer warehouses, rubber & tire industry, car & truck industry, forestry products industry, animal food industry, alfalfa industry, glass industry, metal refining industry, printing industry, pharmaceutical industry, the drip irrigation systems industry, metal pipe industry, fasteners, chains, ropes, fencing, nails, staples, mortgage & loan industry, the grain harvesting industry, greenhouses, HVAC, retail grocery stores, retail fast food outlets, etc.

Most if not all of these industries are domino'd, some to each other, and some to industries not listed. Many of the industries are overseas. Some are showstoppers, some if they aren't JIT will probably cause shortages and higher prices. Some might mean that consumers have less than the "perfection" than they enjoy today. Some might have only transient y2k problems, some might be taken down - & I don't care to forecast. But just given the sheer numbers of major systems and components necessary for daily JIT food we now enjoy my life experience tells me that Mr. Murphy will certainly visit such a complex come y2k.

mb

-- Mitchell Barnes (spanda@inreach.com), September 18, 1999.

This URL was put up on the Senate's 9/22/99 testimony on the food supply: http://www.snowcrest.net/siskfarm/foodrpt.html

-- cabeal (cabeal@efn.org), September 23, 1999.