April 17, 2020
I would like to thank the large number of individuals from all over the nation who participated in the recent webinar. Due to the large number of questions, an attempt will be made in the next few articles to address some of the questions that were not answered due to time constraints. Now, let’s address a few of the questions.
How would you rate the Federal Reserve’s interventions in response to this crisis?
This is a question that has a wide emotional response throughout society. The Federal Reserve took the necessary steps early in the pandemic. My only criticism is that last fall, when the economy was doing well, they should have left more dry powder on the table, rather than lowering interest rates so quickly. As mentioned in the webinar, this is an economic crisis that will require both monetary and fiscal policy. Coordinated actions around the globe will be necessary. Overall, in the recent months, the actions of the Federal Reserve would be graded as solid.
Do you think that moving forward, consumers will focus on purchasing local or U.S. products versus purchasing from China or other countries, even if it means paying more?
For the most part, the answer is yes. The U.S. and other countries will move from globalization to selective globalization with trusted trading partners. For food, fiber and fuel sources, a movement to local and regional products and processing, despite not being the most optimal or efficient, may be in the future. A financially stretched consumer will prioritize the need to purchase safe food versus luxury items and services. Maslow's hierarchy of needs illustrates the psychology and behavioral economics of food, shelter, safety and emotional support. This hierarchy will be important, but these products must be packaged and branded. Also, buying North American products may be a selective globalization outcome of this black swan event.
What will be the impact to the food supply if meat processors continue to close?
Watch this one very closely over the coming months. On the consumer side, spot shortages of pork, beef, poultry and milk may occur. On the producer side, specifically regarding beef, pork and poultry, will processing capacity be available in your specific region? Issues are already occurring in the hog and dairy industries. One must question if too much of the processing capacity is with too few firms. Consolidated processing is optimal and efficient, but does it provide resiliency for the economy and society? This may become a political and consumer issue in this fall’s elections.
We will discuss more questions from the webinar in the next article.
If you missed Dr. Dave's webinar on Tuesday, watch it here.