Supply Chains Food Supply Chain Overview

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Introduction

The Texas food supply chain has been severely tested in the past year and a half. The start of the COVID-19 pandemic led to grocery shortages as well as school and restaurant closings; a year later, Winter Storm Uri – along with the resulting power outages – brought the state almost to a halt. Texans realized that the availability of food cannot be taken for granted.

Food gets to our tables through a supply chain — a complex sequence of production and distribution processes that includes the following industries and steps:

Agriculture: Growing crops and raising animals for food.
Manufacturing: Processing and packaging food products.
Transportation and warehousing: Shipping and storing food products.
Wholesale trade (distributors): Selling food products to grocery stores and restaurants.
Retail trade (grocery stores): Selling food products to customers.
Restaurants: Preparing and serving food products to diners.

A disruption to any of these steps may affect the entire supply chain. Food, unlike many other products, is an essential consumable – there is always demand, even when there are limited supplies. Food products, however, tend to be highly perishable and vulnerable to delivery delays and spoilage. Balancing supply and demand is a delicate process.

Food Supply Chain Features

In a 2018 study, the International Foodservice Distributors Association (IFDA) reported that foodservice distribution is a $280 billion industry nationally, with a workforce of 350,000 supporting 700,000 ancillary jobs throughout the economy. Its impact is large:

The $280 billion in annual direct sales generated by the industry supports an additional $51 billion in output across the broader economy.
An estimated 15,000 foodservice distribution center locations in the U.S. deliver 8.7 billion cases of product to restaurants and foodservice outlets annually – an average of 24 million cases per day.
Foodservice distributors operate a fleet of 153,000 vehicles, which are driven 3.2 billion miles per year by 131,000 drivers.^[1]

Food Supply Challenges

All supply chains are vulnerable to any number of production disruptions, and the food supply chain is no exception. Severe weather and natural disasters have long posed risks to our food supply, and – more recently – the COVID-19 pandemic and cyberattacks have increased this essential sector’s vulnerability.

Winter Storm Uri

While it is not uncommon for our agricultural products to be threatened by severe weather events such as droughts, hurricanes and flooding, Winter Storm Uri, which hit Texas in February 2021, was particularly harsh. Its freezing temperatures, sleet and snow, along with widespread power outages throughout the state, shut down transportation and businesses across much of Texas. These closures caused disruptions in the food supply chain that resulted in hardships for producers and consumers alike. For example:

Many grocery stores were unable to replenish their stock, causing shortages of milk, vegetables and other necessities.
Many of the fruit and vegetable crops in the Rio Grande Valley were destroyed by the extended period of freezing temperatures.
Some Texas ranchers were unable to get feed for their livestock, and many animals perished in the freeze.
According to the Texas Association of Dairymen, milk processing plants were shut down due to lack of electricity, natural gas, frozen pipes or icy roads. The week-long shutdown filled available milk haulers, and millions of gallons of milk finally had to be disposed of because no processing facility could accept it.^[2]
Although the severe weather only lasted for about a week, the damage could have long-term effects on the state’s crops, causing continuing food supply chain shortages.

COVID-19

The COVID-19 pandemic, which has created tremendous economic upheaval around the world, also has put some kinks in the Texas food supply chain. Before the pandemic, more than half of consumers’ spending on food typically was for meals away from home. The shutdown of schools and restaurants led to a dramatic shift in food purchasing and affected the supply chains for many food products.

The specialty crop sector — consisting primarily of fruits and vegetables — was among the hardest hit in Texas. Demand for these highly perishable crops decreased overall with the closure of schools and restaurants. Demand remained strong, however, at grocery stores, and many producers had to adapt to different packaging requirements and changes in volume demanded.^[3]

In some cases, empty grocery shelves were not due to product shortages but to product packaging. For example, when schools closed, the demand for milk in small, single-serving containers virtually disappeared; a corresponding growth in demand for quarts and gallons of milk in grocery stores led to some temporary shortages as dairy processors switched their packaging operations accordingly.

Several meat processing plants across the U.S. had to close or scale back production due to the coronavirus. Since the meat economy is national, closures in other states affect Texas producers who rely on processors around the country. The resulting plant closures and slowdowns throughout the supply chain decreased demand for livestock and milk by processors, thus reducing prices to producers and, in some cases, raising prices to consumers because of limited supplies.

Several Texas meatpacking plants were affected by COVID-19, including those owned by JBS USA Food Co. (Cactus), Tyson Foods Inc. (Amarillo) and Pilgrim’s (Lufkin). Early in the pandemic, these facilities and others like them came under scrutiny over illnesses and, in some cases, deaths as the coronavirus spread among employees.

A presidential executive order signed April 28, 2020, delegated power to the U.S. secretary of agriculture to take action to ensure America’s meat and poultry processors continued operations consistent with federal guidance. (The guidance was jointly issued by the Centers for Disease Control and Prevention (CDC) and the U.S. Department of Labor’s Occupational Health and Safety Administration (OSHA) regarding worker health and safety.) The U.S. Department of Agriculture (USDA) continues to ensure that resource needs are met to keep employees safe and to continue operations consistent with the CDC/OSHA guidance.^[4]

Cyberthreats

While meat processing plant closures due to the pandemic were a temporary problem, another threat to the industry surfaced in May 2021, when Brazilian meat processor JBS S.A. fell victim to a ransomware attack. JBS, the world’s largest meat processor, was forced to shut down production for a few days in its beef and pork slaughterhouses around the world, including several facilities in Texas.

According to the Chicago Tribune, approximately 40 additional cyberattacks on food producers occurred in the 12 months preceding the JBS incident, with targets including beverage company Molson Coors.^[5]

Other Challenges

Other vulnerable parts of the food supply chain include the trucking and shipping of goods to processors and markets. The Wall Street Journal reported in August 2021 that maritime shipping of exports and imports has been affected by a shortage of shipping containers due partly to factory closures in China, which produces the vast majority of these vital elements of global trade.^[6] According to an Agriculture Transportation Coalition survey of members conducted in fall 2020, 22 percent of sales were lost because members were unable to ship their cargo overseas.^[7]

Food transportation costs have increased because the specialized refrigerated truck trailers needed to transport food are in high demand or out of position. In addition, fewer truck drivers were trained due to shelter-in-place restrictions, resulting in decreased freight trucking capacity in the U.S.

The lack of available workers is another major strain on the food industry, not just in trucking but in production facilities, distribution centers and food service facilities. Restaurants attempting to reopen are having difficulty finding workers, which may limit their operating capacity.

Economic Overview of the Texas Food Supply Chain

The Texas food supply chain has links in several industrial sectors: agriculture, manufacturing, warehousing, transportation, wholesale trade and retail trade. The food-related sectors of these industries employ 1.5 million Texans and provide $40.5 billion in annual wages (Exhibit 1). While these sectors enjoyed steady growth over the past decade, most of them – food service establishments in particular – lost jobs over the past year during the pandemic.

Exhibit 1: Texas Food Supply Chain Employment and Wages, 2020
Food Supply Chain Industrial Sector	Texas Employment	Employment Change, 2019 to 2020	Employment Change, 2010 to 2020	Average Annual Wages	Total Wages (billions)
Agriculture (food crops and animals)	34,994	0.5%	13.9%	$40,899	$1.4
Manufacturing (food and beverage processing and packaging)	116,788	-0.2%	16.9%	$51,586	$6.0
Warehousing (farm product storage)	1,400	-3.1%	19.4%	$46,768	$65.5
Wholesale Trade (farm products, groceries, and beverages)	89,894	-2.6%	17.8%	$62,652	$5.6
Retail Trade (grocery and beverage stores)	256,136	4.9%	24.5%	$30,046	$7.7
Food Services (restaurants and bars)	966,782	-13.2%	21.4%	$20,312	$19.6
Total	1,465,994	-8.6%	21.1%	$27,617	$40.5

Source: JobsEQ

These food supply chain-related industries contributed a total of $85.6 billion to the Texas gross domestic product (GDP) in 2020, representing 4.9 percent of the total Texas GDP (Exhibit 2). Of these industries, food services contributed the most, representing nearly 2 percent of the total.

Exhibit 2: Food Supply Chain Contribution to Texas Gross Domestic Product (GDP), 2020
Food Supply Chain Industrial Sector	Contribution to Texas GDP, 2020 (billions)	Share of total Texas GDP
Agriculture (food crops and animals)	$5.8	0.33%
Manufacturing (food and beverage processing and packaging)	$15.3	0.87%
Warehousing (farm product storage)	$0.11	0.14%
Wholesale Trade (farm products, groceries and beverages)	$14.7	0.84%
Retail Trade (grocery and beverage stores)	$15.0	0.85%
Food Services (restaurants and bars)	$34.7	1.97%
Total	$85.6	4.86%

Source: JobsEQ

Texas Agriculture

Agricultural business plays a major role in the Texas economy, and the state’s food and fiber system comprises all economic activities linked to the production of agriculture, including manufacturing, retail sales, transportation and wholesale distribution.

Texas ranks fourth nationally in agricultural cash receipts, which totaled an estimated $20.0 billion in 2020, according to the USDA.^[8] Four of the state’s top five agricultural commodities are food products (Exhibit 3).

Exhibit 3: Texas Top Five Agricultural Commodities, 2020
Commodity	Estimated Cash Receipts (billions)	Share of U.S. Receipts for that Commodity	Share of Texas Receipts for All Agricultural Commodities	Ranking Among 50 States
Cattle and calves	$8.5	13.5%	42.4%	2
Dairy products, milk	$2.8	6.8%	13.7%	4
Broilers	$1.7	7.8%	8.4%	5
Cotton lint, upland	$1.6	29.8%	8.0%	1
Corn	$0.9	2.0%	4.7%	12

Source: U.S. Department of Agriculture

The USDA valued Texas agricultural exports at $6.3 billion in 2019, the fifth-highest total in the U.S., following California, Iowa, Illinois and Minnesota (ranked first through fourth, respectively). Texas’ top five agricultural exports were:

Cotton ($2.1 billion; ranked No. 1 among all states).
Beef and veal ($1.0 billion; ranked No. 2).
Other plant products ($855.2 million; ranked No. 4).
Dairy products ($386.2 million; ranked No. 5).
Feeds ($255.4 million; ranked No. 10).

According to a 2019 study by the Center for North American Studies at Texas A&M University, Canada and Mexico were the most important foreign markets for Texas agricultural products in 2018. Total economic activity for Texas agricultural exports to Canada and Mexico was more than $3.7 billion in exports, supporting 22,972 jobs.^[9]

In 2018, Texas exports to Mexico totaled $863.3 million, including $344.1 million in animal products and $519.2 million in plant products. The top three agricultural exports from Texas to Mexico were, by category:

Cotton ($139.4 million).
Beef and veal ($138.7 million).
Other horticultural products ($82.8 million).

Texas agricultural exports to Canada in 2018 totaled $903.3 million, including $234.0 million in animal products and $669.3 million in plant products. The top three agricultural exports from Texas to Canada were:

Other horticultural products ($266.6 million).
Beef and veal ($97.7 million).
Food preparations ($69.0 million).

Summary

Food is an essential commodity, and getting it to our tables involves a sophisticated supply chain with many vulnerable parts. Despite the challenges faced in recent months, however, our food supply has endured, and the industries involved have adapted to the setbacks and changing conditions.

As COVID-19 restrictions increasingly are lifted, there will be new stresses on our food supply chain. Restaurants attempting to ramp up again quickly may find that supplies are lagging as suppliers work to reverse course and catch up to the new demand. Despite the challenges faced, however, everyone responsible for securing the food supply chain — from farmers in the field to cashiers at the grocery store — continues to do their part to ensure that the supply chain doesn’t break.

Endnotes

Links are correct at the time of publication. The Comptroller's office is not responsible for external websites.

We Deliver: A Comprehensive Economic Impact Study of the U.S. Foodservice Distribution Industry, International Foodservice Distributors Association, August 14, 2018, p. 4. ↳
Email from Darren Turley, executive director, Texas Association of Dairymen, to Lisa Minton, Senior Data Analyst, Texas Comptroller of Public Accounts, May 13, 2021. ↳
COVID-19 Impact on Texas Production Agriculture (PDF), Texas A&M University, Agricultural and Food Policy Center, April 17, 2020. ↳
U.S. Department of Agriculture, Food Supply web page. ↳
Durbin, Rod McGuirk and Dee-Ann, “Meatpacker JBS says systems 'coming back online' after REvil cyberattack,” Chicago Tribune, June 2, 2021. ↳
Berger, Paul, “Where Did All the Shipping Containers Go?” The Wall Street Journal, August 4, 2021. ↳
How Changes to Earliest Return Date Are Affecting Exporters: Research Findings, joint survey conducted by the Agriculture Transportation Coalition and TradeLanes, October 2020. ↳
Cash Receipts by State, U.S. Department of Agriculture Economic Research Service, updated September 2021. ↳
Economic Impacts of U.S. and Texas Agricultural Exports to Canada and Mexico (PDF), Texas A&M University, Center for North American Studies, CNAS Issue Brief 2019-01, July 8, 2019. ↳

Questions?

If you have any questions or concerns regarding the material on this page, please contact the Comptroller’s Data Analysis and Transparency Division.

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