North Carolina farm shifts business to pre-packed boxes with fresh vegetables as virus fears loom. Lyon Farms is selling the boxes of produce in case shoppers don’t want to risk handling individual items. (March 23)
Already hurting from the upheaval caused by a long-lasting trade war, U.S. farmers are now likely to lose billions in income as the novel coronavirus pandemic touches all areas of the agricultural marketplace.
U.S. farmers will lose $20 billion in net income in 2020, according to an updated economics report published this month by the Food and Agricultural Policy Research Institute at the University of Missouri.
The forecast updates a January report by FAPRI with the intent to specifically highlight the effect COVID-19 will have on farmers.
“We’re looking at a situation with a lot sharper – or very big decline in farm income relative to what had been expected,” said Patrick Westhoff, director of the Food and Agricultural Policy Institute. “It’s a much tougher time for farmers than we would have guessed a few months ago.”
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The research group used a “baseline” – or reference point – factored after the signing of the “Phase 1” China trade deal in January to make its projections and show the pandemic’s estimated effect on the agricultural market.
“We do set projections of the future assuming that things continued the way they did before all this happened,” Westhoff said. “Given what we know back in January, in other words, what would (the market) look like?”
The report indicates that in the short-term, the global pandemic will have a broad effect on all areas of U.S. agriculture, including crop and livestock prices and on fuel and ethanol demands.
FAPRI updated its January assumption from a 2.8% increase in overall consumer spending to a 2.2% decrease in consumer spending for 2020 relative to 2019. The update accounts for a 5% overall change in projected consumer spending.
Coronavirus shutdown slows demand
The decline in consumer spending will suppress demand for farm products, forcing prices down, the report predicts. Prices for crops like corn and soybeans are likely to decline 5% to 10%, and the market price for livestock could fall as much as 12%.
Live cattle were bringing $105 per hundredweight when the year began and $82.75 on Tuesday.
The April update by FAPRI was released as the real-world effects of the global pandemic are being felt across the country, with workers falling ill and meat processing plants temporarily shuttering.
In South Dakota, Smithfield Foods closed its Sioux Falls facility Sunday after the state’s health department said half of its 438 workers tested positive for COVID-19. This single Smithfield plant accounts for almost 5% of the country’s pork production, according to the company.
In Colorado, JBS closed its Greeley meatpacking plant after 43 workers tested positive for COVID-19, and two of its workers died. JBS and three other food companies control about 85% of the U.S.’s beef marketplace and about 70% of the U.S. pork marketplace.
And in Iowa, Tyson Foods closed its Columbus Junction plant on April 6 after two dozen workers tested positive for COVID-19. Tyson Foods and JBS control about 40% of the U.S. poultry marketplace.
Pandemic escalates long-term issues
For Tim Gibbons, communications director at the Missouri Rural Crisis Center, the current pandemic is simply highlighting the problems with a U.S. agricultural food system buoyed by large corporations. The Missouri Crisis Center is a farm and rural organization that was established out of the 1980s farm crisis that advocates for Missouri’s local farmers and local businesses.
“It can’t be highlighted enough that it was really bad out here (for farmers) before COVID-19, and COVID has only made it worse,” he said. “It’s shining a spotlight on the rigidity and lack of resilience for the corporate model of (farm production), which does not pay farmers fairly and is not good for consumers,” he said.
The below-cost-of-production payments farmers receive, Gibbons said, are part of a larger system that has forced small farmers out of business, and allowed large agricultural corporations to swallow small operations. The result is concentration of market share among fewer and fewer corporations, and it’s been bad for farmers for decades, he said.
“It’s extreme concentration and it’s not capitalism,” Gibbons added. “It’s monopolization.”
He said larger agricultural system issues highlighted by the pandemic need to be addressed, but in the meantime stimulus money from the CARES Act must find its way to smaller farmers and businesses to keep them afloat, “and it should not go to corporations that have, over decades, extracted wealth from our rural communities.”
Through the CARES Act about $48.4 billion was allocated for the USDA to address issues arising from the pandemic.
Westhoff said some caution should be exercised when reading the FAPRI report because all projections are fluid and highly uncertain at this point due to evolving market conditions and the unprecedented nature of the pandemic. Government intervention is something that should also be considered when trying to understand the predictions, because the USDA is expected to make a decision this week on how to allocate some of the funding it received through the CARES Act, he said.
“All these magnitudes are very up in the air right now, because we don’t know what’s going to happen on any number of fronts,” Westhoff said.
The FAPRI report’s model predicts a quick recovery, but even so the same caution should be extended to that too, he added. Because if the pandemic continues to disrupt economic activity through 2020 “the recession could be far deeper and last longer.”
“The longer this goes on the worse it’s going to be – bottom line,” Westhoff said. “We do assume for this particular analysis a pretty quick recovery, but that may not happen.”
And if the pandemic drags on and requires on-going stay-at-home orders?
“We’re talking about sharper drops in commodity prices, sharper drops in farm income, and more financial problems for farmers,” he said. “The potential for a worst-case scenario is very real.”
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