Two economists and an agri-business owner addressed the virtual audience of the Farm Foundation’s April 28 video forum, “Challenges and Opportunities for Agriculture in a Post-Pandemic World.” The forums are normally held in Washington, D.C., but are being held online during the pandemic.
President and CEO of the Farm Foundation, Shari Rogge-Fidler emphasized the theme of presenting practical agricultural information, useful in the search for solutions in this unprecedented time.
The forum was organized to explore the challenges and opportunities for farmers, for agri-businesses, and for international agriculture. The first speaker was A.G. Kawamura, owner/partner of Orange County Produce LLC, and a former California ag secretary. Kawamura spoke about the challenges faced by his farm and other farms, small and large.
He predicted that if agriculture in America stays with the United Nations’ Sustainable Development Goals, “the resilience that we’re trying to create, for farms big and small, will result in an exciting, dynamic food system and an agricultural renaissance.” The goals, he said, could change people’s views on how food is shared and valued.
Kawamura predicts that new collaborations may come from this struggle that can eventually resolve the challenges of world hunger.
“Instead of whittling down the sources of food, the (U.S.) needs to invest in (diverse) agriculture,” he said.
Kawamura said he was shocked at the speed the food industry, and many industries, slammed to a halt. He noted that the three threats faced by farmers large and small are labor, including employee illness and migrant workers’ availability; unavailability of markets; and cash flow problems caused by buyer defaults and farmers’ lack of collateral.
“We sell almost exclusively to food chain stores. Others sell to the foodservice industry,” he said. “The cost of harvesting, packing and delivery is huge. So, product is destroyed when markets are closed.”
He urged farmers to “stop, pause and switch plans.”
He said that there are “more tools in the tool box than ever before — genomics, logistical capacity, technology to see in real time, to see needs, and the infrastructure to pivot and turn. From all this can come a new nimbleness.”
Dan Basse, the second speaker, is an economist, president of AgResource, and member of the Commodities Market Council. Basse reminded listeners that the USDA estimates that U.S. agriculture contributes 5%, just over $1 trillion, to the U.S. economy, but now faces plummeting commodity prices. Wheat and sorghum are the only commodities that have remained steady in 2020.
Consumers are facing increases in meat prices as well as meat shortages. With the rising COVID-19 infections among employees, meatpackers are pulling back their purchases of cash cattle, processing only captive supplies. A bit of good news for pork producers is that China’s demand provided a record export of pork in March 2020. Basse did not address President Donald Trump’s recent executive order to shore up meat processing.
AgResource predicts U.S. corn demand will be down 240-250 million bushels per month through August, mainly due to struggles in the ethanol industry.
Basse pointed out that in 2019, consumers spent much of their food budget outside the home, dining in restaurants and buying takeout. Now, consumers are frequently cooking at home. Their grocery budgets and, consequently, spending are down as unemployment and furloughs continue. Retailers and grocers are struggling to fill their empty shelves and the void left by the shuttered foodservice industry.
U.S. grocery sales were up 28% in March, but those numbers are expected to fall, as did demand for the U.S. milk and dairy products, down 4-9%. For the first time since 2015, retail milk prices fell below $2 per gallon in the U.S.
With inflation making non-U.S. agricultural products more alluring, AgResource predicts that farm incomes will be down “well into 2021.” That translates to the U.S. government direct farm payments providing 30-40% of farm revenue for 2020. Basse predicts the U.S. government will still need to provide an additional $45 billion to $60 billion.
On the positive side, Basse said, a “renaissance in home cooking” will benefit the small farmers, CSAs and local grocers. With the home cooking resurgence will be a continued expansion of the farm-to-table movement. Meat and poultry shortages brought on by COVID-19 will mean increased prices and demand by the consumers. Basse predicts that more food processing will return to the local level as processors cut back their production.
The last presenter was Luke Chandler, chief economist for Deere & Co. His focus was on the global agriculture markets. He began with a chart showing that in 2020, GDP growth is shattering. At the end of March, U.S. GDP was down 5.4%, the European Union’s was down 4.5%, and the global figure was down 2.6%. Only China, with “unreliable statistics,” shows a growth in GDP of 2%. Chandler expects regaining the pre-pandemic GDP will take 18 to 21 months.
Commodity prices are mostly declining, notes Chandler. Corn and sugar prices have weakened; grains and oilseeds prices are mixed. Wheat prices are higher in part due to concerns about future supplies.
Chandler said the U.S. dollar is strengthening as investors seek safe havens in the midst of the pandemic. But, a strong dollar is a problem for U.S. farmers whose exports become more expensive.
The presenters ended the video forum by emphasizing the importance of consumers understanding the food chain as a whole, and urging farmers to use the pandemic as a teaching moment.