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Agriculture feels impact as pandemic reshapes U.S. diet, rattles producers

Commodity prices took a beating as the virus spread this year, with futures prices for corn down 12%, soybeans down 7%, and cattle down 25%.

Americans will eat more chicken, already their favorite meat, as stay-at-home orders have consumers shopping at the supermarket rather than going to restaurants, said ag lender CoBank on Thursday in assessing the impact of the coronavirus pandemic on food producers and processors. A UN agency said world food prices fell sharply during March as the global economy slowed due to the virus.

“This quarter will define the next year in terms of the (U.S.) economy and how severe the damages caused by the coronavirus will be,” wrote Dan Kowalski, CoBank vice president, referring to the spring months of April, May, and June. “As the coronavirus continues to spread, the biggest challenges for our customers are labor and supply chain disruptions.”

The leaders of three international groups — the World Health Organization, the UN Food and Agriculture Organization (FAO), and the World Trade Organization — warned against knee-jerk restrictions on food exports that could spark panic buying and hoarding. “In the midst of the COVID-19 lockdowns, every effort must be made to ensure that trade flows as freely as possible, specially to avoid food shortage,” they said in a joint statement.

International rice prices climbed for the third month in a row in March, said the FAO, “buoyed by stockpiling spurred by concerns over the pandemic and reports that Vietnam might introduce export bans — which the government has since downplayed.” Despite increased rice prices, the FAO said its index of cereal prices fell in March, as did indexes for sugar, vegetable oil, dairy, and meat, for an overall 4.3% decline in the Food Price Index.

Commodity prices took a beating as the virus spread this year, with futures prices for corn down 12%, soybeans down 7%, and cattle down 25%. With most Americans told to stay at home, CoBank estimated that consumers are purchasing 90% of their food at supermarkets, compared to the usual 48%. Demand for beef, often a premium-priced item in restaurants, is down, while demand for chicken, a component of many home-cooked meals, is up. The price of boneless, skinless chicken breasts soared during March.

“School closings have impacted fluid milk consumption,” said CoBank. “Home stockpiling has provided some price support but not enough to offset the losses related to food service.”

The economic pain of lower milk prices will be felt by dairy farmers for the next few months, said the National Milk Producers Federation. “The forecasts are all indicating that we’re going to be to be hitting the [price] trough in May and June,” said NMPF economist Peter Vitaliano in a podcast. The organization says the USDA should step up its purchases of dairy products and compensate dairy farmers if they have to dump milk because of oversupply or processing disruptions.

In early March, the USDA lowered its forecasts of market prices for cattle, hogs, broiler chickens, and turkeys because of weak prices and large supplies. Per capita meat consumption was forecast at 227.4 pounds this year, the highest ever and nearly 8 pounds more than in 2018.

“Now that the coronavirus has nearly halted restaurant business, the 2020 outlook for (beef) demand is in question,” said CoBank meat analyst Will Sawyer. Loss of foodservice sales may hurt chicken prices, too.

“However, all U.S. protein processors will face two countervailing challenges in the coming months: risk of plant reductions/shutdowns due to worker illness, and cold storage facilities reaching capacity,” Sawyer said. “Storage was filling up before the pandemic, and storage of cuts destined for food service only exacerbates the situation.”

The fruit and vegetable sector benefited from coronavirus stockpiling in March, offset by sharp reductions in sales to the food service industry. Fruit, nut, and vegetable exports suffered as the coronavirus sapped sales to Asia. Produce growers fear a shortage of guest workers.

Analysts say the pandemic could stall a recovery in U.S. farm income.

“#Farmland values still a relative bright spot for #agriculture,” said Nathan Kauffman, vice president of the Kansas City Federal Reserve Bank, on social media. “Up 2.3% from previous year in KC Fed District in first quarter based on new survey data.” Kauffman was referring to data gathered from ag bankers in the central Plains for an upcoming report.

The CoBank report is available here.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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