Coronavirus adds stress to agricultural finances
The agricultural sector will struggle over the next year because of the coronavirus pandemic, leading some farmers to quit or be forced out of business, said economist Allen Featherstone in a think tank paper released on Monday. Low commodity prices are forecast to reduce crop and livestock income by at least $20 billion from 2019 levels, and USDA’s coronavirus relief funds are not expected to offset the losses or compensate all producers fully.
“The profitability of production agriculture will be stressed in 2020 because of COVID-19,” but based on conditions as of June 1, the sector has the financial strength to weather the virus, wrote Featherstone in a paper compiled by the Council for Agricultural Science and Technology. “A second wave of infections leading to shutdowns of the U.S. economy would lead to further deterioration in the sector.”
The CAST paper comprises essays by 29 experts in food and agriculture, with topics that range from food insecurity and rural health to labor constrictions in meat and produce production. Economist Jayson Luck of Purdue University said during a webinar that the meat shortages of April and May, due to outbreaks of coronavirus in meatpacking plants, could be viewed as a capacity challenge. Meat production is highly concentrated in the United States and slaughter capacity is closely matched to livestock production.
“The challenge is that extra capacity is expensive, and who is going to pay for that capacity?” he said in discussing various suggestions of how to remodel the meat processing industry. More large-scale plants, an array of smaller-volume plants, or development of custom slaughter and sales directly to consumers are all being discussed.
The CAST paper, “Economic impacts of COVID-19 on food and agriculture markets,” is available here.