Post-COVID-19 pandemic: What’s it mean for agriculture?
What’s ahead for agriculture after COVID-19?
Agricultural research and technology
by Gil Gullickson
A plethora of agricultural technology in recent years has been fueled by internal budgets and venture capital. COVID-19, though, has tightened all aspects of doing business, including research and development (R&D).
Still, major agricultural firms say they are committed to research and development. “Our R&D is not a short-term investment,” says Tim Glenn, executive vice president, chief commercial officer of Corteva Agriscience. “Those are long-term decisions we make. It’s important to continue to invest in those critical technologies, whether it’s germplasm, traits, crop protection, or digital solutions. If we fall behind in that space, the market is very unforgiving.”
Venture capital money has flooded the agricultural market in terms of financing start-up firms in recent years. Some are faring the COVID-19 downturn well.
“We’re in a very envious position, given our cash situation,” says Mike Miille, chief executive officer of Joyn Bio, a joint venture founded by Bayer and Ginkgo Bioworks to develop engineered beneficial microbes. The COVID-19 environment is tough for cash-strapped start-ups that are trying to raise money, he adds.
Tuning up for expanded food tracability
by Megan Schilling
Scrutiny in food production has steadily increased due to food safety recalls, consumer demand, and sustainability efforts. The pandemic intensified this scrutiny. According to Bryan Hitchcock of the Global Food Traceability Center, the principles of traceability (tracking the path of food ingredients and finished products throughout their life cycle) serve agriculture well by allowing better real-time decision making.
“Traceability tools and systems enable food and agriculture stakeholders to further digitize their supply chains, gaining deeper insights into optimization opportunities, sustainability impacts, and chain of custody,” Hitchcock explains. “We see the digitization of supply chains further accelerating as the pandemic subsides.”
Hitchcock and his team provide regulators, standards bodies, and trade associations with best practices on traceability. He says with the pandemic’s far-reaching implications, advancing digital capabilities should boost the ag industry’s agility in the face of future challenges.
Accelerating Digital Ag
by Gil Gullickson
Even before COVID-19 surfaced, the move toward digital agriculture was certain. “It’s hard to see how you’re going to be a successful farmer in the future without greater technology adoption on the farm,” says Sam Taylor of Rabobank.
Digital tools, such as artificial intelligence, that alert farmers to be preemptive about pest treatments can curb crop damage and save money, Taylor adds.
COVID-19 likely will accelerate this trend, particularly because of social distancing. “Precision tools like the R7 tool have made farmers who use it comfortable with the digital experience,” Jim Hedges of WinField United says about the company’s tool using satellite imagery, yield potential maps, and plot data.
Tools like R7 won’t eliminate in-field agronomists, but they will enhance what they find. Hedges says that adding such advances will move the mind-set from yield only to optimization of yield. This does not mean using “the least-cost inputs, but rather prioritizing where to invest based on return on investment potential,” he explains.
Internet issues for online school, telecommuting
by Lisa Foust Prater
For many farmers and ranchers, COVID-19 is altering family life as they know it. The pandemic is spurring telecommuting to off-farm jobs, online education for school-age children, and closures of day care for young children.
These challenges are made even harder when lack of access to high-speed internet is a major issue, as 24% of rural adults say it is. Telecommuters and students without home internet struggle when coffee shops and libraries are closed.
The Centers for Disease Control and Prevention says a second wave of COVID-19 is likely later this year. If schools and businesses return to an online format to facilitate social distancing, farmers will be in the same boat as they were during planting: balancing farmwork with telecommuting, safely caring for young children, and making sure older kids can do schoolwork online.
Could there be a crop COVID?
by Gil Gullickson
Before the COVID-19 outbreak, massive pandemics seemed relegated to the Spanish flu pandemic of 1918. So, could a COVID equivalent happen today in crops? There have been some ominous signs in recent years. In 2005, Asian soybean rust (which originated in Japan in 1902) ravaged Brazilian soybeans, threatening U.S. production. Fortunately, it could not survive the hard freezes that occur in most of the United States. Citrus greening (which has placed the future of U.S. citrus crops at risk) is caused by a bacterium spread by the Asian citrus psyllid. This crop plague originated in China. “Those are a couple examples of diseases that have been spread on a global basis,” says Mike Miille of Joyn Bio.
There’s a silver lining, though, Miille adds. “There’s going to be a wave of money and a push from a technology standpoint. Right now, it’s all directed toward testing and creating a vaccine. This is taking science and pushing it at an accelerated level driven by this pandemic at a speed that would not normally have occurred.”
It’s possible, though, that spillover products beneficial to agriculture could occur from this technology push, akin to the spin-off technology that resulted from the 1960s race to the moon. “At some point, it’s all going to tie together,” Miille says.
Ag trade reamins in flux
by Mike McGinnis
Joe Glauber of the International Food Policy Research Institute says there are obvious impacts to agriculture due to the COVID-19 outbreak. The impact on the health of farm labor and workers in the meatpacking plants rises to the top. Then there is the disruption of supply chains causing rising retail prices as producers’ prices fall.
Less-covered issues and challenges for U.S. agriculture cannot be forgotten, Glauber quickly adds. “If it weren’t for coronavirus, we would be talking about many of these things today. We have a new NAFTA agreement (USMCA) that is supposed to be going into effect July 1. There are a lot of people asking if we can put this off (especially in the automotive sector) as companies fight supply problems. White House officials say they are going forward.”
The U.S.-China trade agreement is facing hurdles, too. Glauber doesn’t see China being able to successfully meet its Phase One agreements of buying U.S. ag products due to COVID-19. “I just don’t see much happening before the end of the year – with everything else (coronavirus) going on,” he projects.
- READ MORE: Ag trade in a post-coronavirus world
Fertilizer supplies, prices stable
by Gil Gillickson
If there’s a bright spot for farmers from COVID-19, it’s that fertilizer supplies are secure and prices are competitive. “Farmers are getting the fertilizer they need, and prices are at a very low level,” says Rick McLellan of The Mosaic Company.
Whether future fertilizer prices remain low hinges on supply and demand. “There are not a lot of new phosphate plants coming on right now, so as demand continues to grow, prices will come up,” McLellan says.
Prices also hinge on Chinese phosphate exports. “Chinese exports have been quite large and growing over the last 15 to 20 years, and they may stabilize,” he says.
Two large projects are coming on board for potash in Saskatchewan and Russia, which will put pressure on prices. The cure for low prices, though, is low prices, says McLellan. “Supply and demand does not go away,” he says. “Low prices will not stay forever, just like high prices do not stay forever.” Thus, now’s a good time for farmers to build P and K levels, if needed.”
The crash in global energy prices keyed by COVID-19 has also translated into nitrogen (N) prices declining, says Scott Boyd of Koch Fertilizer. Until energy prices snap back, N prices will have difficulty rebounding.
Chemial Supplies are secure
by Gil Gullickson
China is a large supplier of chemical and chemical components, and that raises COVID-19-related concerns. Major manufacturers say they have diversified to limit exposure to any challenges to Chinese manufacturing. Bayer officials observe that issues around COVID-19 have not created a domestic or international shift in how the company currently sources its products.
Corteva Agriscience, too, has sourced chemicals from multiple locations across the world, which lowers dependence on China, says Tim Glenn of Corteva Agriscience. Long term, he says Corteva will examine its diversification strategy to help ensure it has resiliency and reliability in its supply chain. “Right now, though, we’re satisfied with having a diversified supply chain,” he adds.
Prior to COVID-19, some interruptions in supplies from China occurred, says Eric Wintemute of AMVAC. This was due to increased environmental standards for chemical manufacturing mandated by the Chinese government. “A number of (manufacturing) centers were shut down,” he adds. “We had one particular active ingredient where the company was shut down, so that pushed us to look elsewhere.”
Some product supplies still remain tight, while others are in plentiful supply. Still, Wintemute doesn’t expect COVID-19 to disrupt supplies as much as increased Chinese regulation did.
Land values uncertain
by Bill Spiegel
Farmland seems to be a stable investment in what has become an unstable investment world. Landowners will continue to appreciate that land can be a stabilizer in their portfolios, remaining strong even when the stock market loses value, says Dennis Reyman of Stalcup Agri Service of Storm Lake, Iowa.
The most recent land sale season ended before COVID-19 hit farm country, adds Reyman, who is also president-elect of the American Society of Farm Managers and Rural Appraisers.
Most landowners prefer to sell farmland in the fall, after harvest and when farmers have cash in their pockets. Reyman, however, thinks the impact of COVID-19 uncertainty on crop and livestock prices could cause land values to soften. “If they’re thinking about selling land, I may suggest holding off a few months. I wouldn’t sell land unless I had to.”
Bob Thummel agrees. The Beloit, Kansas, auctioneer held two land sales in early March, both of which brought better-than-expected prices. Then, COVID-19 hit. It’s a challenge unlike anything he’s seen in four decades of auctioneering. “We’re in different times now,” he says.
Swine Industry Struggles
by Betsy Freese
Of all ag segments, the swine industry took a brutal body block from COVID-19 shutting down packing plants. This resulted in both short- and long-term impacts to the pork industry, says Iowa State University ag economist Dermot Hayes. The swine industry will never be the same after the pandemic.
Hayes weighs in on the implications, starting with changes to the packing industry, where he expects the following trends.
- More robotics. This trend has already started in new plants and will accelerate.
- Slower line speeds. The packing industry was designed for maximum efficiency and low cost, says Hayes. “We didn’t develop it for resiliency, and it has broken down. In the new world, we are going to have more labor at points in the chain and lower line speeds.”
- Better labeling of product. There were a lot of packages of bacon headed for restaurants with a label saying, “Not for Retail Sale,” says Hayes. “We will find a way to get rid of permanent labels.”
- More flexibility. For example, the lines that pack bacon will more easily convert from 15-pound packs to 3-pound packs.
- More split carcasses heading to export. One way to get rid of a backup of market-ready hogs could be to kill them in the plants, split the carcasses, and ship those to China, says Hayes.
Long-term impacts from COVID-19 on the production side include the following.
- Producers going out of business and further consolidation. “There is money outside of agriculture that could buy barns for pennies on the dime, so I think we will see a whole new round of consolidation and movement to even bigger companies,” says Hayes.
- Independents are at risk. “With the closure of several plants, the remaining plants will earn good money on exports and in retail,” says Hayes. It’s the independent specialized sow owners whose only source of income is pigs (with contracts based on the negotiated price) who are most at risk.
- More Asian companies owning U.S. hog farms. This pandemic could accelerate the trend. “The Chinese have decided that their own country is too crowded with pigs, so they are going to buy production systems in countries that have more space.”
- More contact tracing of pigs and workers.
Digital seed business expands
by Gil Gullickson
Compared with chemicals, seed shouldn’t suffer from potential of COVID-19- induced disruptions. “Seed is a completely different animal, because it’s much more based on local production,” says Tim Glenn of Corteva Agriscience. “We do have some production in South America. A lot of that is for producing parent seed or for producing new hybrids that we are evaluating, so the impact on our commercial lineup is quite limited. We don’t see any disruptions related to South American seed production.”
Where differences will result due to COVID-19, though, are interactions with customers. “COVID-19 is a terrible thing, but, at the same time, it has taught us to do things differently,” says Jim Hedges of WinField United. “There will still be business done face-to-face, but I think digital interaction will increase significantly. There is a certain segment of growers who will embrace a virtual experience.”
Dampened corn consumption
by Mike McGinnis
The biggest future impact from COVID-19 on corn consumption is corn’s use in animal feed and ethanol production, warns Pete Meyer of S&P Global Platts. “Both areas of demand will be watched closely, as they are intertwined. Prior to outbreaks at packing plants, it was somewhat easy to add 200 to possibly 300 million bushels to feed demand, given the lack of dried distillers’ grain production. Now, it’s a bit more difficult – but not a lost cause,” Meyer says.
While it might be too early to consider, many in the trade are asking if there will be a snapback in corn use from the coronavirus.
- READ MORE: Coronavirus cuts corn use
“It’s very difficult to see a major trend higher in demand, except possibly in exports, which we believe could reach 2.3 to 2.4 billion bushels in the 2020/2021 marketing year. Buying habits in protein and driving habits have both changed as a result of the pandemic,” Meyer says.
As livestock production goes, so goes the use of U.S. corn supplies. The National Corn Growers Association partnered with U.S. Meat Export Federation on the value of red meat exports in a study last year. The study shows that in 2018, red meat exports’ impact on corn price is 39¢ per bushel, based on the annual average price of $3.53 per bushel.
Online Auctions Expand
by Dave Mowitz
Live machinery auctions ceased to exist when COVID-19 hit. While a great many sales scheduled for March were canceled, far more were delayed and then successfully held online in early April.
So, did the COVID-19 disruption doom live auctions to the scrap yard?
Yes and no, says Scott Steffes of the Steffes Group. “We have enjoyed huge success with our online-only sales and will continue to expand those in the future,” Steffes says. “At the same time, I certainly see the demand for live auctions, as they are often significant life events (as is the case with retirement or estate sales).”
Steffes, as well as Luke Sullivan of Sullivan Auctioneers, estimates that often 50% or more of equipment sold during live sales is bought online. “That has been growing steadily since farmers came to trust online auction transactions,” Sullivan says.
The Steffes Group had already expanded into online-only sales. “I would estimate 38% of our auction sales before COVID-19 were live, so the impact of online equipment transactions was already well established,” Steffes says.
Other auction houses are likely going online after COVID-19 subsides, believes Kyle McMahon with Tractor Zoom.
“I have always believed technology in agriculture is five to seven years behind Silicon Valley. That’s not always due to a lack of innovation; it’s due to lack of adoption by producers,” McMahon points out. “We will see a higher number of farmers bidding online after COVID-19 than we did before COVID-19, but live on-site and simulcast auctions will forever have their time and place.”
Adopting Technology Slows
by Laurie Bedord
There may be a short-term slowdown in adopting technology due to COVID-19 – but only short term. “We believe top-performing farmers will continue to look for digital solutions that improve their business,” says Aaron Rudberg of S2G Ventures. “However, those farmers will be focused on the need-to-have rather than the shiny, new toy. Specifically, products and services that drive yield improvements and reduce input costs will be more compelling than technologies that just provide data without clear insights toward actions.”
Going forward, Arama Kukutai also believes tech companies will need to meet an even higher bar before farmers are willing to change how they operate.
“Given the longer adoption time lines, ag technology players will need to actively incentivize corn and soybean farmers to minimize adoption risk,” says Kukutai of Finistere Ventures. “Innovation in the field or in the supply chain usually involves time, investment, and risk taking – all of which become greater barriers in a situation where people cannot interact freely and may also be facing supply chain pressures of their own.”
Equipment, parts supplies steady
by Natalina Sents
Long before COVID-19 hit, machinery manufacturers were facing challenges from global trade tensions and depressed farm income.
“COVID-19 has taken a bad situation and made it worse,” says Kip Eideberg with the Association of Equipment Manufacturers.
Eideberg says the industry quickly adjusted. “I think farmers should feel good that they had access to the tools and equipment and support they need to have a successful planting season,” he says.
Companies adapted to meet new needs for workers by “practicing social distancing and increasing cleaning and disinfecting,” says Joe Michaels of Great Plains. “In addition to that, we’ve deployed a system of wellness checks and the use of face masks on a routine basis within our facilities.”
- READ MORE: Q&A: Joe Michaels, Great Plains president
Scott Harris of Case IH says about 40% of its dealers adapted to the situation by “going on the farm to support customers and doing carry-out service for parts. They continued to work on customer machines in their shops. To their credit, every one of our dealers has remained fully available to support producers.”
If there is a threat to U.S. iron makers, it appears to be focused on securing supplies to build machinery and parts from foreign sources.