The ripple effect of COVID-19 for soybean farmers, demand, and transportation
Row-crop farmers are intertwined with many different industries and companies. Whether farmers have green equipment or red equipment, they will be tied to a company through machinery. Farmers’ inputs are connected with companies. Those farmers might have crop insurance with a local company and a loan with the bank on Main Street. After harvest, their crops can be used for human consumption, animal feed, ethanol, and a multitude of other needs.
Those are just a couple of simple examples of where we see farmers’ fingerprints in local and national economies, but when one of those areas faces a shakeup, farmers can see a bullwhip effect from further down in the chain that affects them, too.
Since the emergence of COVID-19 across the U.S., news has picked up about meat plants shutting down, the euthanizing of farm animals, a sharp decline in oil and gasoline usage and prices, and other economic hits to the country.
While livestock farmers are at the forefront of the COVID-19 pandemic’s economic impact, the ripple effect extends to row-crop farmers, too, says Mike Steenhoek, the executive director of Soy Transportation Coalition.
Some of the first soybean demand issues popped up when China’s pork industry took a hit from COVID-19 before it majorly affected the U.S., creating demand destruction.
Domestically, retail meat sales saw a boom as consumers stocked up, but since then the demand has leveled off some in the U.S. Aside from grocery stores, restaurant sales have fallen, helping cause the decline in the meat industry.
“Meat production is our No. 1 customer domestically for the soybean industry, and then having these meatpacking plants close, that’s clearly a concern for our industry right now,” Steenhoek says.
In terms of moving the product through the U.S., Steenhoek says this has been less of a problem as some of the restrictions have been lifted and traffic has plummeted.
COVID-19 is one factor in the changes of soybean supply chains, prices, and demand, but Steenhoek also emphasizes that the seasonality for exports, currency rates, and many other factors contribute to the fluctuations, too. He specifically highlights the U.S. dollar’s strength compared with other currencies as a factor in fewer exports because Brazil’s currency is weaker and more economically beneficial to other countries.
The currency issue also links to COVID-19 as investors flock to more stable areas to keep their money, like the U.S. dollar, widening the gap between the dollar and weaker currencies.
This time of year, soybean exports pick up out of Brazil and South America as a whole, while the U.S. plays a smaller role.
“It typically occurs this time of year, where we don’t export a lot,” Steenhoek says. “What really is more revealing is what happens in the later part of the year when our harvest comes online when South American production has really been exhausted, so then the world starts turning to the U.S. for their soybean supplies.”
No one knows what the future holds for coronavirus and its severity, but some experts have speculated that it could come in another wave – potentially striking in the fall when U.S. soybean exports are more prominent.
Whether that occurs or not, the soybean logistics are positioned relatively well to handle that, especially when compared with the meat industry, says Steenhoek.
“Social distancing, it’s commonly practiced, so if you’re a truck driver or rail crew, they only have two people usually in a train,” Steenhoek says. “Some of these facilities – these elevators, there’s not a lot of people in them … It’s not so much like these meat processing plants where you have 100-plus people working there.
“You’ve got a lot of people inside, so if you’ve got an infection, it can result in the whole plant getting shut down. Grain elevators don’t have that same volume of workforce.”
While the grain supply chain is less vulnerable to the spread of COVID-19, Steenhoek does point out water transportation as something to keep an eye out for – whether it’s barges or ocean vessels.
Steenhoek says a trip on a barge from the northern Mississippi River to the Louisiana area can last two or three weeks in a close space. For an ocean vessel, the trip can take a month from New Orleans to China, Steenhoek says.
“Those are the kinds of things we’re really going to be observing and monitoring,” Steenhoek says. “Obviously, everyone is making sure to get precautions in place, but that’s where we could see if someone got infected, it would impact more on the barge and ocean vessel links vs. trucking or rail.”