Meatpacking plants have closed. Milk prices have cratered. Supply chain disruptions have led to a “perfect storm” beating on U.S. farmers. Altogether, the new coronavirus outbreak could lead to $20 billion in U.S. agriculture losses this year, according to a report from the University of Missouri released this week.
The report paints a grim picture of the virus’ far-reaching toll on agriculture. Instead of seeing the U.S. ag economy grow by 2.8% this year as originally projected in January, the report now expects consumer expenditures to drop by 2.2% relative to 2019 — amounting to a 5% overall drop from the forecast, or a $20 billion loss of net farm income.
Collectively, the effects to farmers stretch “pretty much across the board,” said Pat Westhoff, a professor and director of the school’s Food and Agricultural Policy Research Institute, which produced the report.
Impacts can vary from product to product, the report notes, but the loss of key, high-volume buyers like restaurants and schools has led to falling prices for many commodities, from livestock to crops. For example, school closures have hurt milk demand and cratered prices, explains Westhoff. The same goes for cotton, as people hold off on buying clothing, he adds.
But it’s not just low prices. Food production, processing and shipment have all been affected, Westhoff said. For instance, worker illnesses have sparked recent meatpacking plant shutdowns and created supply chain bottlenecks for livestock producers like hog farmers.
It’s a “perfect storm” of negative impacts and uncertainty, Westhoff said.
Prices for feed cattle have fallen 11.5% compared with earlier projections for the year; hog prices have dropped 9.1%; milk, 8.8%, the report says.
So far, shocks to demand for various commodities have been easier to quantify than the effects of those supply chain hurdles. Although the new report did not focus on the latter, high-profile anecdotes already signal that those issues are escalating, and significant.
In South Dakota, a meat processing plant that reportedly accounts for 4% to 5% of U.S. pork production is temporarily closing after hundreds of employees contracted COVID-19. Earlier this month, a similar work stoppage went into place at a Pennsylvania plant billed as “the largest beef facility east of Chicago” by its operator, JBS, after a virus outbreak.
Elsewhere, low prices have driven some farmers to destroy products such as milk and eggs, or to not harvest crops of vegetables, according to news reports. (Westhoff said he was not aware of any recent examples of that in Missouri.) And the thousands of layoffs facing St. Louis area workers have included some involved in food production, such as Baily Foods, a cookie and cracker maker with facilities in the Metro East.
Could all the industry’s turmoil result in food shortages or insecurity? That’s hard to predict, Westhoff says. As is true across many industries, he believes that answer and the general economic toll will ultimately be determined by the duration of the disruptions.
“While supply chain disruptions,” the report says, “are likely to be resolved within the span of several months, a contraction of consumer income may take longer to recover and have broader effects.”
Westhoff said that production of labor-intensive crops, such as fruits and vegetables, could be most affected by the pandemic, because of their heavy reliance on manual laborers who could be at risk from the virus. Emergency border closures could prevent migrant workers from coming into the country to work those fields, he said.
At the same time, Westhoff notes that the aging demographics of U.S. farmers closely align the group with those at greatest risk from the disease.
“That’s obviously a population that’s more vulnerable,” he said. The prevalence of the outbreak has so far been “pretty low in most rural areas,” he said, but it remains to be seen how those factors might balance out.
“Things are happening very quickly,” said Westhoff. “We don’t pretend that we know what’s going to happen.”
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