Effects of COVID-19 on U.S. agriculture
March 26, 2020 by Manure Manager
“The reward for providing the world economy with the raw materials it needs to grow is perpetual vulnerability.” –The Economist
While non-essential businesses are closing their doors and individuals are told to stay in their homes to flatten the curve of COVID-19, farmers and ranchers are still hard at work. Whether preparing fields for planting, tending to sprouting crops, or taking care of their animals, farmers and ranchers are essential to maintaining food security and keeping the food supply chain operating. However, the COVID-19 pandemic is affecting U.S. agriculture in a variety of ways.
At the most basic level, the global economic uncertainty created by the COVID-19 pandemic has led to market volatility that has caused a rapid decline in commodity prices.
Tanking oil prices and increased production, reduced ethanol demand and low corn prices (below the break-even point) mean that ethanol plants are suffering, with some closures likely. Global economic uncertainty has driven crude oil prices down by more than 60 percent and ethanol prices down by nearly 40 percent, which has pushed ethanol production close to unprofitability. Whether the pandemic will impact profitability or demand for biogas or manure-to-RNG (renewable natural gas) projects remains to be seen.
The United States, in agreement with Canada and Mexico, has implemented a partial closure of both the northern and southern borders to reduce the spread of COVID-19, allowing only essential travel. Trade is included under essential travel, so the hope is that the movement of necessary goods will not be affected. However, COVID-19 concerns and travel restrictions are making it more difficult and expensive to transport goods as usual. It remains to be seen how trade will be affected in the long term.
Border closures, even partial ones, affect more than trade. The U.S. State Department has decided not to process any new H2-A visas during the COVID-19 pandemic. While this will not affect return workers with H2-A visas, no new workers will be able to receive a visa.
According to Chalmers Carr, a Farm Bureau member and South Carolina farmer, there were 205,000 workers in the U.S. through the H2-A visa program in 2019. The number for 2020 was predicted to be more than 235,000; between the expected 30,000 new workers and new workers replacing any H2-A visa holders who choose not to return, this will result in a significant reduction in available farm labour.
Social distancing and isolation have significantly reduced direct-to-consumer sales, and the dramatic decline in full-service restaurant and school meal demand signify a reduction in demand for agricultural goods.
In better news, the U.S. Senate voted yesterday for the implementation of a $2 trillion stimulus package. The U.S. COVID-19 stimulus bill will add $14 billion to the Agriculture Department’s Commodity Credit Corp spending authority, and authorize another $9.5 billion for U.S. farmers hurt by the fast-spreading pandemic.
The Commodity Credit Corp (CCC), set up during the Great Depression nearly a century ago, has been tapped by the Trump Administration for nearly $30 billion in recent years to compensate farmers and assist the sector due to the U.S.-China trade wars.
The additional $9.5 billion would be used to specifically assist livestock producers affected by the pandemic, such as cattle ranchers, and hog and dairy farmers.
Also eligible are fruit, vegetable and specialty crop producers, and those who sell through farmers markets and other local food systems that have been shuttered or economically impacted by the pandemic.
Whatever is happening in the world at large, agriculture remains a steady presence, continuing to do the hard work day in, day out. Keep informed, stay safe, and wash your hands – this too shall pass.
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