Impact of COVID-19 on the global agricultural industry
The impact of the coronavirus on the global economy is without a doubt far reaching. While some industries deemed essential have somewhat weathered the storm, a pandemic impacts the way everyone conducts business. That’s true for the agriculture industry — from farmers to the ancillary industries that support them.
Yes, agriculture is an essential part of the economy. And still, it feels the sting of a tumultuous few months of global uncertainty.
In this article, the Bazis Agro team takes a snapshot of three countries around the globe — India, Russia and the United States — to get a sense of the impact of the coronavirus on agriculture.
More than 10,000 people in India have tested positive for the coronavirus and more than 350 have died as of April 13. Coronavirus has shattered the dreams of a lot of farmers by undermining farm commodity prices as it spreads around the world.
More than half of India’s 1.3 billion people depend on agriculture for their livelihoods, so profitable harvests tend to boost aggregate consumption while smaller crops or low prices can cause a slowdown.
After excessive rains damaged summer-sown crops in 2019, India was banking heavily on winter-sown crops to fuel a rebound in rural earnings. However, the coronavirus outbreak sent crop prices tumbling just as Asia’s third-biggest economy was expanding at its slowest pace in more than six years.
Indian authorities have imposed travel restrictions and banned big gatherings, cutting food demand. Prices for key crops like corn, soybeans, cotton and onions have plunged as much as 50 percent just as farmers prepare for harvest, putting paid to prospects for a rural economic rebound.
The impact of higher yields would be nullified by the lower prices. Farmer earnings on a net-to-net basis would remain the same. COVID-19 is having a major impact on world economics. Agriculture is no exception.
More than 18,000 people in Russia have tested positive for coronavirus and nearly 150 have died of it as of April 13. Although agricultural products are always in demand, Russian farmers are experiencing serious difficulties right now, as many agricultural equipment manufacturers and other suppliers (e.g. milk packaging producers) are not working this month by Presidential Decree. Growers are asking the Government to provide loans under special conditions and reduce utility fees.
Russia has expressed a commitment to support related industry sectors, including packaging and logistics. The government is stressing the necessity to disinfect farm facilities and provide all employees with the means of personal protection.
Although farmers are continuing their work, they are facing a shortage of the means of production. This means many agricultural equipment and machinery manufacturers have put their production on hold and farmers can’t get spare parts for their machinery or have field mechanics repair machinery.
“There are supply-chain disruptions, for instance, Kaluga milk carton factory is not working. This factory is not an agricultural business per se, but we cannot work without them supplying us with their products,” says Oleg Sirota, Head of All-Russia People’s Front project called the People’s Farmer.
The drop in the value of Russia’s currency is also adding to the seriousness of the coronavirus outbreak.
The depreciation of the rouble will result in much higher cost of production. Feed vitamin prices have increased by 30-50%. The prices of mixed feeds are rising because some of the feed components are intended for foreign markets. Crop protection products are becoming more expensive as well. There have been some seed supply disruptions. Although 85 to 90% of Russia’s total demand for wheat seeds is covered, the situation with other seeds is much worse.
Vegetable production is also feeling the impact of COVID-19: Following the recent rise in demand for basic needs products, the wholesale prices of cucumbers and tomatoes have dropped up to 50% compared to those of the last year.
However, there are optimistic forecasts. For example, Russian agricultural equipment manufacturers could take advantage of the current situation when the supply of goods from China has become limited.
As for the limited supply of equipment and components from China, the current situation could improve the marketability of domestic products because it causes businesses to buy domestically manufactured equipment and components.
Historically, when overall agricultural production decreases, it is the small farms in Russia that manage to survive because they make up for the costs incurred by market fluctuations by regulating their own consumption. If the prices of certain products dropped, a family farm is able to cut costs one way or another. That’s why advocates are calling for the government to provide more support to small farmers.
More than 575,000 people have tested positive for coronavirus and more than 23,000 have died in the U.S. as of April 13. The U.S. agricultural industry is feeling the impact of the coronavirus as crop and livestock prices have fallen along with a looming threat of labor shortages for farms.
“The stress out there is really high-level for our farmers,” said Zippy Duvall, president of the American Farm Bureau Federation in a recent interview in the Wall Street Journal.
Before the disruption, economists were hopeful that 2020 would be a more stable year for U.S. farmers, following years of trade disputes cutting into exports and prices falling.
Just look at what a month has done to the U.S. Department of Agriculture’s forecast: In February, the department predicted a 3.3% increase in farm income in 2020 ($96.7 billion in overall income). That prediction feels far from reality now, with future prices for lean hogs down 12% and cattle down 13% in March.
It’s hitting other agricultural segments. Land O’Lakes, a Minnesota-based dairy cooperative, said that coronavirus could disrupt processing plants and transport networks. As a precautionary measure, Land O’Lakes said it would be willing to enforce policies to charge farmers for producing more milk than what the amount allotted to them.
The virus is also impacting ethanol production in the states. One ethanol producer, NuGen Energy LLC, shut down operations at its 130 million gallon per year plant in South Dakota.
Labor shortages in fields has also been a concern. Foreign visa workers, mostly from Mexico, account for 20% of the U.S. farm workforce. In March, the U.S. suspended routine immigrant and non-immigrant visa processing services. However, the State Department has eased requirements for these workers in response to farmers relying on that help to continue producing.
Whether in India, Russia or the U.S., globally there are several major impacts of the COVID-19 outbreak on agriculture.
1. Health of the farmer
According to a 2017 study, farm operators globally are 58 years old, ten years above other sector workers. And more than one-quarter are 65 and older. Many are in a higher risk bracket.
2. The farm workforce
Besides the aging farming population, workers also are susceptible to sickness. Lockdowns and other arrangements to control the spread will also lead to a larger portion of the agricultural workforce not available for work.
3. Markets and farm prices
As social distancing becomes the norm and travel and restaurant visits cease, the normal purchasing habits of consumers are changing, along with the availability of food. The disruptions also impact the movement of foods and the whole agricultural value chain, affecting market prices.
As the situation evolves, the Bazis Agro team is here to monitor it. Feel free to connect with us at email@example.com if you’re looking for more information specific to your region. We’re here to help provide research and answers.