The COVID-19 pandemic has had severe implications on the agriculture industries and the food supply chain.
A coalition of ag groups, including the California Farm Bureau (CFB), has released an economic analysis of the pandemic prepared by consulting group ERA Economics. The report estimates California farms, ranches, and agricultural business will lose between $5.9 billion and $8.6 billion this year as a result of the disruptions from COVID-19.
“California farmers, ranchers and their employees have continued the essential work needed to keep American families fed, but that work has come with sacrifice,” said CFB President Jamie Johansson in an official statement. “The impact is being felt in rural communities throughout the state that rely on agriculture for their residents’ livelihoods. We want legislators and regulators to bear that in mind and avoid making farming even more costly and difficult in California.”
The study focuses on producers, but includes impacts to other businesses related to the agricultural supply chain. The data used in the analysis is based on late April and May 2020; therefore, summer growing season damages are not factored into the estimates.
The report notes that other factors, such as tariffs are affecting industry conditions at the same time as the pandemic.
Analysts looked at 15 different sectors of agriculture and their data. The greatest dollar-loss impact was in the dairy industry, with losses of $1.4 billion to $2.3 billion. Following dairy was the grape sector, then flowers and nurseries.
The beef industry, including cow-calf and feedlot operations, faced impacts mostly from the reduction of beef processing capacity, as well as decreased food demand from the shuttered food service industry.
Cow-calf producers were estimated to lose 15-25 percent of what they were typically paid for cattle. As a sector with high fixed costs and the pasture-based cycle of raising cattle, these price reductions can have significant price impacts on an operation. An Oklahoma State University study calculated producers are currently losing $112 per mature breeding animal.
The beef industry has experienced a drastic drop in sale quantities, and slaughter prices were estimated to fall by 23 percent between January and May.
The total annual impact to ranchers and feedlots is estimated to be 17 percent of annual output, around $760 million.
Above-average slaughter volumes in March dropped sharply in April, and processors reduced prices for live cattle and increased dressed carcass prices as demand for carcasses decreased. The report suggested the difference in dressed and live prices indicates processors were able to increase their margins to recoup quantity losses.
The report determined the most significant impacts of the pandemic were caused by changes in agricultural product demand as a result of: disruptions in the export markets; distribution and supply chain logistics; shutdown of the entire food service industry; and shifts in consumer purchases.
Including secondary impacts, the total impact is around $13 billion in output value, or between $4.1-6.5 billion in economic value-added output for the California economy.
Impacts fall disproportionality on rural counties, with the most disruption to farm jobs, processing, and income falling on workers in economically disadvantaged communities in rural counties.
April employment was down 13.4 percent, or 2.4 million jobs, for agricultural jobs statewide. Counties with the greatest impacts were Kern, Tulare, Imperial and Monterey, with ag-related job losses at 27 to 81 percent, according to the report.
The pandemic has also resulted in direct costs to agricultural businesses, such as implementing social distancing measures, additional record-keeping and workforce monitoring costs, general sanitation and cleaning costs, providing personal protective equipment, additional sick time and workers’ compensation, and more.
The report mentioned federal support programs such as the Coronavirus Food and Agriculture Program are welcomed, but provide insufficient funding to offset economic losses.
The report concluded the outlook for the industry depends on whether another wave of COVID-19 will circulate, if a vaccine is developed, and how the global economy rebounds. Additional economic impacts are likely to result from changes in consumer income.
“Observing how agriculture is affected will help us orient and decisively act to create a stronger future,” UnitedAg President and CEO Kirti Mutatkar said. “The agricultural industry is not only one of the most necessary industries, but one of the most resilient.” — Anna Miller, WLJ editor