U.S. Department of Agriculture Secretary Sonny Perdue says the department is looking at options for future coronavirus relief for producers.
According to Farm Journal Washington Correspondent Jim Wiesemeyer, Perdue says USDA is in the process of evaluating the COVID-19 impacts on the agricultural economy and looking at the “lessons learned so far” as another round of CFAP may be considered.
This comes during a time when lawmakers are furiously trying to pass another economic stimulus package, before August recess.
The pork industry is not shying away from telling producers that they need help. One economist says U.S. hog producers face nearly $5 billion in losses due to COVID-19.
“I’ve been around the pork industry virtually all my life,” says Steve Meyer, an economist with Kerns & Associates. “I’m not terribly young anymore but in the 30 years that I’ve been involved as an analyst, this is by far the largest economic hit I’ve ever seen this industry take. We had a terrible hit in 1998 and we had another one in 2009 but nothing compares to this.
Industry leaders say they appreciate what Congress and USDA have done to help producers with government payments. They hope Congress will act on another package where pork producers are included.
“No question, it’s helping,” says Nick Giordano, vice president of global government affairs with the National Pork Producers Council. “This is by far the worst economic crisis ever. We are going to lose hog farmers. The question is how many?”
Other industries are awaiting the Senate’s plan and what potential aid may look like, as well.
Gary Adams, the president and CEO of the National Cotton Council was on a Farm Journal podcast called, “DC Signal to Noise,” on Friday. Adams says that cotton has “some very definite requests” the industry would like to see in the Senate package to provide assistance to the textile supply chain and producers “needed to get to the other side of this,” Adams explains.
However, U.S. cotton producers are still having issues shipping to China.
“USDA balance sheets, we would see [China] importing somewhere potentially [around] 9 to 10 million bales of cotton from all sources,” says Adams. “I think if we’re back to the market share that the U.S. had prior to the tariffs, we would have been looking at that being a 45% or so market share. It gives you an opportunity, probably, of 4 to 5 million bales of U.S. cotton that could have the potential to go to China if we got back to a situation with no tariffs, and a situation where the economy was doing better and demand was stronger. We’re only shipping [at] probably half that level.”
Meanwhile, the troubles of trade, weather and COVID-19 are showing up at the bank. The Kansas City Federal Reserve Bank released its quarterly Ag Finance Databook. It reports farm lending slowed because of the initial effects of the pandemic.
COVID-19 created a more pessimistic outlook for ag economic conditions. It says the volume of total non-real estate farm loans continued into a yearlong trend of declines during the second quarter, down about 13% from last year.
The report says delinquency rates on farm real estate loans increased about 17% through the first quarter and ag credit conditions remained weak.
Researchers say the paycheck protection will help supplement financing needs of some farmers while payments from the Coronavirus Food Assistance Program may have helped offset declines in farm revenues this year.
While those payments may have helped out, many farmers are still concerned what impact the virus will continue to have on their bottom lines.
AgDay visited one farm retail business in Southwest Michigan where a surprise shot of business is helping to preserve the farm's legacy.
Customers are here at Stover's Farm and U-Pic in Berrien Springs, Michigan. It’s something the owner didn't think would happen this year.
“Two months ago, we had found out two-thirds of our markets were not going to happen in downtown Chicago,” says owner of Stover’s Farm and U-Pic, Kenny Stover. “I have spent my entire life for this farm, trucking to Chicago three or four days a week.”
COVID-19 was one thing but losing the Chicago farmer's market scene and possible business at the farm was another. Yet, people are coming after all.
Stover says, “I remember telling my wife towards the end of April [and] beginning of May, “Hon, we are going to have to sell our house. We are going to have to sell our cars.” [It’s] because that accounted for almost 50 percent of our income from markets we had lost in Chicago.”
Luckily, the Stover family has stayed open and operational but other farmers are having their own issues due to the pandemic.
S&P Global Market Intelligence says banks reported more than $179 billion in agricultural loans the end of March. Of that, 2.68% of total agriculture loans were delinquent in the first quarter of 2020, marking the highest level since the first quarter of 2012.
The Rural Mainstreet Index survey of bank CEOs show estimated farm loan defaults are only slightly higher from a year ago. This month, bankers estimated that farm loan defaults would rise by 5% over the next 12 months. This is up slightly from the 4.8% registered one year ago.
“When we asked the same question last year at this time, it was about 4% to 5%,” says Ernie Goss, agricultural economist with Creighton University and head of the Rural Mainstreet Index. “Even though farm income is down dramatically, we are seeing farm loan defaults [with] not so much of an increase. Even with farm commodity prices down significantly and farm income dragging, farm loans, not so much.”
Goss says loan defaults are stronger than researchers anticipated but loan restructuring has helped.
“The restructuring of loans has had a significant impact by stretching out the payments in some cases,” says Creighton University economist and head of the Mainstreet Index, Ernie Goss.
He says government payments are helping out to some degree.
“I think some of the defaults, the lower default rates than I would have expected, is based upon [that] $16 billion [in] payments,” says Goss.
Some specialists say the bankruptcy impact may not be known for at least one year.
“Should the income be down, government payments not there and if you happen to see something change on the land market, then we could really be into what I would call a severe economic snowstorm in the economic winter,” says David Kohl, professor emeritus of agricultural finance at Virginia Tech.
Kohl says while government payments have helped some producers, he's concerned for next year, when payments are unlikely and if COVID-19 continues.
“Some people are going to lose their jobs or they’re going to have lesser income,” says Kohl. “It hits the producer side but it also [the] consumer side of people buying those agricultural products.”