In 2020, U.S. farmers have been encumbered by a number of setbacks--since March, they have suffered from the market disruptions and health threat posed by the global novel coronavirus pandemic. In addition, the continental United States has been struck by a variety of natural disasters--a serious drought and more recently devastating wildfires in much of the west, several hurricanes and tropical storms bringing destruction from winds and heavy rain to coastal regions in states from Texas to southern New England. A massive, extended storm called a derecho also brought high winds of over 100 miles per hour to Iowa and Illinois in August, damaging thousands of homes and businesses in cities and millions of acres of cropland within a couple of hours.
With respect to the ongoing pandemic, the different sub sectors of U.S. agriculture have been affected in different ways. In the row crop sector, which is highly capital intensive and generally uses relatively little hired labor, the main impact has been through reduced market prices for their commodities due to reduced export demand and somewhat lower biofuels production, the latter having recovered significantly since the drastic production shutdown for the first few months of the pandemic. Through August, the projected market prices of most spring-planted crops were down compared to 2019. In September, however, USDA’s World Agricultural Supply and Demand Estimates publication found that weather-related reductions in expected yields and stronger export prospects raised projected prices for corn and soybeans for the 2020/21 crop year above 2019 levels. The projected price for rice remains well below 2019, while the cotton price is just slightly reduced.
As for the livestock sector, total U.S. red meat production (primarily beef and pork) has recovered since the spring shutdown of significant meatpacking capacity, and is projected to increase by about 1 percent compared to 2019 levels. Cattle and hog prices fell significantly during the peak of the shutdown, as packers sought to discourage farmers from delivering their animals for slaughter. At its low on April 20, the live cattle price was down 15 percent from early March levels, but since then has climbed back slightly above pre-pandemic levels. Hog prices followed a similar path down through late April, but have not yet fully recovered to previous levels.
The closure of schools, restaurants, and most institutional outlets for food affected horticultural and dairy producers most severely, because of the perishability of their products. During April and May, the evening news broadcasts were full of videos of farmers ploughing their nearly ripe berries and tomatoes into the soil, and raw milk being dumped into ditches, because a significant share of demand for those products disappeared almost overnight.
As the livestock and horticultural sectors have begun to gear back up into full production over the last several months, many members of their hired workforce, largely immigrants, continue to come down with COVID-19 as they face working conditions which make social distancing difficult and many employers struggle to obtain sufficient personal protective equipment (PPE) to protect their workers. At least 50,000 farmworkers and workers in food and meat processing facilities have been diagnosed with this disease, and at least a couple of hundred of them have died as a result.
Within specific regions of the country, crops have been damaged or yields reduced as a result of major natural disasters they have faced in the last several months. In the states struck by the derecho on August 10th, there were an estimated 10 million acres of cropland in the storm’s path in Iowa and nearly 7 million acres in Illinois. In Iowa alone, it was estimated by McKinsey and Co. that farmland that had been expected to produce up to 515 million bushels of corn and soybeans were damaged by the storm, accounting for about 15 percent of the crop that the state’s farmers had been expected to produce prior to the storm. The storm also damaged buildings and structures on hundreds of farmers in its path, including on-farm grain silos with tens of millions of bushel capacity.
Across the west, massive wildfires in the last few weeks have damaged an estimated 4.5 million acres of land in at least four states--Oregon, Washington, California, and Idaho. Most of that land is forested, but some crops, such as horticultural crops along the coast, were affected by the combination of extreme heat and fires. In addition, smoke from those fires has also affected the quality of grapes growing in vineyards adjacent to fire zones, such as in California’s Napa Valley. It is anticipated that “smoke taint” that has been absorbed into those grapes will render them largely unusable for wine production.
U.S. farmers have already received some federal assistance to offset the losses they have experienced this year, with more on the way. In May, USDA announced the Coronavirus Food Assistance Program (CFAP) that was expected to provide up to $19 billion in assistance to farmers, most of it in the form of direct payments to farmers but also creating a Farmer to Family Food Box program to enable purchase of products for assembling into boxes for delivery to families in need of assistance through local food banks, etc. The deadline on the direct payment portion was extended from August 28 to September 11, but USDA has dispensed less than $10 billion of the $16 billion made available under the program due at least in part to complicated program rules.
Agriculture Secretary Sonny Perdue recently announced a second CFAP program with $14 billion in additional funding. Farmer signup for this program began on September 18th and will close on December 11. Through September 21, farmers had also collected $3.1 billion in indemnities under the federal crop insurance program, with much more likely to be paid out through the fall as claims stemming from recent disasters are filed and processed.
In its forecast released on September 2nd, USDA’s Economic Research Service is projecting U.S. net farm income for 2020 at nearly $103 billion, an increase of $19 billion over 2019 levels and nearly 6 percent above the 2000-2019 average. Direct government payments are projected at $37.2 billion for the year, accounting for 36 percent of net farm income, the highest share since the late 1990’s.
