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COVID-19’s Impact on Agriculture and How the Industry Is Moving Forward

By February 17, 2021 No Comments
Tractor spraying water on a crop field

Every business and industry was somehow affected by the COVID-19 pandemic this past year. The agriculture industry was no different. Throughout last year, the pandemic greatly impacted the farming and food industries with lasting impacts that will be felt well into 2021. Here we’ll breakdown the major events in the agriculture industry in the past year, the greatest challenges, and what is next to move forward into the future.

COVID-19’s Impact on Agriculture During 2020

Decrease in Demand

The major events of last year began in March. As economies began to shut down and consumers began to stay home, needs shifted from commercial quantity orders to more individualized portions, causing supply chains to struggle. As restaurants closed, many farmers lost orders and customers. In April, equipment manufacturers shifted their focus to making supplies that decreased the spread of COVID-19, making it more difficult to obtain new farming equipment or updated parts. The demand for meat also decreased, leaving farmers with more market-ready livestock.[1] Towards the end of the spring, dairy farmers faced great hardships as the supply of dairy products far outweighed the demand. With the demand for dairy products in restaurants and schools dwindling, combined with limits on the number of dairy products a consumer could purchase at the grocery store, farmers were forced to dispose of the excess milk since these shifts in demand don’t have an effect on the cow’s production of milk.[2]

Effect of Decreased Travel

With everyone working remotely and staying home, the number of people traveling for work and vacation decreased significantly. This decrease affected the ethanol industry, and in April, POET—a major ethanol producer—temporarily shut down their plant. Two more major ethanol producers followed suit over the next few months as well. Since corn is used to make ethanol, this had a tremendous effect on corn farmers. It’s estimated that the decrease in the demand for gasoline could result in an eight billion gallon drop in ethanol production in the United States, leading to a reduction of 2.7 billion bushels of corn used to produce that ethanol. When these plants shut down, their corn supply was at full capacity, meaning they no longer required additional corn from farmers, leaving farmers with an excess crop of corn and nowhere to send it.[3]

COVID-19 Relief

In the summer, the United States Department of Agriculture (USDA) released the Coronavirus Food Assistance Program (CFAP) to give aid to farmers during the pandemic. CFAP only applied to certain types of crops, and farmers had to apply for the relief packages. In the fall, the USDA announced a potential second round of relief packages for the agriculture industry to provide even more needed assistance.[2]

Moving Forward: What’s Next in 2021

Along with many other industries, the future of the agriculture industry still appears uncertain for 2021. It is expected that corn prices will remain low well into the summer of 2021, while soybean costs will increase, having a direct impact on feed costs for farmers’ crops and livestock. Experts predict a shift in commodities from supply surpluses to demand-driven markets. This shift comes from the ample supply of agriculture products from this past year, with the addition of new trade deals and the need for countries to secure inventory in the event of another COVID-19 outbreak in the fall or winter of 2021. For the agriculture industry’s commodities, the demand drivers in the upcoming months will be the rebounding world economy, weather disruptions, and the consumer trend of covering needs more intentionally—as in only purchasing what they consider a necessity.[4]

Moving forward into a future of uncertainty can be extremely stressful. Harbor America has been an expert in the agriculture industry for over 12 years, assisting clients with navigating industry trends and challenges. Through PEO, human resource, and risk management services, Harbor America provides industry knowledge and guidance. Harbor America’s team of experts will assist your business in reviewing and analyzing current and expected industry trends to better equip your business for success for the future.

Sources:

[1] Successful Farming- 12 Months of COVID

[2] Successful Farming- Why Can’t I Buy Milk

[3] Successful Farming- POET Idles Ethanol Plants

[4] Successful Farming- Continued Uncertainty is Seen for 2021

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