Farmers Face Uncertain Futures As COVID-19 Blows Up Supply And Demand Balance
“Uncertainty” is the word that seems to be on everyone’s lips when asked about how COVID-19 has impacted agriculture in Colorado.
Many say that “farmers are eternally optimistic.” So for as much as they’re worried, the uncertainty also allows them to be hopeful that they’ll come out of the other side okay. Some seem hopeful that they’ll come out even better than okay.
Coronavirus is bringing a few of the food industries’ biggest issues to the forefront: labor, health and safety and tumbling prices for agricultural products.
In March, corn futures fell 14%, cattle 25% and dairy prices went down 26% to 36%. Several other commodities saw significant drops too, according to the American Farm Bureau Federation.
“It makes it pretty hard to make a living,” said Kyle McConnell, a corn and cattle farmer in Haxtun, in the northeast corner of the state.
Last week the price for a bushel of corn dropped to around $3. McConnell needs $4 per bushel just to break even.
“As our costs rise, our income has done nothing but drop. So then the margins get tighter and tighter and tighter,” he said.
His corn is primarily used for feed and ethanol, which is used in fuel. And since people are driving less, the demand for ethanol has dropped dramatically, taking the need for corn down with it. Which, in turn, leads to overproduction.
“Any time we have overproduction and the carry-outs are at record highs, the only way to offset that is through lower prices,” McConnell said.
Many farmers could be eyeing a change in crop due to the price drops, but Colorado Corn Growers Association Executive Director Nick Colglazier said that corn farmers are already locked in by this time of year.
“They’ve already prepared for those acres to be corn,” Colglazier said. “It is going to be hard for them to transition over.”
He said it’s not impossible, but farmers will have to decide whether the change is worth it economically.
“For a lot of them, even with these low prices, it could possibly still be corn that is the best economic option for that farm,” Colglazier said. “Even though at some point you could be losing money for every acre of corn you plant.”
Similar imbalances are happening across the other commodities as demand disappeared from restaurants, schools, universities and businesses that have shut down or reduced operations. Suddenly, there’s a glut of product with fewer places to go.
The images of empty grocery store shelves aren’t signaling a lack of supply, said Taylor Szilagyi, director of policy communications for the Colorado Farm Bureau.
“The way consumers’ purchasing habits have changed, we’re seeing bigger rushes and bigger purchases of certain types of food,” she said. “And it's just going to take the supply chain and the transportation from one place to another a little bit longer to catch up.”
And even when the prices for certain agricultural prices go up, that doesn’t mean the farmer who produced it is making a lot more money.
“It doesn’t necessarily go from the farmer’s ground to your plate. It has to go through, likely, a processor, it costs money to transport the food. It costs money for the grocery stores to then take that food and sell it,” Szilagyi said. “And so really farmers aren’t receiving the full price of what you’re paying at the grocery store. They’re receiving a much, much lower price.”
And thus far, increased buying at the grocery store has not been nearly enough to make up for the lost demand elsewhere.
The lack of demand and dismal prices has left a lot of farmers with nowhere to put their product. There have even been reports of farmers in the Midwest and on the East Coast dumping their products, particularly milk.
So far, there have been no similar reports in Colorado.
Foy Chapin runs Chapin Dairy Farms in Morgan County. His operation milks almost 2,000 cows and he hasn’t had to do any dumping.
“Colorado is somewhat unique compared to the other states. We have the world's largest mozzarella cheese manufacturer here in Colorado,” he said. “And they take a large percentage of Colorado’s milk. Right now we have a good home for milk. It’s all getting processed.”
Chapin is hurting because of the low prices. And he’s worried that dumping milk may be in his future too, if the pandemic goes on too much longer and starts impacting the Leprino Foods dairy plant in Greeley the same way it has halted operation at the JBS USA meatpacking plant in the same city.
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, provides the U.S. Department of Agriculture and the Commodity Credit Corporation (a federal corporation which works to “stabilize, support, and protect farm income and prices”) a combined $23.5 billion in aid.
That money “is a good start,” says Taylor Szilagyi of the Colorado Farm Bureau.
“With all of this uncertainty, it doesn’t seem like it’s going to be enough,” she said.
And she’s not alone. Rocky Mountain Farmers Union President Dale McCall said he also believes more will be needed.
“We don’t want a handout, but we want to make sure our markets are open and that we can grow some of those markets back. But that’s going to take some time,” he said.
Agricultural industries can also apply for Small Business Administration paycheck protection loans, which are designed to help businesses keep employees on during these difficult times. But, unlike other industries, they don’t qualify for the more general Economic Injury Disaster Loans.
A bipartisan group of legislators sent a letter to the SBA urging the agency to allow farmers to qualify, saying that leaving farmers out of the disaster loans program is “contrary to congressional intent” in the CARES Act aid package for small businesses.
Concerns about pricing, demand and financial aid are just part of the uncertainty looming over the industry right now. From how to get products to consumers for those who once relied on farmers’ markets or other direct sales, to socially distant planting practices, to mental health concerns as farmers and ranchers get lonelier and more stressed, it’s all piling up.
Farmers are particularly worried about the medical facilities they rely on, McCall said.
“We’re really concerned about the rural hospitals being prepared,” he said, “if this spreads to the rural areas like we think it might.”