covid19’s impact on u.s. food and agriculture...covid19’s impact on u.s. food & agriculture...

April 20, 2020

COVID19’s Impact on U.S. Food and Agriculture

Jayson Lusk, Department Head & Distinguished Professor of Agricultural Economics

James Mintert, Director, Center for Commercial Agriculture

Michael Langemeier, Associate Director, Center for Commercial Agriculture

COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020

COVID-19’s Impact on Food & Agriculture1. U. of Missouri’s FAPRI reduced their 2020 Net Farm Income estimate by $20

Billion

2. USDA will provide $16 billion in direct payments to farmers and ranchers

a. $9.6 billion for the livestock industry, $3.9 billion for row crop producers, $2.1 billion for specialty crops producers, $500 million for others crops

1. Producers will be compensated for 85% of estimated price losses that occurred from January 1-April 15, 2020

2. Producers will be compensated for 30% of estimated price losses beginning April 15 and continuing through the next two quarters


Grocery sales increased but are leveling off

0%

73%

91%

37% 38%

71%

55%

28% 29%

-5%

8%

89%102%

31% 31%

3/1/2020 3/8/2020 3/15/2020 3/22/2020 3/29/2020 4/5/2020

Week Ending

Beef Chicken Pork

Source: IRI

Year-over-Year Change in Fresh Meat Grocery Sales

Significant short-run disruptions in food markets

Source: Safegraph https://www.safegraph.com/dashboard/covid19-commerce-patterns

https://www.safegraph.com/dashboard/covid19-commerce-patterns


Heterogeneous spending impacts

Source: https://www.nytimes.com/interactive/2020/04/11/business/economy/coronavirus-us-economy-spending.html

https://www.nytimes.com/interactive/2020/04/11/business/economy/coronavirus-us-economy-spending.html

Food prices increased but are leveling off

Source: Lusk calculations based on USDA data

$175

$185

$195

$205

$215

$225

$235

$245

$255

$265

$275

3-Fe

b

6-Fe

b

9-Fe

b

12-F

eb

15-F

eb

18-F

eb

21-F

eb

24-F

eb

27-F

eb

1-M

ar

4-M

ar

7-M

ar

10-M

ar

13-M

ar

16-M

ar

19-M

ar

22-M

ar

25-M

ar

28-M

ar

31-M

ar

3-Ap

r

6-Ap

r

9-Ap

r

12-A

pr

15-A

pr

Choi

ce B

oxed

Bee

f Pric

e ($

/cw

t)

Wholesale Daily Beef Prices

2019 2020

$50

$55

$60

$65

$70

$75

$80

$85

$90

3-Fe

b

6-Fe

b

9-Fe

b

12-F

eb

15-F

eb

18-F

eb

21-F

eb

24-F

eb

27-F

eb

1-M

ar

4-M

ar

7-M

ar

10-M

ar

13-M

ar

16-M

ar

19-M

ar

22-M

ar

25-M

ar

28-M

ar

31-M

ar

3-A

pr

6-A

pr

9-A

pr

12-A

pr

15-A

pr

Pork

Cu

tou

t Val

ue

($/c

wt)

Wholesale Daily Pork Prices

2019 2020

$50

$60

$70

$80

$90

$100

$110

Natio

nal C

ompo

site C

hick

en Pr

ice ($

/cw

t)

Wholesale Weekly Chicken Prices

2019 2020

$75

$100

$125

$150

$175

$200

$225

$250

$275

$300

$325

Com

bine

d Re

gion

al Sh

ell E

gg P

rice

(cen

ts/d

ozen

)

Wholesale Weekly Egg Prices

2019 2020


Asset fixity leads to farm surplus amidst retail stockouts

vs.

vs.


Price changes depend on exposure to Food Away From Home Market


Round

Chuck

LoinShort Plate

COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020Source: Lusk calculations based on USDA data

Butt

Loin

Belly

Ham

Price changes depend on exposure to Food Away From Home Market


Meat packing is vulnerable to worker illnesses

15 pork plants slaughtered 59% of all hogs


Beef processing has taken a hit



Pork to a lesser extent …


Fed Cattle Prices Have Collapsed

95

105

115

125

135

145

JAN APR JUL OCT

$ Per Cwt.SLAUGHTER STEER PRICES

Southern Plains, Weekly

Avg. 2014-18 2019 2020

Data Source: USDA-AMS, Livestock Marketing Information Center

And So Have Feeder Cattle Prices

110

130

150

170

190

JAN APR JUL OCT

$ Per Cwt.MED. & LRG. #1 FEEDER STEER PRICES

700-800 Pounds, Southern Plains, Weekly

Avg. 2014-18 2019 2020


Hog Base Prices Down 20% in Last 2 Weeks

40

50

60

70

80

90

100

JAN APR JUL OCT

$ Per CwtBASE SLAUGHTER HOG PRICES

National, Weighted Average Carcass Price, Weekly

Avg. 2014-18 2019 2020


Baby Pig Prices Down Sharply Based Upon

Weak Market Hog Price Expectations for Late 2019

15

25

35

45

55

65

JAN APR JUL OCT

$ Per Head

EARLY WEANED PIG PRICESNational, 10-12 Lbs, Delivered, Weekly

Avg. 2014-18 2019 2020


Impacts of COVID-19 on U.S. AgricultureSource: Food & Agricultural Policy Institute, University of Missouri

Livestock Prices (20) Baseline (3/20) COVID (4/20)

Steers ($/cwt) 122.10 108.06(-11.5%)

Barrows and Gilts ($/cwt) 53.15 48.33

(-9.1%)

All Milk ($/cwt) 19.46 17.75(-8.8%)

2020 Budget Comparisons for CornSource: Purdue Crop Cost & Return Guide

Budget Item January 2020($ per acre)

April 20, 2020($ per acre)

Difference($ per acre)

Crop Revenue $781 $665 -$116

ARC-CO/PLC $6 $42 $36

Combined Revenue $787 $707 -$80

Variable Costs $436 $434 -$2

Contribution Margin $351 $273 -$78

ARC-CO/PLC Payments are based upon base acres and are assumed to be the same for corn and soybeans

2020 Budget Comparisons for SoybeansSource: Purdue Crop Cost & Return Guide

Budget Item January 2020($ per acre)

April 20, 2020($ per acre)

Difference($ per acre)

Crop Revenue $579 $536 -$43

ARC-CO/PLC $6 $42 $36

Combined Revenue $585 $578 -$7

Variable Costs $247 $244 -$3

Contribution Margin $338 $334 -$4

ARC-CO/PLC Payments are based upon base acres and are assumed to be the same for corn and soybeans

DefinitionsNet Farm Income

– Gross revenue minus cash expenses and depreciation; excludes operator and family labor, and opportunity costs

Net Return to Land– Gross revenue minus cash expenses (except rent), depreciation,

and opportunity costs (except opportunity cost on owned land)

Earnings– Gross revenue minus cash expenses, depreciation, and

opportunity costs

-$150-$100

-$50$0

$50$100$150$200$250$300

07 08 09 10 11 12 13 14 15 16 17 18 19P 20P

Net Farm Income Sources, Corn/Soybean Rotation ($ per Acre)West Central Indiana Case Farm

Government Payments Crop Insurance Crop Net Returns Net Farm Income

Harvest Year

-$150

-$100

-$50

$0

$50

$100

$150

$200

$250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019P2020P

Difference in Earnings per AcreWest Central Indiana (Corn Minus Soybeans)

Harvest Year

Corn Prices Required to Produce Per Acre Returns Equivalent to SoybeansSoybean Price Low Productivity

(C=133; SB=44)Avg. Productivity(C=165; SB=54)

High Productivity(C=198; SB=65)

$7.50 $3.75 $3.66 $3.52

$8.00 $3.92 $3.82 $3.68

$8.50 $4.08 $3.99 $3.85

$9.00 $4.25 $4.15 $4.01

$9.50 $4.41 $4.32 $4.17

$10.00 $4.58 $4.48 $4.34

Current Prices Favor Soybeans Over Continuous Corn

Corn Prices Required to Produce Per Acre Returns Equivalent to Soybeans

Soybean Price Low Productivity(C=141; SB=44)

Avg. Productivity(C=176; SB=54)

High Productivity(C=211; SB=65)

$7.50 $3.42 $3.34 $3.21

$8.00 $3.57 $3.49 $3.36

$8.50 $3.73 $3.64 $3.52

$9.00 $3.89 $3.80 $3.67

$9.50 $4.04 $3.95 $3.83

$10.00 $4.20 $4.10 $3.98

Soybeans Versus Rotation Corn?

164

324

263

148

429

357

293

202

118

203154

221 199

91157

173 181 184217

253 282

291 281241 235 245 241 241

$50

$100

$150

$200

$250

$300

$350

$400

$450

07 08 09 10 11 12 13 14 15 16 17 18 19 20P

Cash Rents and Net Returns to Land, West Central IndianaNet Return to Land Cash Rents

Harvest Year Purdue Center for Commercial Agriculture

Net returns include estimated ARC-CO (soybeans) and PLC (corn) payments for 2019 & 2020


What Will U.S. Farmers Plant in Spring 2020?1. Corn Acreage in 2020

– USDA’s Planting Intentions estimated 97 million acres– Weakening returns for corn suggest acreage shift likely– Planted corn acreage could fall 1 million or more acres below intentions

2. Soybean Acreage in 2020– USDA’s Planting Intentions estimated 83.5 million acres– Could pick up 1 million acres or more from corn

3. Assuming Trend Yields in 2020, What Are the Implications?4. Large Increases in Ending Stocks @ End of 2020 Marketing Year

ü Especially for corn


Trend Yield in 2020 Would Provide Record Corn Crop

15.15

14.6114.34

13.69

15.60

10

11

12

13

14

15

16

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Billion Bu.

Harvest Year

Total U.S. Corn Production

Source: USDA, 2020 Purdue estimate Purdue Center for Commercial Agriculture


Weak Energy Prices Put Downward Pressure on Ethanol Values

$1.44

$1.32

$1.15

$1.03

$0.84

$1.89 $1.82 $1.83

$1.78

$1.14

$0.50

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50

19.01 19.02 19.03 19.04 19.05 19.06 19.07 19.08 19.09 19.10 19.11 19.12 20.01 20.02 20.03

$/Gallon

Year & Month

Monthly Average Unleaded Gasoline & Ethanol Rack Prices

Omaha, NE, January 2019-March 2020

Ethanol Unleaded Gasoline

Source: Taheripour & Mintert, 2020; Nebraska Energy Statistics Purdue Center for Commercial Agriculture


Estimated Daily Ethanol Plant MarginsReturn Over Operating Costs, $/Gallon of Ethanol

September 3, 2019-April 9, 2020

($0.12)($0.20)

($0.10)

$0.00

$0.10

$0.20

$0.30

$0.40

9/3/19 10/3/19 11/2/19 12/2/19 1/1/20 1/31/20 3/1/20 3/31/20 4/30/20DateSource: CARD, Iowa State University Purdue Center for Commercial Agriculture

$/Gallon


Shelter In-Place Plus U.S. & World Recession Reducing Demand for Corn to Produce Ethanol

Wide range in estimated magnitudes of reduction in corn demand

Estimates depend on

1) How long restrictions on activity continue

2) How rapidly U.S. economy recovers

Taheripour & Mintert estimated 3 scenarios

Est’d reductions between 350 and nearly 640 million bushels for 2019 crop year

Result: Larger projected Ending Stocks @ end of 2019 marketing year & lower prices


Weak Ethanol Demand Pressuring Corn Basis Levels Lower


Trend Yields & Rebound in Soybean Acreage Will Push Soybean Production Above 4 billion Bushels

4,428

3,558

4,142

2.5

3.0

3.5

4.0

4.5

5.0

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Billion Bushels

Harvest Year

U.S. Soybean Production

Source: USDA Purdue Center for Commercial Agriculture


USDA’s 2019 Ending Stocks Estimates Appear Optimistic

7%

16% 16% 15%

3%

7%10%

23%

12%

0%

5%

10%

15%

20%

25%

30%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

% of Usage

Harvest Year

U.S. Ending Stocks as % of UsageCorn & Soybeans, 2005-2019

Corn Soybeans

Source: USDA-WASDE Purdue Center for Commercial Agriculture

Corn 2019 ending stocks could be as large as 17-19%


2020 Ending Stocks Likely to Increase Sharply

7%

16% 16%15%

29%

3%

7%10%

23%

12%

18%

0%

5%

10%

15%

20%

25%

30%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

% of Usage

Harvest Year

U.S. Ending Stocks as % of UsageCorn & Soybeans, 2005-2020

Corn Soybeans

Source: USDA-WASDE, 2020 Purdue estimate Purdue Center for Commercial Agriculture


Impacts of COVID-19 on U.S. AgricultureSource: Food & Agricultural Policy Institute, University of Missouri

Crop Prices (20/21) Baseline (3/20) COVID (4/20)

Corn ($/bu) 3.70 3.35(-9.5%)

Soybeans ($/bu) 8.85 8.27(-6.6%)

Wheat ($/bu) 4.84 4.58(-5.4%)


SummaryReduction in consumer incomes will reduce meat demand worldwideü Food Away from Market will be very slow to recoverü Stronger at home market, but not enough to offset loss in away from home marketü Meat processing plant capacity issues remain a concern

Corn production in 2020 could set a new recordü But ethanol demand expected to remain weak as recession takes its tollü Worldwide recession could reduce export demandü 2020 carryover into 2021 could be largest since late 1980s

Soybean production likely to exceed 4 billion bushelsü Export demand will be key, but very uncertainü Worldwide recession will hurt world demand for exports

Declining net return prospects, particularly for corn, will put downward pressure on cash rents and land values

April 20, 2020

Next Crop Outlook WebinarMay 15, 2020

More info & register atpurdue.ag/webinar

covid19’s impact on u.s. food and agriculture...covid19’s impact on u.s. food & agriculture...

Documents