• Market Crumbs

Coronavirus Hits Farmers

Image via Johny Goerend on Unsplash

Farmers in the U.S. have faced numerous challenges over the last few years. The U.S.-China trade war, poor harvests from flooding or heat and bankruptcies, just to name a few.

U.S. farm debt is projected to reach a record high of $416 billion, according to the U.S. Department of Agriculture. Adjusted for inflation, the current farm debt is just below the 1980 record of $431.6 billion. U.S. farm bankruptcies jumped nearly 25% last year to levels not seen since 2011.

Specialty farmers such as dairy and citrus have also been getting crushed. Some of the largest dairy farms have gone bankrupt over the last year as consumers' preferences shift. According to the U.S. Department of Agriculture, the U.S. lost 2,731 licensed dairy farms from 2017 to 2018. The total number of dairy farms now stands at 37,468, with Borden noting that 94,000 dairy farms have stopped producing milk since 1992.

Citrus farms, particularly in Florida, have been devastated by citrus greening disease. Since it hit the state in 2005, nearly 5,000 of the 7,000 farms growing citrus have gone out of business. It's estimated the disease cost Florida 34,000 jobs in the 10 years after it first hit.

With the coronavirus taking its toll on the U.S. economy, farmers are facing another devastating year. The coronavirus has caused agricultural commodity prices to collapse and raised concerns over labor shortages.

"We were already under extreme financial pressure. With the virus sending the prices down — it’s getting to be the straw that broke the camel’s back," said Iowa farmer Robb Ewoldt. "We were hoping for something good this year, but this virus has stopped all our markets."

As a result of the coronavirus, much of the labor from Mexico farms depend on will not be allowed into the U.S. Farm trade groups are now pushing the Trump administration to allow temporary visas for farm workers from Mexico.

Prices of commodities such as corn, soybean, wheat, lean hogs, milk and cattle have all plummeted over the last few weeks. With restaurants and schools closing, as well as consumers stockpiling nonperishable goods, demand for these products has declined.

Corn farmers are getting hit even harder as ethanol prices have also fallen. Ethanol, which uses corn as a primary input, has seen demand take a hit as a result of a reduction in driving.

Ewoldt, who farms soybeans and corn, says the trade war, weather and lack of capital has made farming "not profitable anymore." Pointing to how the struggles for farmers keep compounding, Ewoldt said "We’ve stopped saying it can’t get worse."

U.S. livestock producers have asked the Department of Agriculture to let them delay payments of government loans. The $2 trillion coronavirus relief bill signed Friday adds $14 billion to the Agriculture Department’s Commodity Credit Corp (CCC) spending authority and provides $9.5 billion to farmers.

That may not be enough, however. The National Cattlemen’s Beef Association has already asked Congress to increase the CCC's spending authority to $50 billion as cattle and other commodity prices continue to fall.

As this vital part of the U.S. economy continues to take blow after blow, farm debt and farm closures are likely to continue to increase. Despite being told by U.S. President Donald Trump last year to "Start thinking about getting bigger tractors," farmers are facing much larger problems.

Leftover Crumbs

  • Results in 5 minutes. Abbott has received approval from the U.S. Food and Drug Administration for its coronavirus test that can provide positive results in as little as five minutes. Abbott will have the tests available to health care providers next week and will ramp up production to 50,000 per day. "The COVID-19 pandemic will be fought on multiple fronts, and a portable molecular test that offers results in minutes adds to the broad range of diagnostic solutions needed to combat this virus," Abbott COO Robert Ford said.

  • We're in a recession. International Monetary Fund chief Kristalina Georgieva says the global economy is now in a recession as a result of the coronavirus. "We have stated that the world is now in recession and that the length and depth of this recession depend on two things: Containing the virus and having an effective, coordinated response to the crisis," Georgieva said. "We’ve never seen the world economy standing still. Now we [do]. How we go about revitalizing it is another important topic."

  • Trump and GM go at it. U.S. President Donald Trump has invoked the Defense Production Act to force General Motors to manufacture ventilators after saying the company is "wasting time." GM defended itself, saying they have been working "around the clock for over a week to meet this urgent need" and their commitment to working with ventilator company Ventec Life Systems "has never wavered."

  • No open date announced. The Walt Disney Company said Disneyland and Disney World will remain closed until "further notice" as a result of the cornavirus. "While there is still much uncertainty with respect to the impacts of COVID-19, the safety and well-being of our guests and employees remains The Walt Disney Company’s top priority," the company said.

  • Struggles continue for SoftBank. Satellite operator OneWeb has filed for Chapter 11 bankruptcy, becoming the latest SoftBank-backed company to run into troubles. OneWeb is pursuing a sale of its business and has laid off employees as it seeks debtor-in-possession financing. "Our current situation is a consequence of the economic impact of the COVID-19 crisis," OneWeb CEO Adrian Steckel said.