COVID-19: ‘Very large’ impact on farm income seen

Economists already were predicting that 2020 would be another tough year for the farm economy even before the COVID-19 pandemic hit and oil prices plunge. Now, a top farm economist who’s advising USDA says he expects the pandemic to have a “very large” impact on farm income. 

University of Missouri economist Pat Westhoff, who is preparing some estimates for USDA, says he’s not ready to release the numbers. But he suggests that the pandemic could wipe out the potential income boost that would have been provided by the ‘phase one” trade deal with China. 

“It seems very likely to us that we're talking about a significant drop in farm income this year,” he said in a webinar sponsored by the St. Louis Agribusiness Club.

Both USDA and Westhoff’s Food and Agricultural Policy Research Institute had estimated that net cash farm income would fall to about $110 billion this year, a figure that didn’t account for a potential surge in exports under the China deal. Westhoff now thinks net cash farm income could be under that number because of the pandemic. 

Ouch: Prices for many commodities have tumbled as the COVID-19 crisis has grown, Westhoff notes. Cotton prices have fallen 25% since Feb. 4. Live cattle prices are off 16%. Milk and corn prices are down 11%.

Take note: Farm states continue to have some of the lowest COVID-19 rates. As of Monday, Nebraska had seven confirmed cases per 100,000 population, by CNN’s count. Texas and Minnesota each had 10 and Oklahoma had 12. (By comparison, New York state had 342.)

But experts continue to warn that illnesses are inevitably going to skyrocket outside New York, too. President Trump, by extending his social distancing guidelines until April 30, has effectively ruled out any regionalization of those restrictions at least until May. 

On our website: A USDA poultry plant inspector is the lead plaintiff in a lawsuit seeking hazard pay for federal workers exposed to coronavirus through their work.

Produce industry appeals to USDA

Fruit and vegetable producers across the nation are seeking help from USDA on a number of fronts to stem losses from the market disruptions created by the COVID-19 crisis. 

In a four-page letter to USDA, more than 70 industry groups are asking USDA to set up a plan for reimbursing growers and shippers for losses “due to the collapse of the food service sector.” The groups also want USDA to take over schools’ cancelled produce contracts.

Keep in mind: The $2 trillion stimulus bill just signed into law earmarks $9.5 billion for specialty crop producers and others.

Plantings report will miss some COVID-19 impact

Traders will be closely watching USDA today for the annual prospective plantings report. But the report is based on a survey done in the first half of March, so it won’t reflect the full impact of the pandemic and the recent plunge in oil prices. 

Because of the recent drop in corn prices and rise in wheat markets, Westhoff says he expects farmers to plant a little less corn than previously expected and a bit more wheat. The fall in oil prices has dragged down the ethanol market, forcing the industry to cut back on production. 

The average trade guess for planted corn acres is 94.3 million and 84.8 million for soybeans. “Right now, (soybeans) are favorable, and we are seeing an uptick in planted bean acres,” Allendale’s Nathan Cardwell told Agri-Pulse.

Planting delays likely due to oversaturated soils

Citing saturated soils, USDA Meteorologist Brad Rippey expects widespread planting delays in parts of the Midwest that could last for several weeks.

But he says Northern Missouri, southern Iowa, and portions of Nebraska “may be able to achieve some fieldwork if it remains dry enough."

Enviros take aim at WOTUS

Nine environmental groups have served notice that they plan to sue the Trump Administration over its new “waters of the U.S.” rule, alleging EPA and the Army Corps of Engineers did not adequately consider its impact on endangered species.

The Natural Resources Defense Council leads the coalition, saying that the agencies’ failure to consult with federal wildlife agencies violated the Endangered Species Act.

‘Wetlands no longer protected under the rule support a diverse range of animals by, for example, acting as integral components of food webs, and providing breeding sites for birds, nursery habitat for amphibians, colonization opportunities for invertebrates, and maturation habitat for insects,” says the groups’ letter to EPA and the Corps. 

Another coalition filed a similar notice of intent last month.

Still hope for Chinese rice imports

When China recently released a list of 679 U.S. commodities that importers could apply to buy tariff-free from the U.S., rice was not on it. That may make it more difficult for U.S. exporters, but sales are still expected, U.S, industry and government officials tell Agri-Pulse.

A spokesman for the USA Rice Federation says the announcement by China’s Tariff Commission “included a clause that allows products not explicitly listed to still apply for waivers, to date, we are aware of several waiver approvals for unlisted products and we anticipate Chinese rice importers to follow the same path to receive waivers.”

China agreed in the “phase one” trade deal to honor its WTO tariff rate quota commitments, which include a pledge to buy about 6.3 million metric tons of rice annually.

Chinese importers have been applying for and getting tariff exemptions on corn, soybeans, wheat, pork and other U.S. commodities.

Brazilian delays spur US soy sales to China

Heavy rains in Brazil and new trucking restrictions are delaying soybean shipments to China, so the U.S. has been stepping in to sell old crop supplies to Chinese buyers, says John Baize, an analyst with the U.S. Soybean Export Council. China bought 199,300 metric tons of U.S. soybeans in the week ending March 19, even though Brazilian crops are cheaper, according to USDA.

Baize suspects that an export sale of 110,000 tons of soybeans announced by USDA on March 20 was to China, although delivery was listed as “unknown destinations.”

Dozens of Brazilian municipalities have banned trucks in efforts to limit the spread of coronavirus and that’s making it difficult for farmers to get their soybeans to the ports, Baize said. While the cost of U.S. soybeans is higher, it’s only about $2 more per ton out of the Pacific Northwest and crushing margins in China are larger than normal.

“Supply is getting tight for soybeans in China,” Baize told Agri-Pulse. “Chinese crushers have seen that they’re going to have delays … so they’re buying from the U.S.”

USDA extends ReConnect deadline again

Due to the COVID-19 pandemic, USDA is extending the second-round application deadline for its ReConnect program again. The application window will run through April 15

This is the second time the deadline has been moved from its original deadline of March 16th. In March 2018, Congress provided $600 million to USDA to expand broadband infrastructure and services in rural America. 

He said it. “We're talking about a major scale-back in ethanol production, and when ethanol production scales back that means there's less demand for corn, which drives down corn prices as well.” – Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri.