Exposure to market risk in 2020 is expected to be higher for dairy and specialty crop producers than other commodities, according to a quarterly report obtained by Agri-Pulse.
Farmer Mac is expected to release its quarterly economic report later this week. Farmer Mac Chief Economist Jackson Takach told Agri-Pulse pivoting from a restaurant and wholesale focus is very difficult for dairy and specialty crop sectors grappling with COVID-19.
“If you’re packaging up ten-pound bags of cheese, it’s a very different structure, very different market, very different supply chain than if you are doing eight-ounce bags for grocery sales,” he said.
As soon as schools and restaurants closed, Takach said a lot of milk and cheese produced at a very large volume had nowhere to go, causing dairy producers to be forced into dumping milk. Because dairy producers receive a higher proportion of their income from cash receipts, they have a relatively higher exposure to market price risk compared to other producers, the report noted.
Takach said specialty crop producers across the Southeast as well as California are seeing the same logistical and supply chain problems because a lot of fresh fruits and vegetables sold to schools, restaurants, and hotels can’t be immediately changed to sell in grocery stores.
When it comes to expenses, commodities will face differing pressures. Labor-intensive specialty crop producers will see expenses rise but cash grain producers could see lower fuel and interest costs, the report said.
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