Most commodity prices have been hurt by COVID-19, but the livestock markets have taken the largest hit.
The livestock sector was hit with backed up processing capacity and slower demand with restaurants shutting down and stay at home orders. However, the corn market also took a hit when the ethanol industry was crushed by lower energy prices and cut production and shut down or slowed operations at more than half the ethanol plants across the country.
As a result, Congress approved $19 billion of assistance for agriculture through the Coronavirus Food Assistance Program, or CFAP. Included was $3 billion for USDA’s food purchasing program and $16.5 billion in direct payments. USDA released payment details recently and aid is starting to be disseminated. The big question is will it be enough?
South Dakota Farm Bureau President and Volga, S.D., farmer Scott VanderWal says it will be a lifeline for many.
“Anything will help because just about every commodity we raise right now in agriculture is under the cost of production because of the COVID-19 pandemic and decreased demand,” he says.
Livestock producers are even included, getting a bigger share of the payments with the meltdown in the processing sector. VanderWal says this is a bridge for many of those operations until the economy rebounds and the packing industry gets back to normal.
“We’re all just trying to hang on and stay in business just like every other industry in the country right now. But it’s really a matter of survival right now for everybody," he says.
Milk prices also tumbled with lower demand when schools and restaurants shut their doors and operations in some parts of the country were even forced to dump milk. So, dairy producers are concerned the CFAP dollars won’t go very far.
“Those dollars are going to run out very quickly," Marv Post, South Dakota Dairy Producers Association president says. "The dollars that were put there aren’t going to heal everybody I don’t think.”
So, he’s hopeful dairy farmers can rely on the Dairy Margin Coverage Program or other government programs for a safety net. For larger producers, Post says they likely had done additional risk management before the large drop in prices.
“Larger producers, hopefully they have taken care of on either contracts or their own business plan they’ve covered themselves some," he says.
Milk prices have rebounded substantially from the March lows, but that doesn’t replace the income that was lost during the height of the COVID-19 demand loss period. So, Post is expecting there could be future aid packages.
“We hate to rely on the government for those things and so let’s see once when all the dollars that they’ve already allocated let’s see what happens with them and then we’ll see what’s needed above that," he says.
Agricultural lenders say the payments are timely and eclipse any previous aid. Nate Franzen is president of the agribusiness division for First Dakota National Bank. He says the move has been unprecedented.
“If you really step back and look at what the government’s doing, it's pretty amazing," he says. "We’ve kicked out more money than I’ve ever seen in my lifetime to try and address the challenges out there in the economy right now.”
However, Franzen says it’s hard to define if the assistance will be enough to keep some farmers and ranchers in business.
“It depends on the operation,” he says.
“I’ve been saying there’s absolutely no amount of money in the world that’s going to make everybody whole. But it still comes back to the point that we’re just trying to hang on and every little bit helps," he says.
Franzen thinks it is possible lawmakers could approve additional assistance for agriculture if they determine the need exists.
“My sense today is Congress is really monitoring things closely and stands ready to continue to do things on an ad hoc basis,” he explains. Even then, Franzen says it may be too little too late for some operations after several years of low commodity prices and a trade war.
For consumers, VanderWal justifies the aid as a matter of ensuring food security. He says consumers experienced something he never thought was possible in the U.S.
“People have seen empty grocery store shelves, and I think they’re realizing what agriculture means in this country to our country,” he says.
That should be a subtle reminder that consumers do not want to have to rely on imports for their food supply.