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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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
Heterogeneous spending impacts
Source: 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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
Asset fixity leads to farm surplus amidst retail stockouts
vs.
vs.
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
Price changes depend on exposure to Food Away From Home Market
Source: Lusk calculations based on USDA data
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
Meat packing is vulnerable to worker illnesses
15 pork plants slaughtered 59% of all hogs
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
Beef processing has taken a hit
Source: Lusk calculations based on USDA data
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
Pork to a lesser extent …
Source: Lusk calculations based on USDA data
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
Data Source: USDA-AMS, Livestock Marketing Information Center
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
Data Source: USDA-AMS, Livestock Marketing Information Center
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
Data Source: USDA-AMS, Livestock Marketing Information Center
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
Weak Ethanol Demand Pressuring Corn Basis Levels Lower
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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%
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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%)
COVID19’s Impact on U.S. Food & Agriculture Webinar, April 20, 2020
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