Coronavirus Hits Already Frail U.S. Farm Economy

Corn farmers and cattle ranchers watch commodity prices drop, while produce growers fear labor shortages

By Jacob Bunge , Kirk Maltais and Jesse Newman
March 21, 2020 5:30 am ET
The new coronavirus is dealing another blow to the struggling U.S. agricultural sector, driving down crop and livestock prices and threatening labor shortages for farms.

Even as consumers clear food staples from supermarket shelves, Midwestern farmers’ prospects have dimmed. Agricultural futures on the Chicago Board of Trade have been on a slide since Feb. 24, when coronavirus concerns began to weigh on U.S. stock markets. Corn futures have shed nearly 10%, wheat futures have fallen nearly 2%, and soybean futures have dropped over 4%.

In U.S. Plains states, prices offered for ranchers’ cattle have dropped over the past two weeks, reflecting selling by investment funds and fears that consumers will eat less beef as they avoid restaurants—and that meatpacking plants could suffer staffing shortages. Longer term, the declines reflect worries that after consumers’ current rush to stock pantries, an economic downturn will limit spending and pressure prices.

Produce farms and orchards across the U.S. fear disruption after the Trump administration restricted immigration from Mexico, threatening a critical labor source. Dairy prices have fallen, with less milk flowing to school cafeterias and traffic expected to drop off for cheese-buying burger chains and pizzerias.

“The stress out there is really high-level for our farmers,” said Zippy Duvall, president of the American Farm Bureau Federation.

On Dec. 1, 2019, a patient in Wuhan, China, started showing symptoms of what doctors determined was a new coronavirus. Since then, the virus has spread to infect more than 100,000 people. Here’s how the virus grew to a global pandemic. Photo: Getty Images

Virus-driven disruptions could derail what economists had expected to be a more stable year for farmers, following years of sagging prices and trade disputes that cut into exports. The U.S. Department of Agriculture in February forecast that net U.S. farm income would rise 3.3% this year to $96.7 billion, lifted by higher prices for livestock and dairy commodities. Even at those levels, U.S. net farm income would remain 30.5% below its 2013 peak.

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The coronavirus’ spread through the U.S. has upended that view. Futures prices for lean hogs have fallen 12% in the past two weeks, while live cattle has dropped nearly 13%.

Near Minneapolis, Kan., feedlot manager Perry Owens watched cattle prices drop by $250 to $300 a head over the past few weeks. Offers for cattle this week were so low that some ranchers aren’t bothering to take their cattle to market, and some livestock sales scheduled in Kansas, Texas and elsewhere were called off, he said.

Falling prices are likely to push more ranchers out of the long-struggling cattle business, Mr. Owens said. “We were in a disaster before, now it’s catastrophic.”

Tyson Foods Inc., the largest U.S. meat processor by sales, said it plans to pay a premium on cattle slaughtered next week, to help feedlots through the price drop.

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Dairy farmers face the prospect of milk prices collapsing by as much as 25% this year, falling to levels last seen during the 2008 financial crisis, said Tom Bailey, a senior analyst for agricultural lender Rabobank. School shutdowns will affect the approximately 7% of fluid milk consumed by school lunch programs, he said, and a drop-off in restaurant activity will cut into the 40% of cheese sold to food service outlets. More raw milk is made into cheese than any other dairy product in the U.S.

Land O’Lakes Inc. this month notified dairy farmers that the coronavirus could disrupt its processing plants and transport networks. If the Minnesota-based cooperative isn’t able to market milk normally, Land O’Lakes said, it will begin enforcing policies that charge farmers for producing more milk than their allotted amount, to reduce potential oversupply. A spokeswoman said the message to farmers was a precautionary measure, and that the cooperative’s plants are operating normally.

“We’re doing a lot of finger-crossing,” said Dan Siemers, a dairy farmer in Newton, Wis., who sells milk to Land O’Lakes. Generally high dairy supplies make it harder for farmers to market their milk, he said. “There are not a lot of other places to go with it if your buyer can’t take it.”

While many food companies have seen voracious demand for their products in recent days, agriculture executives say the surge may not represent a fundamental shift in consumers’ overall food purchasing as many shy away from restaurants.

Corn futures have shed nearly 10% recently.
PHOTO: DANIEL ACKER/BLOOMBERG NEWS

Coronavirus’ spread, combined with last week’s oil-market collapse, is ratcheting up pressure on U.S. ethanol producers, an industry that represents almost half of all U.S. corn consumption. At current prices, market participants fear that ethanol producers may be losing 25 to 45 cents a gallon of ethanol produced, raising the risk that plants slow production or close altogether.

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“I don’t know that there’s a plant in the industry that’s not in the red today,” said Todd Becker, president and chief executive of ethanol producer Green Plains Inc.

Green Plains has yet to cut any production in response to coronavirus’ effect on ethanol demand, Mr. Becker said. However, the company is evaluating its options day-to-day, he said.

Ethanol producer NuGen Energy LLC this week shut down operations at its 130-million-gallon-per-year plant in Marion, S.D. Element LLC, a joint venture between Ohio-based grain company Andersons Inc. and ICM Inc., is idling its ethanol plant in Colwich, Kan., according to a person familiar with the matter. The Renewable Fuels Association, a trade group for ethanol makers, has called on the Trump administration to help the industry.

Farmers across the country face possible labor shortages after the administration said it would stop processing some visas for U.S. entry in offices across Mexico as coronavirus spreads. The State Department says it will keep processing visas for seasonal workers, though the extent of the program remains unclear. The U.S. and Mexico on Friday also agreed to limit travel across their border, while allowing workers to continue crossing.

“We’re in a terrible fix if they shut the Mexican border off,” said Gregg Halverson, chairman of Black Gold Farms, one of the biggest U.S. potato producers with farms located around the country. Mr. Halverson said his sweet potato-growing operations rely heavily on immigrants holding temporary H2A farm-work visas.

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