Farmers Estimated to Lose Billions in 2020

April 15, 2020

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by Nathan Anderson (Columbia Daily Tribune) Already hurting from the upheaval caused by a long-lasting trade war, U.S. farmers are now expected to lose billions in income as the novel coronavirus pandemic touches all areas of the agricultural marketplace.

U.S. farmers will lose $20 billion in net income in 2020, according to an updated economics report published this month by the Food and Agricultural Policy Research Institute at the University of Missouri.

The forecast updates a January report by FAPRI with the intent to specifically highlight the impact COVID-19 will have on farmers.

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In South Dakota, Smithfield Foods closed its Sioux Falls facility Sunday after the state’s health department said half of its 438 workers tested positive for COVID-19. This single Smithfield plant accounts for almost 5 percent of the country’s pork production, according to the company.

In Colorado, JBS closed its Greeley meatpacking plant after 43 workers tested positive for COVID-19, and two of its workers died. JBS, along with three other food companies control about 85 percent of the U.S.’s beef marketplace, and about 70 percent of the U.S. pork marketplace.

And in Iowa, Tyson Foods closed its Columbus Junction plant on April 6 after two-dozen workers tested positive for COVID-19. Tyson Foods along with JBS, controls about 40 percent of the U.S. poultry marketplace.

Meanwhile dairy farmers, without the demand from restaurants and public schools, are being forced to dump milk, and restaurants are struggling to stay afloat as stay-at-home orders shut their doors.

For Tim Gibbons, communications director at the Missouri Rural Crisis Center, the current pandemic is simply highlighting the problems with a U.S. agricultural food system buoyed by large corporations. The Missouri Crisis Center is a farm and rural organization that was established out of the 1980s farm crisis that advocates for Missouri’s local farmers and local businesses.

“It can’t be highlighted enough that it was really bad out here [for farmers] before COVID-19, and COVID has only made it worse,” he said. “It’s shining a spotlight on the rigidity and lack of resilience for the corporate model of [farm production], which does not pay farmers fairly and is not good for consumers,” he said.

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“It’s extreme concentration and it’s not capitalism,” Gibbons added. “It’s monopolization.”

He said larger agricultural system issues highlighted by the pandemic need to be addressed, but in the meantime stimulus money from the CARES Act must find its way to smaller farmers and businesses to keep them afloat, “and it should not go to corporations that have, over decades, extracted wealth from our rural communities.”

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And if the pandemic drags on and requires on-going stay-at-home orders?

“We’re talking about sharper drops in commodity prices, sharper drops in farm income, and more financial problems for farmers,” he said. “The potential for a worst-case scenario is very real.” READ MORE

Wisconsin farm bankruptcies rising rapidly as coronavirus weighs heavily on agriculture (Milwaukee Journal Sentinel)

Coronavirus hammers ethanol industry after 'terrible year' in 2019 (Rapid City Journal)

Iowa ethanol plants close, slow production as coronavirus curbs commutes nationwide (Des Moines Register)

ETHANOL PRODUCTION RECORD LOW FOR SECOND STRAIGHT WEEK (Brownfield Ag News)

Farmers plant larger corn crop, befuddling economists (E&E News)

Ringneck slows production (Onida Watchman)

Slumping ethanol market hurting The Andersons (Toledo Blade)

Update on how industry is coping with COVID-19 (Energy.AgWired.com; includes AUDIO)

Cattle and pork producers struggle to find dried distillers grains (Agri-Pulse)

American Farmers Were Already Hurting. Now the Coronavirus Slowdown Might Do Them In (Time Magazine)

NCGA ANALYSIS SHOWS $50 PER ACRE REVENUE DECLINES FOR CORN DUE TO COVID-19 (National Corn Growers Association)

Closure of US meat plants raises more concerns over long-term corn feed demand (S&P Global Platts)

Excerpt from Rapid City Journal: The pandemic has hit the ethanol industry at a time producers were already suffering through poor market conditions owing to the trade war with China, a glut of oil production during a price war between Russia and Saudi Arabia that sent ethanol prices tumbling, and waivers from the U.S. Environmental Protection Agency that enabled American refineries to use less ethanol.

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The market upheaval has jeopardized the jobs of hundreds of well-paid ethanol plant workers in South Dakota and beyond, but has also hurt the financial fortunes of tens of thousands of farmers who provide the corn that is the basis for the biofuel and byproducts such as distiller’s grains.

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The per-gallon price paid to ethanol producers has fallen to record lows, dropping 37% in one month from $1.24 a gallon on Feb. 27 to just 78 cents a gallon on March, 27, according to the U.S. Department of Agriculture. The per-gallon price in late March was down 47% from a recent high of $1.47 per gallon in South Dakota in late November.

The per-bushel price paid to South Dakota corn producers has followed the downward trend in the ethanol industry. According to USDA, the per-bushel price of corn fell by 16% from $3.57 per bushel on Feb. 28 to only $2.99 per bushel on March 27.

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Across the country, dozens of ethanol plants have closed, gone idle or reduced production as Americans and people across the world have dramatically cut back on driving amid the pandemic. Production levels for 2020 are expected to be down by 4 billion gallons, Jennings said.

About 30 of the roughly 200 ethanol plants in the U.S. have shut down, and another 80 have reduced production by 50% or more, Jennings (Brian Jennings, CEO of the American Coalition for Ethanol) said.

Sioux Falls is the corporate headquarters of one of the world’s largest ethanol producers, POET biofuels, which has 27 refineries in seven states, including six plants in South Dakota. On April 7, POET announced that it would idle production at three refineries — two in Iowa and the plant in Chancellor, S.D., — and delay the start-up of a plant in Indiana.

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Redfield Energy in Redfield has reduced production to 75% of its maximum capacity amid the market slowdown, said Dana Siefkes-Lewis, chief administrative officer at the plant.

By storing excess ethanol in tanker rail cars or on-site storage tanks, the plant that typically produces 63 million gallons of ethanol a year has avoided laying off or cutting any of its roughly 50 employees, Siefkes-Lewis said. The plant has also transitioned into making hand sanitizer to aid in the battle against COVID-19 and to help keep the plant operating, she said.

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In addition to the placement by China of tariffs on American ethanol exports, and the Russia-Saudi Arabia price war that sent prices haywire, the U.S. ethanol market was stung by waivers granted by the Trump administration and former Environmental Protection Agency Administrator Scott Pruitt, Jennings said.

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“The candid and honest answer is that the Trump administration was looking to do favors to the oil refiners, who have long complained about the fact the Renewable Fuel Standard eroded their market share,” Jennings said.

Jennings sent a letter to current EPA Administrator Andrew Wheeler on April 3, urging the agency to ensure that the full required level of ethanol to be used by American refiners remain intact despite the overall slowdown in demand and use of ethanol by consumers. He also argued against allowing any more waivers to be enacted. READ MORE