By Hannah Packman, NFU Communications Director
The farm economy was weak long before the pandemic. For years, chronic overproduction has severely depressed commodity prices. Global trade disputes that eroded export markets certainly didn’t help, nor did corporate control of the agriculture industry.
But new pandemic-related disruptions have pushed down prices even lower than they were before – so much so that growers of many major commodities are losing money on everything they sell. Though the reasons vary from commodity to commodity, the decline can largely be attributed to backed up supply chains, market losses, and shifts in consumption.
- Corn: In addition to a many-year glut, corn markets have been severely affected by falling demand. Fully 40 percent of corn is used in ethanol production. But because stay at home orders and travel bans kept Americans off the road, fuel consumption – and, as a result, ethanol consumption – dropped precipitously, costing the ethanol industry an estimated $10 billion worth of sales. When the demand for and price of ethanol dips, corn follows. Last June, farmers were earning on average $4.16 per bushel of corn; this June, prices were 24 percent lower, at $3.16 per bushel – below the break-even point for most farmers.
- Hogs: After suffering substantial losses due to the trade war with China, hog farmers are facing new challenges because of the pandemic. For one, there were restaurant closures and other commercial food businesses, which buy 25 percent of U.S. pork (and three-quarters of its bacon). That alone cost the industry $5 billion. If that weren’t enough, dozens of meat plants across the country were forced to slow production or temporarily close after thousands of workers tested positive for covid-19. At one point, pork processing capacity was down 25 percent. This meant that demand for hogs at meat plants was lower than it had been before – which not only stranded farmers with nowhere to slaughter their animals, but it also crushed prices. A year ago, hogs were being sold for $57.40 per hundredweight; now, they’re fetching just $40.70, a startling 29 percent slide.
- Soybeans: Soybean growers (who were also still recuperating from the U.S.-China trade war) are struggling for some of the same reasons corn growers are; first of all, there’s just too much of it, which is holding down prices. On top of that, approximately 5 percent of U.S. soybeans are used for biodiesel which, like ethanol, has been in lower demand because of the pandemic. But soybean growers also experiencing some of the side effects of meat plant closures. About 77 percent of soybeans are used to feed poultry and livestock. When ranchers scrambled to slow production at the height of plant closures, they purchased less feed. Overall, these factors have cost the sector has $4.7 billion and kept prices below the cost of production. In July 2019, when China was still heavily taxing soybeans, prices were $8.37. Since then, they have rebounded slightly to $8.51, but the pandemic has slowed the recovery.
- Cotton: Overproduction and diminishing demand has cratered prices and created a global cotton glut that’s lasted for many years. The pandemic has exacerbated the problem; high levels of unemployment have left fewer consumers with disposable income to spend on clothes, which has worn away at already dwindling cotton demand. Last year at this time, cotton prices were $0.74 per pound, close to the break-even price. Now, it’s just 60 cents per pound, meaning farmers are losing 15 cents for every pound of cotton they sell.
- Dairy: Dairy farmers are no stranger to low prices. For about six years, dairy prices have regularly dipped below production costs, with catastrophic consequences for small and mid-sized producers. In that time, the number of licensed dairy farms has fallen 24.6 percent, from 45,244 to 34,147. Financial conditions were beginning to improve at the beginning of the year when the pandemic shut down major dairy purchasers like restaurants, schools, and coffee shops, leaving farmers with millions of gallons of excess milk. By May, milk prices had tumbled to $13.60 per hundredweight. They have since bounced back to $20.50 per hundredweight – a huge improvement, but still below the cost of production.
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