Impact of COVID-19 on Agriculture

SPECIAL UPDATE: IMPACT OF COVID-19 ON AGRICULTURE

DR. JOHN NEWTON, @NEW10_AGECON JNEWTON@FB.ORG 1 CHIEF ECONOMIST, AMERICAN FARM BUREAU FEDERATION

Nearly 20,000,000 Acres Unplanted in 2019 Due To Flooding

Prevent Plant Prevented planting is a failure to plant an insured crop with the proper equipment by the final planting date.

2

Source: USDA FSA, Farm Bureau Calculations

A Bounce Back From #NoPlant19 Was Expected for Corn and Soybeans, Wheat Record-Low Acreage 120

Million Acres Planted

100 80 60

Decoupling of Farm Programs

40

Freedom to Farm Bill

20 0

1960

1965

1970

1975

1980

Corn

1985

1990

Soybeans

1995

Wheat 3

2000

2005

2010

2015

2020P

Cotton Source: USDA OCE, USDA NASS, Farm Bureau Calculations

Record Meat Production and a Competitive Meat Case Was Expected for 2020 50

Poultry

45

Production Expected to Climb 1% to 45.5 Billion Pounds

Billion Pounds

40 35

Pork

30

Production Expected to Climb 4% to 29 Billion Pounds (CWE)

25 20

Beef

15

Contraction the the cattle herd likely to slow production to only 1% in 2020

10 5 1965

1970

1975

1980

1985

1990

1995

2000 4

2005

2010

2015

2020

Source: USDA FAS PSD Online, USDA OCE, USDA NASS, Farm Bureau Calculations

Rewind to the March U.S. Farm Sector Net Farm Income and Net Cash Income Forecast $160

U.S. Net Cash Income was Projected to Decline 9% or $10.9 Billion from 2019

Net Cash Income

$140

$109.5B

Billion Dollars

$120 $100 $80

$96.7B

$60

Net Farm Income

$40 $20

U.S. Net Farm Income Projected was to Increase 3.3% or $3.1 Billion from 2019 (Includes Depreciation and Inventory Changes)

$0 1990

1995

2000

2005

2010

5

2015

2020P

Source: USDA ERS, Farm Bureau Calculations

Light At The End of The Tunnel…Was a Freight Train Daily Change In Infected COVID-19 Cases 60,000 54,461 52,104 51,174

50,000

49,199

45,255

45,746

45,283

42,705 41,374

40,000

39,873 34,756

33,501 32,724

33,152 31,298 31,937 31,694 29,096 30,777 30,405 30,026 29,642 28,553 27,874 27,065 26,017 25,481 25,291

30,000

36,291 34,195 32,921

28,341 27,341 28,194 26,038 25,512

10,000 0

35,189 34,935

34,162

32,748 31,480 30,536

29,741 29,195 27,689 27,408 24,519 22,481

21,502

20,000

39,035

27,882 27,178 25,587 25,256 25,733 24,185 22,475

19,793 19,136 18,185 18,036

27,809

27,617

25,300 25,101

21,954 21,193 19,764 18,878

25,541 24,141 23,621

21,769 20,449 19,004

21,823 20,813

24,504 24,230 22,815

18,991 18,883 18,282

25,224

22,732 21,351 20,895 20,129 19,958 17,354

25,556 25,334 22,950 20,794

25,559

26,439

23,705

19,824 19,660

18,127 17,731 17,414

11,943 10,262 10,089 7,936 6,346 5,322 5,240 2,776 1,781 1,392 713 596 452 398 11468192 98 6 2320317048115

3/1/20 3/8/20 3/15/20 3/22/20 3/29/20 4/5/20 4/12/20 4/19/20 4/26/20 5/3/20 5/10/20 5/17/20 5/24/20 5/31/20 6/7/20 6/14/20 6/21/20 6/28/20 7/5/20

US

7 per. Mov. Avg. ( US )

6

Source: Johns Hopkins GitHub, Farm Bureau Compilations

Americans Spent $1.7 Trillion in 2018 on Food 54% of Food Expenditures in 2018 Occurred Away From Home

$253B Other Food Away From Home

15% 37%

$678B Restaurants (Full- and Limited-Service)

39%

$628B Grocery Stores, Warehouses and Supercenters

9% $153B Other Food At Home

7

Source: USDA ERS, Farm Bureau Calculations

Total Expenditures in Grocery Stores and Food Service Established Declined by $50B in March – May YoY Billion Dollars

$75

$67B

$70 $65

Grocery Stores, +23% May 2020 Compared to February 2020

$60

$55 $50

$41B

$45 $40 $35

Food Service and Drinking,

$30

+38% May 2020 Compared to April 2020

2014

2015

2016

2017

2018 8

2019

2020 Source: U.S. Census Bureau, Farm Bureau Compilations

Panic Buying and Increased Grocery Traffic Contributed to Higher Retail Prices For Many Products, CPI jumped 4%-5% Percent Change in Retail Price, May 2019 to May 2020 Eggs Ground Beef Pork Chops Potatoes Sugar White Bread Choice Steak Whole Milk Chicken Breast Cookies, chocolate chip, per lb. (453.6 gm) Wheat Bread American Cheese Spaghetti and Macaroni Cheddar Cheese Bananas Ice Cream Tomatoes Flour Rice Orange Juice Bacon

20% 17% 15% 11% 11% 10% 9%

8% 8% 8% 7% 6% 5% 4% 2% 2% 2% 2% -2% -3% -8%

-10%

-5%

0%

5% 9

10%

15%

20%

25%

Source: BLS, Farm Bureau Calculations

Closed Meat Processing Plants Created Regional Shortages of Select Products YoY Change in Weekly Hog Slaughter

YoY Change in Weekly Cattle Slaughter 20%

30%

2019

2019

20%

10%

10%

0%

0%

+1.4%

-10%

Weekly Cattle Slaughter is estimated to be 1.4% above prior-year levels.

Cumulative slaughter is 5% below 2019.

-20% -30%

2020

-10%

+11%

-20%

Weekly Hog Slaughter is estimated to be nearly 11% above prior-year levels.

Cumulative slaughter is 0.5% above 2019.

-30%

2020 -40%

-40% 1

6

11

16

21

26

31

36

41

46

51

Week Number

1

6

11

16

21

26

31

36

41

46

51

Week Number 10

Source: USDA AMS, LMIC, Farm Bureau Calculations

Impact of COVID-19 on U.S. Commodity Futures Prices Cumulative Percent Change in Price Since January 80%

Class III Milk, +33%

60%

Rice, +26% 40%

Ethanol, -7% 20%

Soybeans, -8% Feeders, -12% Cotton, -12% Wheat, -13%

0%

Corn, -14% Live Cattle, -14%

-20%

Class IV Milk, -21%

-40% -60%

Hogs, -50% 1/2/20 1/12/20 1/22/20 2/1/20 2/11/20 2/21/20 3/2/20 3/12/20 3/22/20 4/1/20 4/11/20 4/21/20 5/1/20 5/11/20 5/21/20 5/31/20 6/10/20 6/20/20 6/30/20

11

Source: Barchart, Farm Bureau Compilations

USDA WASDE’s Commodity Value Change, Before and After COVID-19 Old Crop and 2020 Livestock

Wheat

New Crop and 2021 Livestock

-$266M -$1.0B

Cotton Pork Soybeans

Beef Corn

$46 Billion -$6.2B -$8.2B -$9.1B -$13.8B

-$1,505

-$4.0B

Change in WASDE Commodity Value for Select Commodities

Milk Broiler

-$3.9B

-$343

-$2,381

-$3,091

-$2,992

-$941 -$3,184

-$4,472

-$3,693

-$4,324

-$4,744

-$655

-$4,801

-$9,042

-$16,000 -$14,000 -$12,000 -$10,000

-$8,000

-$6,000

-$4,000

-$2,000

$0

Million Dollars 12

Source: USDA WASDE, Farm Bureau Compilations

Food and Agriculture Provisions of the CARES Rescue Package, Ag $ Less Than 0.5% of CARES Package Million Dollars Office of the Secretary, $9,500

19%

18% Child Nutrition Programs, $8,800

CCC Replenishment, $14,000

29%

Other, $916

2% SNAP, $15,810

32% Source: USDA, Farm Bureau Calculations 13

$5.4 Billion in Coronavirus Food Assistance Program Direct Payments, Avg. $15K Per Producer As Of July 7, 2020, Million Dollars

14

Source: USDA, Farm Bureau Compilations

Chapter 12 Farm Bankruptcies By Region, 627 Filings, U.S. +23% 12-Month Period Ending in March 2020 Northwest, 46 Filings +109%

Midwest, 316 Filings +42%

Northeast, 19 Filings -24%

Mid-Atlantic, 54 Filings -4%

West, 26 Filings +44%

Southwest, 37 Filings -16%

Source: U.S. Courts, Farm Bureau Calculations

Southeast, 117 Filings +15% Puerto Rico 11 Filings 15 -42%

Source: U.S. Courts, Farm Bureau Calculations

Cumulative Monthly Change in Jobs Thousand Jobs

25,000

January 2010 to February 2020, +22.7 Million Jobs

March, -1.4 Million

20,000 April, -20.8 Million

15,000 10,000

June, +4.8 Million 5,000

May, +2.7 Million

0 2010

2011

2012

2013

2014

2015

2016 16

2017

2018

2019

2020 Source: FRED, Farm Bureau Compilations

Food Security Is Directly Related to Per Capita GDP, Global Economic Slowdown in 2Q 2020 90,000 Ireland

80,000 70,000

United States Qatar

Per Capita GDP

60,000

Germany Canada

50,000

United Kingdom

40,000

United Arab Emirates

30,000

Czech Republic

20,000 China 10,000

Mexico Russian Federation Serbia

Ukraine

Myanmar

Nigeria

0 0

10 20 30 40 50 60 Percent of consumer expenditures spent on food & non-alcoholic beverages, that were consumed at home 17

70

Source: USDA ERS, World Bank, Farm Bureau Calculations

A Reversal in the Trend Expected: SNAP Expenditures Have Fallen 15% Since 2017 to $60B Million Dollars

$90,000 $80,000 $70,000 $60,000

$50,000 $40,000 $30,000

$20,000 $10,000 $0 1969

1979

1989

1999

18

2009

2019 Source: USDA, Farm Bureau Calculations

More individuals Likely to Receive SNAP Benefits, Average Benefits Per Household Relatively Could Move Higher SNAP Participation

Average Benefit Per Individual

60,000

$160 $140

50,000

$120 40,000

$100

30,000

$80

$60

20,000

$40 10,000 0 1969

$20 1979

1989

1999

2009

$0 1969

2019 19

1979

1989

1999

2009

2019

Source: Feeding America

U.S. Unemployment, Off-Farm Income and Loan Delinquency, Delinquencies Now At 2.7% 80,000

12%

U.S. Unemployment

10%

60,000

8%

50,000

6%

40,000

4%

Farm Loan Delinquency Rate

30,000

Percent

70,000 Household Income, Off-farm Income

Off-Farm Income

2%

20,000

0% 1996

1998

2000

2002

2004

2006

2008

20

2010

2012

2014

2016

2018

2020F

Source: USDA ERS, Farm Bureau Calculations

Total Farm Debt at $425B & Real Estate Debt Rose to A Record-High $265B, +$3B, in Inflation-Adjusted Dollars $450 2020 Inflation Adjusted Dollars (Billions)

2020 TOTAL DEBT $425 BILLION

1980 TOTAL DEBT $440 BILLION

$500

$400

$350 $300

2020 REAL ESTATE DEBT $265B

$250 $200

$150 $100

2020 NON-REAL ESTATE DEBT $161B

$50 $0 1960

1970

1980

1990 21

2000

2010

2020 P

Source: USDA ERS, Farm Bureau Calculations

YTD U.S. Ag Exports* Down 4%, or $2.3B, to $61.9B YTD Change in Agriculture Exports, Jan to May 2020 Compared to Jan to May 2019 CANADA -$278 M

MEXICO -$448 M

JAPAN -$150 M SOUTH KOREA -$166 M

CHINA +$496 MILLION INDIA -$178M 22

-$350 M HONG KONG Source: USDA FAS GATS, Farm Bureau Calculations *Data Includes Agricultural and Related Goods

U.S. Cumulative Exports to China, January to May FAS Total Exports to China Less Forestry

$12,000 $10,525

$10,354

$10,000

$9,369

Million Dollars

$8,789

$8,696

$8,000

$7,609 $6,534

$6,860

$6,062

$6,000

$5,615

$5,462 $4,962

$4,000

$3,595

$4,797

$3,359

$2,750

$2,049

$2,000 $731

$1,088

$2,281

$828

$0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 23

Source: USDA, FAS GATS, Farm Bureau Compilations

Ag Sales Pace Needed to Reach $36.5 Billion Phase 1* U.S. Exports to China, and Pace Needed to Meet Phase 1 Commitment

$35,000

Pace Needed to Meet Phase 1

$30,000

$27,397

$25,000 Million Dollars

$31,025

$22,482

$20,000

$17,593 $15,501 $13,871

$15,000

$12,403 $11,214 $9,884

$10,000

$8,403 $6,206

$5,000

$5,462

$4,282

$3,335

$2,233

Actual Exports to China Sales Are 50% Below Needed Pace

$3,123

$1,400

$0

JAN

FEB

MAR

APR

MAY

JUN 24

JUL

AUG

SEP

OCT

NOV

DEC

Source: USDA, FAS GATS, Farm Bureau Compilations *Assumes 15% for insurance and freight, fiscal year 2020 adjusted to include aquaculture.

$14.3 Billion in 2019 Market Facilitation Program Payments As Of March 16, 2020

Includes payments made for dairy, hogs, specialty crops and non-specialty crops

Source: USDA FSA, Farm Bureau Analysis

$566 Million for Livestock $275 Million for Specialty Crops 25 $13.5 Billion for Non-Specialty Crops

FAPRI Net Cash Income Projections Show Challenges Ahead for U.S. Agriculture U.S. Farm Sector Net Cash Income From USDA and FAPRI $160 Net Cash Income (Minus Federal Support)

$19.7B

Federal Support

$140

$32.8B

Government Payments in 2020 (USDA pre-CFAP)

Government Payments in 2020 (FAPRI)

$120

Billion Dollars

$114.9

$116.1

$108.0

$100

$91.4

$80 $60

$114.9

$82.2

$88.4

$88.1

$90.4

$16.6B

$89.9

$81.7

$78.5

$71.5

$69.4

$57.5

Government Payments in 2021 (FAPRI) (No MFP or CFAP)

$69.4B

$40

Farm-Related Net Cash Income from Crop and Livestock Sales Minus Gov’t Support

$20 $0 2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

26

2018

2019

2020P

2020 2021 FAPRI FAPRI Source: USDA ERS, FAPRI, Farm Bureau Calculations

Share of Greenhouse Gas Emissions by Economic and IPCC Sector Draft U.S. Inventory of Greenhouse Gas Emissions and Sinks, 2018

Economic Sector Residential 5%

IPCC Sector Industrial processes 6%

U.S. territories 1%

Commercial 7%

Waste 2%

Agriculture 9.3%

Agriculture 9.9% Transportation 28%

Industry 22%

Energy 83%

Electricity generation 27%

27

U.S. Livestock Emissions as a Percent of Total GHG Emissions, Based on IPCC Sector 4.0%

1990 to 2018 in CO2 Equivalents

3.5%

Beef Cattle

Dairy Cattle

Swine

Other

0.65% 1.92%

0.67% 1.95%

0.66% 1.88%

0.64% 1.77%

0.62% 1.71%

0.62% 1.76%

0.64% 1.82%

0.61% 1.79%

0.59% 1.80%

0.57% 1.77%

0.61%

0.54% 1.74%

1.87%

0.53%

0.53% 1.75%

1.75%

0.53% 1.76%

1.69% 0.51%

0.53% 1.77%

1.69% 0.50%

0.53%

0.53% 1.82%

1.75%

0.52% 1.85%

0.53% 1.89%

0.54%

0.56% 2.02%

1.95%

0.57% 1.98%

0.58% 1.95%

0.60% 1.95%

1.90%

1.5%

0.61%

2.0%

1.85%

Percent

2.5%

0.62%

3.0%

Swine emissions represented 0.04% of total GHG emissions in 2018

Dairy Cattle emissions represented 0.65% of total GHG emissions in 2018

1.0% Beef Cattle emissions represented 1.9% of total GHG emissions in 2018

0.5% 0.0% 1990

1995

2000

2005

28

2010

2015

Index of Methane Emissions Per Unit of Production for Beef Cattle, Dairy Cattle and Swine, 1990 = 100

-8%

110

Beef

105

Emissions per unit of beef production have declined by nearly 8% since 1990, and was more than 10% lower in recent years

Index (1990 = 100)

100

95

-18%

90

Swine

85

Emissions per unit of pork production have declined by more than 18% since 1990

80

-25%

75

Dairy

70 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

29

Emissions per unit of milk production have declined by nearly 25% since 1990

Harvested Acres Needed to Produce the 2018 Crop 140 120

Million Acres

100 80 60

121

-40 Million

130

It required 33% fewer acres in 2018 to produce corn than it would have in 1990

-42 Million It required 33% fewer acres in 2018 to produce soybeans than it would have in 1990

81

It required 17% fewer acres in 2018 to produce wheat than it would have in 1990

-4 Million

40

48

It required 27% fewer acres in 2018 to produce cotton than it would have in 1990

20

14

0 Corn

-8 Million

88

-1 Million

40

10

It required 28% fewer acres in 2018 to produce rice than it would have in 1990

3

4

Cotton

Soybeans 1990

2018

30

Wheat

Rice

31