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Pandemic drives home economic lessons

One lesson that has been driven home during the current global pandemic is how interdependent and global our economy is. That’s clearly evident with agriculture; the glut of dairy products caused by a steep decline in demand from the restaurant and food-industry sector has sent prices plummeting. Combine that with declining exports. The ripple starts to wash over other agriculture sectors.

Dairy farmers wanting to cull cows to decrease production are running into livestock markets unable to move as much product because regular cattle prices have decreased 25 percent. Hog prices have decreased as well. Slaughterhouses are closing because of the pandemic.

Crop prices have also declined, leaving virtually no sector of the ag industry untouched. The Food and Agricultural Policy Research Institute at the University of Missouri released a study that predicts crop and livestock prices could decrease 12 percent this year, translating into a $20 billion hit on farm income.

People still need to eat. But it’s how food products are packaged and where they move through the food supply chain that’s caused the problems.

A paragraph from the study summarizes the cause and the wide-sweeping impact.

“Supply-chain disruptions and sharp changes in consumer demand have been observed and have so far varied considerably by commodity or product,” it states. “The expansion of shelter-in-place orders has reduced food consumed away from home, and with it altered consumer demand among food products. In addition such restrictions on movement have sharply reduced gasoline usage, and along with it demand for ethanol. Distribution and processing have been a concern for livestock and dairy processing as well as fruit and vegetable producers, particularly those reliant on supplying restaurants and schools.”

The food industry would adapt to the current shift in food consumption given time. But at some point restaurants will reopen and consumer demand will move back to whatever our new normal may be. Dairy is hit particularly hard because we can’t tell cows to stop producing milk. I expect some roller coaster rides in the meat markets due to the longer-term nature of being able to grow an animal to slaughter weight.

A common observation or remark I hear about the pandemic is that our country would be better-situated if we were completely self-sufficient for our food as well as our goods and supplies. In other words, everything we eat and use should be made in America.

It sounds like a good idea, but that ship sailed decades ago. Our shift from manufacturing to a service economy crossed the “Rubicon” in the mid-1950s. That’s when the number of service jobs exceeded the number of manufacturing jobs — and the gap widened from there. The production of many goods shifted internationally when it became cheaper to produce there and ship here.

The United States is fortunate to provide most of its own food. But we import about 15 percent of our total food supply — including 32 percent of our fresh vegetables, 55 percent of our fresh fruit and 94 percent of our seafood, according to the U.S. Food and Drug Administration.

If we wanted to be a truly self-sufficient country, it would require every American to be willing to pay more for many products. We would need to be willing to go without many of the fresh fruits and vegetables we currently enjoy when they’re not in season here. Consider whether we would have the fortitude and discipline to change our lifestyles and stretch our budgets.

A review of the pandemic should take a close look at the vulnerability of key medicines and medical goods. Whether we make more in our country or whether we do a better job of stockpiling, we can certainly improve our critical medical supply chain.

The pandemic will certainly have a long impact on many sectors of our economy, including agriculture. Farmers are accustomed to rough rides but this one comes just when they were looking for a little bit of a break from a long economic downturn and trade uncertainties caused by the tariff war.

Small businesses also are hard-hit. The U.S. government says natural disasters cause 40 percent of small businesses to fail; one in four small businesses will close within a year after the event. With closure orders the pandemic event is ongoing, so I wouldn’t be surprised to see the closure rate even greater — even with billions of federal dollars of support.

It’s easier to navigate the storm when we see it coming, but this one came fast and furious. Not much more we can do but strap in tight, buy local when possible and ride it out.

Chris Hardie spent more than 30 years as a reporter, editor and publisher. He was nominated for a Pulitzer Prize and won dozens of state and national journalism awards. He is a former president of the Wisconsin Newspaper Association. Contact him at chardie1963@gmail.com.

Now is not the time to make old friends into new enemies

As if 20 percent unemployment, wretchedly weak commodity markets, shuttered ethanol and meatpacking plants, and a coronavirus pandemic aren’t bad enough, the White House chose mid-May to, literally, go viral with China, one of American agriculture’s best cash-and-carry customers.

This fight, however, isn’t over steel, aluminum or soybeans. It’s about spilled milk: How much responsibility China bears for COVID-19’s beginnings and, according to the White House, the country’s failure to control and contain it.

Five months ago that would have been a worthwhile fight had both leaders coordinated their responses to what experts were saying about the new, deadly virus. Today, though, it’s useless because political belly bumping now can’t change what each failed to do last winter.

Moreover, it won’t do anything but worsen today’s already worsening trade picture between the two nations. On May 8, the Center for Strategic and International Studies, a bipartisan, non-profit policy research institute in Washington, D.C., forecast total 2020 U.S. exports — everything from pigs’ feet to kitchen sinks — to China at $60 billion, or about one-third of the $187 billion total both sides had agreed upon in “phase one” of a new, joint trade deal signed in January.

Scott Kennedy, CSIS senior advisor of Chinese business and economics, told CNBC that the forecast was “‘admittedly a worst case scenario’” but that any increases above the $60 billion mark still “‘will not change the overall picture, just the details.’”

The reason, Kennedy added, is that “The targets were never realistic; they were just gaudy numbers meant to impress. The pandemic made the unrealistic the impossible.”

U.S. pork exports did ramp up. Through 2020’s first quarter, one in three pounds of U.S. pork was exported to China. At the same time, though, U.S. soy exports to China were down a price-cracking 39 percent.

In fact, China has purchased just $3.1 billion of U.S. farm goods in 2020’s first quarter, well off pace for it to reach the U.S. Department of Agriculture’s projected $14 billion in ag purchases this year.

(Even worse, that unachievable $14 billion is but two-thirds of total U.S. ag exports to China before the White House and Beijing began the tariff fight two years ago.)

If U.S. farmers and ranchers are tired of the two countries trading more threats than groceries, China appears to have reached its tipping point, too. On May 12, FERN’s AG Insider reported that a “state-controlled Chinese newspaper on Monday [May 11]” urged China’s leaders to “invalidate the ‘phase one’ trade agreement” in retaliation “for a U.S. coronavirus blame campaign.”

For those of us who can’t remember January, let alone what phase one of the deal called for — in fact, a wildly “gaudy” $40 billion in 2020 U.S. ag exports — any move by China now would drain U.S. prices even lower.

The week before, when President Donald J. Trump mused that he was “torn” over whether to impose new tariffs on China as retaliation for the pandemic, market analysts quickly pointed out that new tariffs would clip commodity prices well into the 2021 marketing year.

Which, by sheer coincidence, begins in the run-up to the November general election and in the middle of the Trump Administration sending another $33 billion in direct government payments to U.S. farmers and ranchers to help mitigate COVID-19’s effects on the ag economy.

That means 2020 will be the third year in a row (for a total of about $65 billion) the White House will have sent what was supposed to be “one-time” aid to American farm and food producers.

Regardless of what that means to the White House, to U.S. farmers and ranchers it means we should be working to keep our old friends and stop going out of our way to make new enemies.

The Farm and Food File is published weekly throughout the U.S. and Canada. Past columns, events and contact information are posted at www.farmandfoodfile.com.

© 2020 ag comm

America’s food security in danger as dairy farmers become broke

What’s happening right now in the dairy sector is the equivalent of the Titanic slamming into an iceberg. The problem is, instead of trying to patch the hole and save the ship, the U.S. Department of Agriculture is investing in new lifeboat cushions due to insufficient resources.

The USDA’s much-trumpeted $2.9 billion bailout for the dairy industry basically ignores the farms that are most critical to maintaining the national milk supply.

Recent news reports claim that USDA officials will purposely misappropriate distributions to large dairies, leaving many of the country’s top milk producers teetering on the edge of collapse.

Considering that the U.S. Small Business Association says a small business, depending on your industry, could be defined as a maximum of 250 employees or a maximum of 1,500 — depending on your industry — you have to wonder what the USDA is thinking and who is exactly crunching their numbers.

The general rule of thumb is one employee per every 100 cows, so to even reach the low end of the small business employee limit, a single farm would have to be home to 25,000 cows. That is simply not reality.

These “larger” family farms are really small businesses in every sense of the word, but the USDA seems to be playing politics with them and the futures of all the families who have members working at these farms.

It won’t take much to cause a landslide. Once just a handful of these farms go under, the damage to the country’s food chain will be immediate and devastating. Shortages of vital dietary foods — cheese, butter, etc. — will be everywhere. Parents who have never given a second thought to the abundance of food at their local grocery store will, for the first time, send their children to bed hungry.

The USDA must not implement payment caps. In virtually every other sector — be it banking, airlines, manufacturing, etc. — federal aid has been based on COVID-19’s impact on the business and national security. Only agriculture has been subject to payment caps regardless of financial ruin caused by the virus. The implications of this policy, if moved to fruition, is frightening. The New York Times recently summed it up in a single headline: “‘Instead of Coronavirus, the Hunger Will Kill Us All.’ A Global Food Crisis Looms.” All farms together are the reason for the surrounding infrastructure in an area — processors, truckers, crop farmers — and once the farms, no matter the size, start to fall, all of these other nearby “small businesses” will start to hear their own death knell.

The federal government cannot make the audacious gamble that it can sustain the dairy industry and ignore the anchoring farms. Even the most cursory observer knows it’s an unsustainable option. The coronavirus will likely be the killing stroke to wide swaths of dairy that had not yet recovered from a 5-year downturn, fueled by trade wars and surging tariffs.

“About half the cheese we make in this country … 60 percent of the butter and about a quarter of the fluid milk goes into away-from-home outlets that have either entirely or mostly collapsed right now,” notes Paul Bleiberg, vice president of government affairs for the National Milk Producers Federation.

In the U.S. alone, the number of people already classified as “food insecure” is 37 million — about one in 10 Americans. That number is about to get a lot worse, unless Washington’s decision makers begin steering aid to the farms, regardless of size, best positioned to protect America’s food supply lines.

The American Dairy Coalition is a farmer-led national lobbying organization of progressive, modern dairy farmers. We focus on federal dairy policy. For more information, contact CEO Laurie Fischer at 314-391-8390