Farmer optimism dropped to a three-year low in April, according to a Purdue University survey released Tuesday, and a majority of farmers expect 2020 to be worse than 2019.
In 2019, thousands of acres of Hoosier farmland went unplanted after historically heavy rainfall destroyed crops and prevented farmers from getting seed in the ground on time. On top of that, farmers were left to deal with the effects of the trade war with China, which caused American soybean farmers to lose their largest market.
Optimism rose toward the end of 2019 as the U.S. and China formalized plans to sign a phase-one deal and the U.S. signed the renegotiated NAFTA agreement commonly called the U.S.-Mexico-Canada Agreement (USMCA), but the novel coronavirus, COVID-19, has created pessimism as farmers feel economic effects from the virus.
“Over the past two months, producers have felt the first shock waves being created by the coronavirus,” said James Mintert, the barometer’s principal investigator and director of Purdue University Center for Commercial Agriculture. “Disruptions in the supply chain are causing many to look at ways they can mitigate risk in this uncertain environment and sharp declines in commodity prices have added significant financial pressure on many U.S. farming operations.”
In less than two months, corn futures declined 15 percent and soybean futures fell 8 percent, according to Purdue. Cattle and hog futures declined 21 and 33 percent respectively, according to the same report.
“The sharp drop in commodity prices added to an already strained financial situation for many farmers,” Purdue researchers say.
The current economic conditions outlook had its largest one-month drop on record in April as news spreads about issues at slaughterhouses and milk packaging plants during the pandemic.
Local Purdue Extension Educator Ed Farris said he’s heard about dairy farms north of Huntington County having to dump milk and dispose of livestock since meat and milk processing plants are feeling the effects of COVID-19.
The Tyson Foods Fresh Meat plant in Logansport, Indiana temporarily shut down operations in April after an outbreak of COVID-19 cases caused low attendance and community backlash, according to Associated Press reports. Farris said any issues felt at processing plants trickle down to local farmers, causing them to make tough decisions.
“Poultry, they’ve had to eliminate birds at some barns because they don’t have any way to harvest them at the meatpacking facilities, you know, because of the virus,” Farris said. “Most recently we’ve all heard about the situation at Tyson in Logansport, so there’s a lot of effects there that are affecting both crop and livestock farmers.
“If you’ve got pigs that are ready to harvest, and the meatpacking plant is shut down, you can only hold off so long on getting those pigs out to market,” he continued.
Corn prices dropped sharply in April as fuel demand dropped worldwide since governments implemented stay-at-home orders to slow the spread of COVID-19. Corn prices dropped below $2.80 a bushel in April but have since rebounded slightly as farmers head into the planting season.
Farris said ethanol demand was already declining before the pandemic hit, so the recent shuttering of ethanol plants only added to the problem. He said it’s common for commodity prices to drop this time of year historically, and he said although market disruptions have some long-term effects, farmers can expect prices to fluctuate and possibly rebound throughout the summer.
“There will be some periods where the price will come back,” he said. “I think farmers are capable of looking at the markets and selling when there is a rally. They always say fear and greed control the market, but farmers are the eternal optimists.”
He said although some farmers may choose to switch from corn to soybeans given the market outlooks, most will stick to their original plan since a lot of planning goes into each year’s harvest.
Right now he said it’s important for farmers to be honest when looking at their financial health, since he believes some farmers are being forced to use working capital to cover bills during the economic downtown. He said it’s important for farmers to talk to their lenders to look into restructuring debt to help keep the farm solvent.
Farris said the recent years of low commodity prices has caused profitability expectations to drop, and he said he’s seen some farms go up for retirement sales in the past year due to economic conditions.
In the April survey conducted by Purdue University, at least 54 percent of farmers said they expect to apply for federal assistance this year, and nearly two-thirds of farmers replied that they were “very worried” about profitability in 2020.
“When asked their number one concern regarding their farm and COVID-19, 42 percent of respondents said they were worried about their farm’s access to markets, 37 percent said financial, while just 13 percent said health and safety,” the Purdue report states.
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