(West Lafayette, IN) -$16 billion in direct federal payments might not be enough to help ranchers and farmers overcome a sudden hit on profit margins stemming from the COVID-19 outbreak.

 

            That was among the insight shared by agricultural economists at Purdue University during a Monday webinar about the impact of coronavirus on the industry.  Jim Mintert, director of the Center for Commercial Agriculture at the West Lafayette campus, said USDA has indicated $9.6 billion in direct payments will go to livestock producers; $3.9 billion to row crop producers; $2.1 million to specialty crops producers and $500 million for producers of other crops.

 

            He said the payments will cover 85-percent of the estimated loss in prices from January 1 to April 15 and 30-percent of the estimated price losses from April 15 until the end of the third quarter.

 

            Michael Langemeier, associate director of the Center for Commercial Agriculture, said more federal assistance might be needed especially for row crop producers because of corn prices dropping by as much as .55 per bushel in just the past few weeks. 

 

            The price drop is tied mostly to ethanol consumption being sharply down from people driving less because of the nationwide stay at home restrictions aimed at slowing the spread of the virus.

 

            More than one-third of the corn in the U.S. is used for making ethanol blended into the gasoline used by most commercial vehicles.  "I think you’re going to need more money,” Langemeier said.

 

            Mintert said the impact of COVID-19 is being felt throughout agriculture with average U.S. farm income starting to recover from a several-year slump projected for 2020 at $20 billion lower than what was forecast a month ago. "It just shows how ugly things look right now,” he said. 

 

            He said a rush to grocery stores by consumers has not entirely absorbed the losses in meat consumption from the ban on indoor service in restaurants and schools closing to combat the spread of COVID-19. 

 

            Live animals are also starting to back up on farms from several meat processing firms temporarily closing from having infected workers in their plants in states like Iowa and South Dakota. 

            Mintert said the closures have added to the increase in supply and falling prices especially for pork since the shuttered plants mostly slaughter hogs.

 

            “A big part of our meat processing is concentrated in a handful of processing plants that have a lot of workers.  If you got one or two or three or four of these plants shutting down it can have some really big impacts,” he said.

 

            Adding to the hurt for pork producers were recent forecasts of higher prices before the outbreak from a boost in exports to China.   “This is really kind of a kick in the teeth for the pork industry,” Mintert said.  He also said he doesn’t expect much of a change in feed prices in the coming weeks.

 

            However, prices could drop long term if demand for meat remains lower from consumers having less money to spend especially for more expensive cuts if it takes a long time for the economy to recover from the lockdown related to coronavirus. 

 

            Langemeier said soybean prices have not fallen as dramatically as corn which could lead to more farmers planning to grow corn making the switch to soybeans this spring.

 

            He said there could be at least one million fewer acres of corn than last year when 97 million acres of corn were planted in the U.S.