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Two years in, ag industry continues to feel pandemic effects

Covid looking back composite art

The middle of this month marks two years since the effects of the coronavirus pandemic disrupted so many aspects of daily life in the United States. Jayson Lusk, head of the agricultural economics department at Purdue University, says it has been an eventful era.

“A lot has happened in those two years,” he says.

Some impacts of the pandemic settled after those early frantic weeks, but coupled with other long-term factors in the ag and business industries, it has continued to affect life on the farm and in agribusiness.

Lance Albin, president of UMB Bank’s agribusiness division, is based in Kansas City and remembers all the unknowns.

“The early days were clouded with uncertainty,” he says.

Albin says for many farmers who had already bought their inputs, that spring was sort of business as usual on the farm, albeit with some concerns about health and the world beyond the fence row. But he also works with agribusinesses, and many large food companies — along with some livestock and dairy producers — had to navigate choppy waters.

“Folks in the dairy industry, the schools were shut down, and the milk that would go to schools or Starbucks, there was some disruptions there,” Albin says.

Lusk remembers the early days of the COVID-19 outbreak, when he was giving a lot of interviews as the national media tried to figure out what was happening in the food system. He says the early stages of the pandemic saw the start of a surge in meat demand, as people looked to stock up.

“If you look at the early stages of the pandemic, we had a run on grocery stores,” he says. “We saw a lot of meat sales in grocery stores. We saw an increase in meat demand. Consumers were stocking up, putting meat in freezers.”

Lusk says supply chain issues that cropped up combined with strong demand to drive meat prices higher.

“We’ve seen really strong beef and pork price levels since then,” he says. “What’s been remarkable to me is the demand strength. Despite those higher prices, beef and pork demand has been strong.”

Albin says the supply chain issues have been a lingering impact tied to the COVID pandemic, as well as other factors.

“The supply chain disruption, that’s clearly connected to COVID, and we’re still working through it,” he says. “That supply chain disruption’s been very real with its impact on agriculture.”

As for another ongoing impact, Albin says monetary stimulus efforts, along with high crop prices, helped drive land values higher.

“It has driven land values higher almost by the day,” he says. “Each auction just blows away the auction before. It’s not just a little higher, it’s dramatically higher.”

The early stages of the pandemic saw federal spending policies and stimulus checks designed to help people in the challenging times. Although Lusk says this could have contributed to the inflation, with “more money chasing the same or fewer goods,” he says he understands why the federal government did what it did. He said in some ways the lawmakers tried to apply the methods of alleviating a regular recession, giving people more money to spend to stimulate the economy, but early on people did not have their regular options for going places and spending money.

“People had money, they just didn’t have anywhere to spend it,” Lusk says. “…We treated that like it was a recession caused by macroeconomic factors.”

Packing plant shutdowns generated a lot of national attention. Those that remained open faced reduced capacity and higher costs as they implemented safety features and spread out workers. The labor supply also dropped, with fewer people willing to work due to health concerns or other factors — like parents not having childcare while schools were closed and more people opting to retire.

Still, demand remained strong even as prices went up.

“Demand has kept up with those cost increases,” Lusk says. “… One of the contributors to the supply chain issues is the demand. People are wanting to buy a lot of stuff.”

Albin says much higher input costs have also been a challenge, linked in part to supply chain disruptions and supply being unable to match demand. He says farmers and ag businesses need good relationships with understanding bankers to navigate through the times, and he says there are still reasons for optimism.

“Even with the higher inputs, we have pretty healthy levels of profitability for most folks,” Albin says. “This recent run of prices have made 2022 look like another profitable year. The inputs are concerning. The prices are exciting.”

Lusk says the situation has led to people evaluating a lot of structures, from food systems and regulations on food sales and movement to ways businesses in the food sector can be more flexible. He expects businesses to look for ways to rely less on labor, especially when it is tough to find.

“It really did highlight the challenges that can occur when you have shortages of labor,” Lusk says. “You may see more investments in automation and find ways to rely less on labor.”

However, he says increasing food system resiliency could be costly, and it might work against efforts to reduce food waste, if more resiliency could mean having more product on hand. He also cautions against tailoring all food system changes to the coronavirus pandemic.

“Whatever the next big disruptor is, it’ll probably look different,” Lusk says. “They say generals are always fighting the last war.”

For Lusk, the pandemic was a reminder how much more there is to learn about ag and food topics.

“I spent most of my career studying ag and food issues,” Lusk says. “One of the things COVID helped me understand was how little I understand about food and agricultural markets, and how much the details mattered and the details are different. … It’s really kind of amazing all this shows up in our grocery stores.”

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Ben Herrold is Missouri field editor, writing for Missouri Farmer Today, Iowa Farmer Today and Illinois Farmer Today.

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