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Will COVID have a lasting impact on Agribusiness?

September 24th, 2020

Let’s review the potential short and long-term impacts of COVID-19 on agricultural, as presented by Farmer Mac’s economist, Dr. David Kohl.

In the short run, commodity prices, specifically corn, livestock, cotton, and milk, witnessed dramatic adjustments as people's eating habits and the demand for fuel changed very rapidly.

In the intermediate and long-term future, we’ll need to take into account whether new strains of the virus emerge, impacting consumer, business and government spending and investing activities. On the plus side, the agriculture industry’s biosecurity protocols, for the most part, have ensured the safety of U.S. food systems, maintaining the positive image of U.S. agriculture domestically and abroad.

It will be interesting to observe how farmers and ranchers adjust their investment behavior:

  • Will potential farmland and real estate purchasers move towards cash holdings rather than investing in hard assets?
  • Or, will farm and nonfarm investors seek farmland and real estate purchases as hard asset investments?
  • And, will all of the fiscal stimulus in the U.S. and abroad create an economic situation where interest rates will increase?

The economic health of our major agriculture trading partners including Canada, Mexico, Japan and China are also important to domestic agribusinesses. Will these nations be in a position to accept and pay for U.S. exports? And will a softening of the tariff agreements occur in the future?

Will the government support payments for agriculture continue and at what level and to what extent? For the past two years, these payments have been a profit and cash flow bridge for many producers, allowing them to service debt and pay bills.

Consumer behavior shifts, including to online shopping and home delivery, will create winners and losers in agriculture and the economy as a whole. Young and beginning farmers and ranchers, who have been very entrepreneurial, may drive the trend toward adapting and finding new innovative ways to be profitable in a consumer driven economy with shifts in preferences and habits.

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For information about available funding for land acquisitions, refinancing, or other lending options for agricultural projects, please contact us to get started.

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