As I write this column, people across the country are starting to receive COVID-19 vaccines. According to market watchers, this is hopefully the first step in seeing the nation return to some sense of normalcy as 2021 moves forward.
But given how much of the news cycle these past 12 months have been dominated by COVID-19, I thought it was be interesting to look at its impact on various sectors of the agricultural world. Back when the pandemic began in earnest in mid-March 2020, several companies allowed their employees to begin working from home instead of driving daily to the office. Take ethanol, for example. As the economy contracted, so did fuel consumption. According to experts, ethanol producers were hit hard, with prices down 23% through mid-May. “That is naturally going to have impacts on demand for corn,” observed Dr. Robert Johansson, Chief Economist for the USDA, in an early June 2020 report.
And this market softness has continued into 2021. In fact, according to a recent financial report from CHS Inc., the company continued to see lower demand in its Energy Division for the first quarter of the year. “Unfavorable market conditions in our refined fuels business, driven primarily by the COVID-19 pandemic, resulted in volume and price declines that significantly reduced earnings in our Energy segment compared to the same period of the prior year,” reported CHS.
However, while the energy portion of agriculture suffered under COVID-19, demand for U.S. crops outside of the U.S. soared. “Despite the COVID-19 pandemic, U.S. ag exports generated more than $270 billion for the U.S. economy since 2019, proving that the ag sector is resilient under any circumstances, according to trade experts,” said Veronica Nigh, an American Farm Bureau Federation Economist. “Today, more than 20% of what U.S. farmers produce is exported.”
Looking ahead to 2021, things are expected to improve in the ag equipment sector. “Agriculture machinery investment growth will accelerate,” predicts the 2021 Equipment Leasing & Finance U.S. Economic Outlook released by the Equipment Leasing & Finance Foundation.
Finally, a recent report from CoBank foresees more positive growth for agriculture as COVID-19’s influence wanes. “The coronavirus still dominates the economy and continues to impact rural industries, but with vaccines rolling out, the virus will slowly loosen its grip in 2021,” said Dan Kowalski, Vice President of CoBank’s Knowledge Exchange Division. “The steady climb in corn, soybean, and wheat prices during the fourth quarter of 2020 afforded growers and grain cooperatives the opportunity to capture significant margins.”
Kowalski added that ag retailers should see some growth from these improving market conditions. “Farm supply retailers benefited from the grain price rally and are poised for a favorable spring agronomy season, weather permitting,” he said. “Armed with liquidity, growers took advantage of generally favorable weather to conduct post-harvest fall fertilizer applications and other field activities. It is likely that as farmers sought to mitigate tax liabilities by year-end, they increased prepayments to cooperatives, providing ag retailers with additional working capital.”