Report details pandemic effects on state’s farms

Issue Date: June 24, 2020
By Dave Kranz

COVID-19 graph

Pandemic-related losses to California farms, ranches and agricultural businesses will range between $5.9 billion and $8.6 billion this year, according to an economic study released Tuesday. The analysis says the state's agricultural sector has already suffered $2 billion in losses so far, from disrupted markets and rising production costs related to the COVID-19 outbreak.

Financial impacts of the pandemic vary widely among different parts of the agricultural economy, the study said, depending in part on how much a particular crop or commodity relies on sales to food service and how much it has been affected by shifts in retail demand and changes in costs of production and processing.

Produced by Davis-based ERA Economics, the study was commissioned by a coalition led by the California Farm Bureau Federation and including UnitedAg, Ag Association Management Services Inc., the California Fresh Fruit Association, California Strawberry Commission, California Tomato Growers Association and Western Plant Health Association.

CFBF President Jamie Johansson said the study illustrates the scope of the pandemic's impact.

"California farmers, ranchers and their employees have continued the essential work needed to keep American families fed, but that work has come with sacrifice," Johansson said. "The impact is being felt in rural communities throughout the state that rely on agriculture for their residents' livelihoods. We want legislators and regulators to bear that in mind and avoid making farming even more costly and difficult in California."

Analysts looked specifically at 15 different agricultural sectors, using data on production, exports and prices through early May, plus interviews and surveys of people and businesses. The study showed the greatest projected dollar-loss impact to dairy, $1.4 billion to $2.3 billion; grapes, $1.5 billion to $1.7 billion; and flowers and nurseries, $660 million to $740 million.

"The timing of impacts varies by commodity and region," the report noted.

For example, farms in the Imperial Valley and Central Coast were harvesting and making planting decisions when stay-at-home orders took effect, meaning they "incurred proportionally higher impacts," according to the report.

Abrupt shifts in purchasing patterns in export and domestic markets—prompted by the constriction in restaurant and other food-service sales and a swing to retail purchases for at-home use—have affected farmers, ranchers and agricultural businesses at various points in the supply chain, the study said, resulting in farm-gate crop price impacts.

The dairy business, for example, suffered both from the sudden disappearance of school and restaurant food-service demand and a decline in export markets, although the report said retail demand had increased.

"The effects of the COVID-19 pandemic on the dairy industry are substantial and have likely not yet peaked," the study said.

In the grape business, the report said, the pandemic has depressed prices for table grapes and has had "a devastating effect on demand for wine"—particularly for smaller wineries and specialty labels not sold through retail outlets.

"As the season progresses and California growers begin to harvest winegrapes, growers are likely to see wineries pass on impacts in the form of lower grape prices, particularly for the spot/bulk market," the study predicted.

Floriculture and nursery businesses have suffered substantial losses, the report said, because of impacts to transportation and reduced demand.

"The floriculture industry was also caught between shelter-in-place orders that allowed producers to continue operating as essential agricultural businesses but required retailers to close storefronts," the analysis said.

Some crops have seen increased business during the pandemic, the report said, citing shelf-stable items such as rice, processed tomato products and canned fruit. But in aggregate, the study said, "the losses far outweigh the isolated benefits."

The study also noted job losses in agricultural and food-related occupations due to the pandemic, citing state Employment Development Department data that showed employment in crop farming down by 94,000 in April compared to the same month a year earlier. Including food service and retail, the report said, total April jobs were down more than 800,000 statewide.

"The economic impacts fall disproportionately on impoverished, rural counties in the state," the study noted.

The report found additional impact to farms, ranches and rural businesses from higher operating costs for measures intended to increase employee health and safety, and in the logistics required to move crops and commodities to market.

"Along with the loss of key markets due to food service disappearing overnight or flower shops and garden centers not being allowed to operate in certain areas, we now are adapting to significant increased operational costs that many California farmers will never recoup," said Chris Zanobini, president/CEO of Ag Association Management Services.

Examples include increased spacing of harvesting, sorting and packing crews; mandatory sanitation of equipment and facilities; investments in masks, gloves and other personal protective equipment; employee training on COVID-19-specific health measures and new workplace practices; and logistical measures to account for changes in product mixes and for transportation, storage and shipping constraints related to the pandemic.

"Observing how agriculture is affected will help us orient and decisively act to create a stronger future," UnitedAg President and CEO Kirti Mutatkar said. "The agricultural industry is not only one of the most necessary industries, but one of the most resilient."

The full report, titled Economic Impacts of the COVID-19 Pandemic on California Agriculture, may be found at www.cfbf.com/covid-19-study.

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.




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