What Crop Shortages Mean for Local Farmers and Your Wallet
The upheaval because of COVID-19 throughout 2020 and into 2021 has impacted several industries, including the supply and food chain.
You might have noticed. Thus far, 2021 has seen lumber prices at an all-time high. In addition, according to CNBC, both corn and soybean futures saw a spike in May — the highest in nearly a decade — with prices slowly on the rise again.
Now knock-on effects from the pandemic, combined with a few other key factors, including weather and imports, contribute to fears of potential crop shortages and increasing prices for both farmers and consumers.
Global Factors Impact Crops Pre- and Post-Pandemic
A global perspective helps explain why prices are rising and some crop supply is so tight.
Before the pandemic started, swine flu hit China's hog population in 2018, decimating it, according to an April 2021 story from Reuters. So now, to catch up as new hogs come of age, Agri-Pulse reports that the country is buying up American corn for feed.
Different planting cycles around the world also contribute to rising prices and crop shortages. In Brazil and Argentina, two major producers of corn and soybeans, the harvest is in March and April. In the Midwest, corn and soybean crops go into the ground in April and May for harvest in late summer and early fall. According to Successful Farming magazine, Brazil and Argentina got hit with a combination of poor weather and labor shortages due to COVID-19 throughout much of the last 12 months, reducing crop yields, as Axios reported, and denting earlier exports, according to Reuters. Just as the Chinese demand grew, the expected crop out of South America fell short, leaving American farmers to help fill the gap.
Now consumers are starting to feel the impact of low supply and high demand from smaller South American yields, increasing Chinese demand and residual supply chain issues from COVID-19. Rising tortilla prices in Mexico due to the demand for corn is a prime example.
Unexpected Trends Cause Inventory Shortages
Last year, during the height of the pandemic, as people were staying home and buying up supplies to hunker down for the long term, the Washington Post reported that canned goods started flying off the shelves.
Typically, consumer buying cycles are relatively steady and planned out. However, by mid-2020, consumers, now cooking primarily at home rather than going out to eat, made virtually all of their meals. Excess demand, coupled with supply chain slowdowns for safety reasons, added to shortages. Canned corn, for one, was hit hard. Sales in late March and April 2020 increased by nearly 50 percent, according to The Wall Street Journal, causing supermarkets and other retailers to run out of inventory months ahead of schedule.
For farmers, the unexpected demand surges and 2020 challenges due to the pandemic impact plans for upcoming plantings. With a crop like corn, that is planted once a year, making sudden changes for additional quantity or turning over new fields—while possible—isn't always easy.
When producers try to meet unexpectedly skyrocketing demand, they're not just up against the challenges of limited supply. During the pandemic when supply chains the world over hit significant snags, just getting their goods to market proved difficult, according to the College of Agriculture and Life Sciences at North Carolina State University. Factories shut down or cut hours due to safety concerns, resulting in less inventory. Many trucking companies also reduced loads and drivers, not anticipating increased demand for some items.
The Outlook in the US
Despite the challenges, midwestern farmers continue to do the best they can to meet demands. According to the United States Department of Agriculture's National Agricultural Statistics Service (USDA NASS), farmers have increased corn, soy and wheat plantings over 2020 to help boost supply. The aim is to meet expected increases in demand for food, gas and other crop-based products as the nation's vaccination rate grows and the country re-opens for business.
However, a harsh winter hasn't helped planting conditions. July looks to be a mixed bag too, depending on the location, according to the Farm Journal. For parts of the Midwest, including Ohio, Illinois and Indiana, the weather looks promising for a good yield. In Minnesota, the Dakotas and parts of Iowa conditions look drier, which may negatively impact yield.
Those soaring crop prices, while benefiting many farmers in the short term, will likely have a trickle-down impact, as grocers and food companies pay more to produce canned and packaged goods, according to Axios. To keep their profit margins, those additional costs are likely to translate to consumers paying more at the grocery store. All of this means consumers might see prices increase for products in the coming months, Bloomberg reports.
Have questions on how crop shortages may impact you? Westfield has a suite of coverage for farmers, wholesalers and other businesses through the Agribusiness Network. Get in touch with your local independent Westfield agent to learn more.