Please note: Some of the interviews for this article were done as the Covid 19 Crisis was just unfolding in March and February.
“I still have a few beans left from 2018; market facilitation payments have helped me try to ride out the market but I’m running close to the end of wanting to ride that market. I keep waiting for the trade agreement to be signed and that didn’t do anything. Now it looks like the coronavirus may limit consumption of soybeans and the market may soon realize that poor harvest means a lower supply of beans driving the price back up.”
Bill Hejl Amenia February 9, 2020
When 2020 began, there was a sense of cautious optimism among farmers. Despite years of trade war fighting and loss of revenue on both sides, China seemed ready to start renegotiating. A phase one deal with China was announced in December days before Donald Trump’s most draconian rounds of tariffs were to be implemented. Meanwhile, House Speaker Nancy Pelosi, to try and garner support before taking the gamble of impeaching the president, put the United States Mexico and Canada Agreement (USMCA) up for a vote which would keep NAFTA’s agricultural deals intact after an uncertain year of negotiations. The deals were inked by February and although there was skepticism, there was also hope that the worst part of the trade war was over. As the year continued, there came news of a virus in the Wuhan Province of China that was spreading more rapidly than anyone imagined. The beginnings of a new pandemic. By the end of February, it was in the United States, and by March 9, 2020 the first recorded case reached North Dakota.
“I can’t say that I’m confident about the markets because we are in completely uncharted territory. Before COVID there was some optimism because prices couldn’t go anywhere but up. We’re at such a low point that I have lost more money in the last three years farming than any other period, and I farmed since 1987. I hope we can see a comeback, but exports are down, we have a trade war and a pandemic that’s affecting the world, and prices find new ways to go lower.”
Donnie Nelson June 29, 2020
As the virus spread the impact was quickly felt in North Dakota. Market prices fell further for soybeans and corn. A lockdown forced most of the nation to shut down causing a drop in oil prices as a staggeringly high number of people no longer needed to commute to work. Oil prices reached negative prices per barrel reducing demand for corn in the ethanol industry. Restaurants, public school cafeterias, and universities were no longer ordering large quantities of beef, poultry, pork, milk, and eggs. In numbers not seen since the Great Depression, thousands of hogs were euthanized, trucks filled with milk dumped, and millions of eggs were smashed in a desperate effort to bring prices back up. Milk prices dropped 3 dollars per hundredweight in less than a month. Meat processing plants, like the Smithfield Plant in Sioux Falls South Dakota, became hotbeds of COVID outbreaks and were forced to be closed resulting in more farms with animals and products that they couldn’t sell. Seasonal laborers were unable to travel to North Dakota disrupting planting season and calving. Across the country supply chains were stretched thin and grocery stores restricted sales on meat, eggs, and dairy products.
“The toughest part of dealing with COVID-19 was getting my labor situation under control. My seasonal workers were the hardest to get in. I was just able to pick them up in mid-June and then they had a 14-day quarantine. They had to be separated and live alone. We had to get groceries or whatever ever they needed because they were not supposed to leave the farm. If they work alone and they’re working on the farm we just try to keep our distance for 14 days. We can keep our distance pretty easily in this job.”
Donnie Nelson June 29, 2020
A Tale of Two Markets
The food supply chain in the United States has flaws that were exposed during this crisis. First, our supply chain is really two different supply chains. Production plants have sections that package food for personal use that supplies grocery stores, and sections that produce large quantities of food for restaurants and cafeterias in prisons, schools, retirement homes, and universities. These large-scale food facilities make up most food processing plants in America. Food is sold in bulk with a small portion of the food sold in individual packages meant for grocery store purchasing.
“On a positive note I saw oil prices dip from COVID-19 and a Saudi/Russia oil war. I was able to buy some cheap diesel and a new storage tank at half the price. As for grain and oilseed production, I really don’t see the Covid has necessarily affected the logistics of it, but domestic demand could be affected in the future. My ability to haul off my grain at the elevator was unaffected, the only change was that the driver had to stay in the truck to avoid contact with the workers.”
Todd Leake July 7, 2020
The American economy encourages a service-based industry that values convenient, cheap food that’s accessible near and around where people work. To keep food fresh most places rarely keep a stockpile of inventory, and orders are placed on demand rather than in advance. The whole process is called Just in Time production. When COVID caused restaurants to shut down and Americans worked and cooked more at home. By not going to restaurants and cooking their own food, a shortage of household essentials was created. There was always more than enough food, but the packaging machinery of food couldn’t change fast enough to meet the new demand.
“Covid didn’t change our operations significantly from day to day. Our biggest challenge was getting accessibility to certain parts because the plants closed due to COVID. One part order I placed stated that the best they could fill it was September 1st.”
Glen Philbrick August 12, 2020
Due to outbreaks in companies like Tyson, Cargill, Smithfield Foods, and JBS USA, shutdowns became commonplace in plants across the country disrupting supply chains across the nation. Several plants closed to contain the spread. That action caused demand to drop again sending the market prices into further freefall for all commodities. In response the Trump administration forced the plants to reopen using the Defense Production Act citing that keeping our food supply chains open was critical to national security.
“Personally, I don’t go to town as much. If I do, I’m very careful. Grand Forks is not exactly a hotbed for cases. Supply chains are unaffected but Grand Forks is where my supply chains for seed, fertilizer, or diesel originate locally. There’s just nothing except small distributors in small towns anymore.”
Todd Leake July 7, 2020
“Covid didn’t change my life much on the farm, we are isolated in normal situations. I don’t see my neighbors or mother as often. On the farm your core group of workers and people basically live and work together. If one person gets it, you’re all getting it. Farm life doesn’t care if there’s a pandemic, work still needs to be done. We limited our trips to town, but we still have to get parts, get repairs and groceries. That said, it happened at the right time for us before calving season started and we hadn’t really started farming. By the time the state started opening up, we were already busy planting and calving.”
Donnie Nelson June 9, 2020
Plants that were shut down and incorrect packing machinery at those that were open caused meat shortages across the nation. Prices rose for essentials like eggs, ground beef, and milk products at the grocery store According to AmTrust Financials website grocery store and supermarket profits in most states were up 20% to 50% during the first three months of the COVID-19 outbreak. This caused a migration to local businesses. Local meat processing across North Dakota has loads of back orders across the state. Many local ranchers had the ability to meet the local meat demands but had nowhere to slaughter their animals.
“COVID is a mixed bag for our farm. There are some aspects that have made our business more successful. We run a herd sharing operation and business locally has been booming. Selling our milk and beef locally has been good, but the national and regional markets are not as good and local processing is a challenge.”
Jenna Vanhorne July 29, 2020
In March of 2020 Congress passed the CARES act with roughly 1.25 Billion Dollars allocated to North Dakota with 406 million allocated currently. Direct food and agriculture related provisions in the CARES Act totaled around $49 billion. Nationally, 23 billion dollars were allocated to the Consumer Credit Council (CCC) to distribute the funds to farmers. While not official yet, most economists speculate that this means another round of Market Facilitation Programs or some other form of subsidy will be given to commodity farmers. The cattle and dairy industries along with nontraditional farmers were allocated 9.5 billion dollars in stimulus. Agricultural operations were given access to the Payroll Protection Program (PPP) which gives small businesses funds to pay up to 8 weeks of payroll costs including benefits or for payment of interest on mortgages, rent, and utilities. The 659 billion dollars allocated were used up within weeks, before most farmers knew they were eligible.
“Since COVID hit we didn’t really get much notice that any relief was coming our way. In some ways it was because the government only advertised the PPP relief as a loan for small businesses. We didn’t think of them as farming loans. By the time that we had realized that we qualified they had run out of money to fund a PPP loan for our operation.”
Jenna Van Horne July 29, 2020
Ranchers Get a Flawed Bailout
Under the CARES Act the USDA allocated payments similar to the Market Facilitation Payments that farmers were entitled to during the trade war with China. Between Jan. 15 and April 15, ranchers were given a sliding scale of $214 per head if they sold on Jan 15 to $33 per head if they decided not to sell their cattle, with a maximum payment of $250,000. Critics of this act say that while ranch aid was long overdue and anything is better than nothing, the dates were arbitrary. On January 15, the virus had not been discovered in the United States and the market saw no immediate drop. Profitable cattle sales were made, yet some ranchers still qualified to be paid $214 a head. When the markets did drop, some ranchers closed or reduced sales as feeder lots had reduced demand. This resulted in ranchers that could’ve received a payment of $102-$139 only received $33 a head. The cattle market suffered a 38% decline in the price of live cattle from February to June in North Dakota. In April, a dozen large meat packing plants across the country closed amid the spread of COVID-19. Reduced demand for cattle resulted in local markets, which weren’t even open to sell cattle or only sell limited amounts. The markets continued to decline well after the April 15 deadline, forcing ranchers to lose close to $100 a head in subsidies through no fault of their own. During the last month of eligibility, ranchers were penalized for not selling and prices continued to fall well into May.
“We received payments from the CARES act, but they picked the weirdest time periods to pay. On the crop side many had to sell in the fall to pay bills and those bushels you got nothing on Overall, it didn’t work well for me. I sold some feeder cattle in the time period for high payments and felt I got a fair price from market, and when I sold the rest of them after the CARES Act deadline for lower payments. I got a much lower market price than if I had sold them at the earlier time. I got a high payment and high market price from CARES, but I put more feed and money into them. In the end, I was penalized for making a real time decision. The relief package didn’t work well for me and probably not for many other ranchers as well. It seems that farmers and ranchers didn’t get consulted but investors and futures players like hedge funds were.”
Donnie Nelson June 9, 2020
“With CARES and cattle relief, I sold my steers before the price really started to drop. I have some cattle that I’ve held off selling because the price is low. My concern is that come fall cattle prices are going to be average or lower yet. The uncertainty is always lingering in the back of my head.”
Glen Philbrick August 12, 2020
On September 15, the USDA announced a second round of payments totaling up to 14 billion dollars Called Coronavirus Food Assistance Program 2 (CFAP 2). Many problems were fixed with this program and many complaints were addressed. Ranchers will receive a flat payment of $55 per head, up to $250,000 or 4,546 head per producer for the maximum amount of cattle the producer has on hand from Apr 1- 31 Aug. However if a larger ranch can provide proof of over 400 hours of labor required to maintain their cattle during the Apr 1- Aug 31st time period they can qualify for 2 or 3 payments of $250,000 bringing their total eligibility to 750,000 dollars maximum.
Subsidies will also be paid to every type of agricultural producer minus cover crops any plant grown for livestock feed.
Problems Linger
As the pandemic continues North Dakota and the nation at large continues to suffer. Prices are forecasted to be low, and it’s estimated that farmers face losses of more than $20 billion this year, according to the University of Missouri’s Food and Agricultural Research Institute. The North Dakota Legislature has yet to hold an emergency session. September has seen the highest number of active cases and deaths since March. This inaction is causing anxiety among our farmers and rural North Dakotans about the government. While this in many ways has affected social life more than working in the fields, supplies chains and markets have, and will continue to be affected until the virus is under control. Farming and ranching operations are at risk if the owner becomes sick. Many operations only have 2-3 people doing all the labor. If someone were to get sick it would be difficult to find someone to harvest the crops or tend to the cattle. There are many issues that still need to be solved and effective leadership is needed.
“There’s a lot of things to be worried about, I’m glad that there is some help out there like the MFPs, CARES act, and other programs; but the trade issues with China bother me because that’s still not solved.”
Glen Philbrick August 12, 2020
Are you a farmer or rancher whose operation has been directly impacted by the Coronavirus pandemic? Coronavirus Food Assistance Program 2 provides direct relief for agricultural producers who continue to face market disruptions and associated costs because of COVID-19.
Signup for the Coronavirus Food Assistance Program 2, CFAP 2, has already begun and will run through December 11, 2020. Learn more at farmers.gov/cfap.