Mike von Massow
Farming in the Era of COVID-19
We are experiencing unprecedented disruption to normal life and commerce in order to flatten the pandemic curve due to COVID-19. Physical distancing requires us to stay at home. COVID-19 has forced the closure of non-essential businesses across many jurisdictions globally. Exemptions include those involved in supporting the food supply chain from sellers of animal feed to the sellers of food in grocery stores. Restaurants are closed and we have seen some empty shelves at the grocery store due to stockpiling and increased demand due to fewer restaurant visits. The food system is robust, continues to supply food, and is catching up after the demand shocks. We have enough food and it will continue to find its way onto grocery shelves. Farmers, the foundation of the food supply chain, are used to dealing with uncertainty from weather and market volatility but COVID-19 means additional risks.
First, is the risk of the virus directly affecting the farmer and farm employees. The likelihood of infection for those on the farm is less than the general population given the relative isolation in which most farm work is done. Few people will be physically in touch with a farmer in his tractor working the land this spring. However, there is still a threat of infection and producers must understand the protocols to prevent the spread such as physical distancing between farm employees, themselves, and between suppliers bringing inputs (i.e. fertilizer, feed) and services (i.e. machinery repair, vets). Given the average age of farmers in Canada is 58 and roughly one-quarter are over 65, farmers are particularly vulnerable to the virus should they become infected.
Second, is the risk associated with the lack of farm workers. Canadian agriculture, particularly the livestock sector for full-time employees and the fruit and vegetable sector for seasonal workers, have increasingly relied on foreign workers to fill their labour needs. This pool of workers will remain available as the Canadian government recently exempted temporary foreign workers from the restrictions affecting other travellers. While those workers can enter the country, the limits to travel will hamper the ease and timing of their eventual entry. The Temporary Foreign Worker Program exists because farmers have had difficulty finding domestic help, but the sudden and dramatic increase in unemployment levels due to the economic slowdown will likely increase the availability of Canadians willing to work on farms. It remains to be seen whether foreign workers will still be willing to travel but that is not expected to be an issue. There may also be some delay as regulatory and screening requirements are developed and executed. Once here, the workers will have to be quarantined and limited to work on the farm. Planning is already in place to facilitate that.
Third, is the risk from not having access to other inputs aside from labour. In the short run, there is no major concern about the availability of the goods and services needed by farmers. The planting season is ready to start, and the seed, fertilizer, fuel and pesticides have all been in place for weeks generally. Similarly, the supply of feed and other inputs for livestock production have not been affected in the short run. However, disruptions affecting the rest of the economy currently could have ramifications on the supply chain of the inputs and transportation network if the pandemic continues into the summer. This remains to be seen but the general consensus is that the farm sector is prepared and robust and that production will continue relatively normally. There are sectors that were struggling with low prices before COVID-19 and Farm Credit Canada (a crown corporation that provides financing to farmers) has been given an additional five billion in capital to ensure that farmers have access to financing for this crop year.
Governments have prioritized the food supply chain and are working to ensure that food continues to move. While it doesn’t affect Canadian farmers generally, the decision to keep the borders open to commerce was driven in large part by the desire to keep imported food coming to Canada. Open borders are not just important for Canadian consumers. Canada is an important exporter of foods and if borders are closed or restricted this could have serious impacts for Canadian producers as prices would drop as markets are lost and excess supply resulted.
Fourth, is the risk of disruptions at critical points in the supply chain. In the unlikely event that an individual farmer or operation is affected and restricted, food would continue to flow because of the large number of independent farms. The processing sector has a much higher degree of concentration which means that product flows through a smaller number of players on the way to the consumer. If one of those processing plants were to close or be restricted, then there could be disruption. The impact of this disruption would fall disproportionately on the producers as compared to consumers. It is much easier to move processed products around to fill market gaps than it is to ship raw product. Producer prices would fall in local markets if there was the potential to sell at all.
The disruption would be most significant for perishable products or livestock. Farmers who can’t sell live cattle, for example, would have to keep them on feed longer. This increases cost and can reduce grade which both affect profit margins. If farmers can sell less they will face cash flow problems as they count on being able to sell the products they produce with high front-end investment.
It is not expected that COVID-19 would cause long-term plant closures given the designation of food production as essential. For example Sanderson Farms, a poultry processing plant in Mississippi, had a case of COVID-19. Management sent the employee home along with others working in close proximity but the plant remained open. We have seen similar things in other manufacturing facilities in Canada (Toyota for example). A large and significant outbreak within a workforce could cause a shutdown, whether short or long-term. An Olymel plant in Quebec instituted a two-week closure when nine staff tested positive. The industry is scrambling to find other places to process the animals that would have gone into that plant.
It is more likely that there could be capacity constraints as plants adapt to provide protection and physical distancing between workers. There have been some reports of this in the dairy industry in Ireland, for example. Another issue could be employees refusing to come in to work because of the risk. Food processors often struggle to find sufficient labour and it would be difficult to replace skilled workers even in a period of high unemployment with COVID-19 related layoffs.
There are new risks for farmers in a COVID-19 world, but it is our expectation that our system is resilient and robust enough to survive these challenges. Farmers in Canada and across North America are well positioned and ready to continue to produce the food we depend on.
#farming #agriculture #COVID19 #food #foodprocessing #labour
Recommended citation format: von Massow, M & Weersink, A. "Farming in the Era of COVID-19". Food Focus Guelph (80), Department of Food, Agricultural and Resource Economics, University of Guelph, April 6th, 2020.