Tennessee agricultural sectors take hit from COVID-19

Research from economists with the University of Tennessee Institute of Agriculture indicates that the COVID-19 pandemic has affected all aspects of agricultural commodity production and distribution, leading to substantial price declines and reduced income for farmers. Soybeans, which generally generate the largest cash receipts for Tennessee producers, is among the crops affected. Photo by T. Johnson, courtesy UTIA.

KNOXVILLE — The latest research from the University of Tennessee Institute of Agriculture indicates that the COVID-19 pandemic has affected all aspects of agricultural commodity production and distribution, leading to substantial price declines and reduced income for farmers.

Price declines for corn, cotton and soybeans occurred in the first five months of 2020 and are projected to continue. Price reductions associated with the pandemic’s market effects have in turn caused a negative impact on farm income and farm-associated expenditures throughout the state.

In anticipation of declining farm income due to price losses, the federal government passed the Coronavirus Food Assistance Program (CFAP). Without CFAP payments, Tennessee corn, soybean, cotton and wheat producers are estimated to have declines in income of $58.8 million, $21.4 million, $20.3 million and $1.2 million, respectively, for a total decline of $101.7 million in producer income for crops in storage. This decline in income is reduced to $43.7 million with CFAP payments. “However, the mitigating effects of CFAP payments do not account for priced inventory, entity payment restrictions or 2019 production caps,” said Aaron Smith, associate professor and crop marketing specialist in the Department of Agricultural and Resource Economics (ARE). “As such, the estimated $58 million loss in producer income—$101.7 million less $43.7 million—mitigated by the CFAP payments should be considered a maximum, with the actual loss in producer income likely falling somewhere between $43.7 and $101.7 million.”

With the temporary closures of restaurants and several beef slaughter and packing plants, the livestock sector has also experienced a large decline in cattle sales for the first four months of 2020, slowing the movement of cattle through the supply chain. Steer and heifer receipts in all weight classes through Tennessee-reported auctions declined by a total of 15,458 head or 24%.

The U.S. Department of Agriculture’s Farm Service Agency is accepting CFAP applications through September 11, 2020.

Tennessee’s forest product exports have also taken a hit from the COVID-19 outbreak, due to supply and demand disruptions in both the finished wood products markets and the interrelated market for raw materials and inputs. When comparing January-April 2020 to the same period in 2019, Tennessee forest product exports were down by 23% from $62 million to $48 million.

An analysis of the COVID-19 impact on smaller agricultural processing and marketing firms also indicated that most analyzed businesses have suffered marked reductions in sales; however, these reductions varied greatly across the different types of businesses analyzed. “Among those reporting a large negative impact include 71% of apparel manufacturers and 67.5% of beverage and tobacco product manufacturers,” said David Hughes, ARE professor and Greever Chair in Agribusiness Development.

These reports can be found on ARE’s Agri-Industry Modeling and Analysis Group’s COVID-19 impacts website. The site features a collection of reports assessing the impacts of the COVID-19 pandemic on Tennessee’s agriculture and economy.

Through its land-grant mission of research, teaching and extension, the University of Tennessee Institute of Agriculture touches lives and provides Real. Life. Solutions. utia.tennessee.edu.

Published August 14, 2020