ROLLA — The economic downturn following the spread of the coronavirus in the U.S. has hurt agriculture in the short term but is also providing opportunities for long-term gains.
Commodity prices are down again this month, following a trend that has been going on for more than five years. In addition, China’s promises to buy $36 billion in U.S. crops this year and $43 billion next year may not come to fruition.
Charles Baron, co-founder of Farmers Business Network, an online farm information and consulting service, said historically low interest rates are another outcome of the downturn, and that could help farmers.
“Farmers who are positioned to do so are really rushing to renegotiate their financing. And it’s a great moment for farmers to put themselves in a long-term cost position and capture a lot of savings,” said Baron, citing increased applications to refinance land and large equipment loans.
“It can save farmers tens of thousands of dollars every year for many years,” Baron said.
While there is an opportunity for long-term gains, the short term will be very rough for farmers, according to Pat Westhoff, professor of agricultural economics at the University of Missouri.
He said his team is still crunching numbers, but the early indicators suggest the low crop prices and trade uncertainty will do significant damage to farmers' bottom lines.
“The negatives are almost going to certainly outweigh the positives. So we’d expect lower farm income at the end of the day than we would have had had the coronavirus attack not occurred and if the China agreement had not been reached.”
Westhoff said the coronavirus pandemic is unprecedented, which is making it difficult to make specific economic predictions.
“It’s taking us some time to come up with a very preliminary assessment, because every time we think we’ve got things understood, we realize there are a half-dozen other factors we didn’t include that are changing all the time.”
Westhoff also said the uncertainty and tough times for farmers in recent years will make it unlikely that many will refinance.
But Baron disagrees. He said he has seen a 400% increase in applications in March to refinance among his network of farmers compared to last year.
“Farmers think in the very long term. They are in it for the long haul and are getting ready to put seeds in the ground with the idea that they are going to be at it for decades to come,” Baron said. “But they need to put themselves in very strong cost positions to survive these downturns in the market.”
Follow Jonathan on Twitter: @JonathanAhl
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