DENVER, COLORADO, US — Despite the surge in COVID-19 cases and resulting complications, the impact on the food and agriculture sectors is generally expected to be less severe than earlier in the pandemic, according to a new quarterly report from CoBank’s Knowledge Exchange.
The report said the impacts for food and agriculture will vary significantly based on product. It also noted that overall, the US economy continues to thrive with workers returning to the labor force and consumers still spending.
Until the omicron surge subsides, the biggest economic risk will be the millions of workers who report sick and hamper already beleaguered supply chains.
“Economic risks from new, high-impact coronavirus variants will remain throughout 2022,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange division. “But Americans are increasingly making peace with the notion that the virus, in some form, will be with us for months if not years, and we must find a way to live more normally with it. This shifting mindset will de-risk the economy to some degree.”
Corn and soybean futures prices traded higher in the fourth quarter, reaching six-month highs at the end of December. Grain exports are recovering after barge movement disruptions caused by Hurricane Ida lingered into the fourth quarter, CoBank said. However, combined corn, soybean and wheat shipments to China have fallen by one-third compared to last season. Partially offsetting the decline in Chinese buying, combined exports of corn, soybeans and wheat to Mexico increased by 24%.
Farm supply cooperatives and ag retailers enjoyed a profitable fall season amid high crop prices, strong farmer cash flows and favorable harvest conditions. Fertilizer prices continued to climb, increasing approximately 20% in the fourth quarter and 160% versus the year prior. Input cost inflation, crop protection product shortages and labor challenges could threaten farm supply margins through the spring 2022 planting season and potentially beyond.
Ethanol production rebounded to pre-COVID levels and fourth-quarter profit margins rose to all-time records, currently averaging $1.34 per gallon. Production reached a record 17 billion gallons annualized for two consecutive weeks in late October, before settling down to 16.3 billion at year end.
US animal protein production was moderately higher through the fourth quarter, but supplies are under pressure due to demand.
China’s imports of animal protein have slowed significantly from their record peaks during the summer months. For US producers, reliance on China has waned for poultry and pork, while the opportunities for beef remain robust. The 2022 outlook for sales to China remains mixed, as the nation’s hog inventory has rebounded but African swine fever remains a wild card.
As of late December, the United States has regained 84% of the jobs lost since the pandemic began, equating to a deficit of 3.6 million fewer workers compared to early 2020. The supply chain outlook has improved due to more workers in warehousing and transportation. Since May 2020, the United States has added 800,000 jobs in the two sectors, eclipsing the pre-COVID number of jobs by 3%.