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In: Economics

How will COVID-19 influence in the future market for farmers?

How will COVID-19 influence in the future market for farmers?

Solutions

Expert Solution

For Americal agriculture sector , the last few years have been tough. A trade war with China isolated farmers from one of their biggest markets, a growing debt crunch strained many of their budgets, and extreme weather that often seemed to alternate between flooding and drought destroyed harvests, one after the other.

But the coronavirus pandemic decimated those hopes almost overnight. With stay-at-home orders in place, demand for nearly every agricultural product has collapsed. Restaurants have stopped buying food, purchases of cotton for consumer goods has slowed, and low oil prices have reduced demand for ethanol, hurting corn planters. Some farmers have dumped their product, and others have held off on harvesting it in the first place. Farmer advocacy groups, meanwhile, are warning that American family farms maybe teetering on the brink of collapse.

Depending on the length and depth of the crisis, this pandemic—and the concurrent recession—may fundamentally reshape the landscape for independent agricultural producers.

Farmers have faced financial hardship before. For decades, they have dealt with volatile prices, fluctuating weather and swings in government policy that left them vulnerable. As a result, many face a debt crunch that experts say threatens the viability of American family farms. President Trump’s tenure has offered little reprieve from the challenges. Most significantly, his trade war with China eroded business with the U.S.’s largest goods trading partner. China agreed to ramp up its purchase of billions of dollars of U.S. agricultural products in January as part of a trade deal with the Trump administration, but the fallout from the coronavirus pandemic has raised questions about whether it will follow through on the commitment.


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