Economic Impacts of the Pandemic on California Crop Agriculture:

Assessment of the Data and the Path Forward

2021 Plant and Soil Conference

February 1, 2021 Daniel A. Sumner,

Agricultural and Resource Economics, UC, Davis and UC Agricultural Issues Center

www.aic.ucdavis.edu

Outline and Overview1. The regular issues, irrigation water, farm labor availability, global

competition, demand changes, regulation pressures innovations etc. all continued un abated. But this talk is about the pandemic.

2. The pandemic caused death and dislocation on a grand scale globally. 3. The pandemic caused great disruption in food demand across marketing

channels, including export markets.4. The pandemic caused disruption in farming, processing and packaging and

shipping in part due to labor concerns, including disease among vital workers and their families.

5. When we focus on some economic outcomes for the pandemic year, it is harder to show the disruption.

6. The food system was remarkably resilient and was supported by massive government transfers to food buyers and food producers and marketers.

7. Many individual companies and establishments could not survive, but the food system came through remarkably, so far.

Issues and Data

• How did farm income and cash receipt fare in 2020 compared to recent years?

• USDA data and forecasts for the sector and by commodity group • No aggregate California data yet from USDA or other sources• The biggest story turned out to be the government payments

• How did produce shipments (quantities and prices) fare in 2020 compared to recent years

• USDA Agricultural Marketing Service data for week-by-week shipments for specific representative commodities.

• Mostly California shipments of specific fruits, berries, melons and vegetables (WA shipments of apples and cherries)

US Farm Cash Income, 2019 - 2020

2019 2020F 2018 - 19 2019 - 20FCash income statement ($ millions) (% Change)a. Cash receipts 369.7 366.5 -0.46 -0.87

Crops 193.7 200.2 -0.70 3.34Animals and products 176.0 166.3 -0.19 -5.51

b. Fed. farm payments 22.4 46.5 64.22 107.1c. Farm-related 34.7 34.1 19.23 -1.76d. Gross cash income (a+b+c) 426.9 447.1 3.06 4.73e. Cash expenses 317.5 313.0 1.96 -1.43

f. Net cash income (d-e) 109.4 134.1 6.4 22.6

Cash receipts by commodity, 2011-2020F(Billion dollars)

2018 2019 2020FAll commodities 382.8 374.3 366.5 Animals and products 181.7 178.2 166.3 Cattle and Calves 69.1 67.1 62.3 Dairy products, Milk 36.3 41.0 40.4 Crops 201.1 196.1 200.2 Food grains 12.5 11.7 11.4 Feed crops 59.1 59.7 56.9 Cotton 7.7 7.3 6.6 Oil crops 40.7 36.8 39.1 Vegetables and melons 19.1 19.2 19.6 Fruits and nuts 30.1 29.1 33.4 All other crops 30.6 31.4 32.3

Milk Production in Western States, 2018-2020

2.60

2.65

2.70

2.75

2.80

2.85

2.90

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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2018 2019 2020

2017: $12.1 Billion

Price Loss Coverage & Agriculture Risk Coverage ConservationSupplemental and ad hoc Disaster Assistance Market Facilitation ProgramOther

2018: $14.0 Billion

2019: $22.6 Billion 2020: $37.2 Billion

What do we know about Covid Payments

• Projected $23 billion in 2020 from USDA• Distributed widely but mostly to standard program crops• CARES Act $1.7T to $2.6T. So USDA payments will be about 1%• The paycheck protection from Small Business Admin is about $8.8 billion

for agriculture, about 1.6% of total. Farming is about 0.6% of GDP.• Are these enough, was farming hurt worse?• Direct payments were substantial as a share of income. Unemployment

and just big checks mailed out.• Payments included USDA aid to the poor (food stamps, WIC, school lunch)• These payments kept food demand high.

Remarks on the New Farm Subsidy Policy

• The 2018 Farm Bill increased U.S. farm subsidies. • Subsequent ad hoc subsidies doubled and tripled the payments • We are in the third or fourth year of tens of billions in payments to farms as

compensation for government policy actions that destroyed markets• These are NOT payments to the poor or disadvantaged. Approximately zero

of these payment go to those in poverty! • Farm payments are distributed roughly in proportion to production of

covered commodities.• The West tends to produce less of the most subsidized commodities.

California Compared to National Farm Economy

• California cash receipts has been about $50 billion (14% of nation)• (California is larger than the next two combined (Iowa and Texas) • California is about 75% crop receipts compared to more like 50%

nationally. California livestock receipts are more than half milk.• (Meat animals are double and triple counted because cattle (and pigs)

are sold by farms two or three times in the farm value chain)• California agriculture is less seasonal than much of farming. Crops and

milk are sold every month• California farming is much more labor intensive and less land intensive• Produce is a big deal in California and most of it is shipped east.

Total Quantities Shipped for Commodity Groups Each Year (Billion pounds)

Commodity Group 2018 2019 2020WA Apples & Cherries 5.99 5.72 6.09

Berries 1.99 1.82 1.91

Grapes 1.79 1.68 1.61

Nectarines & Peaches 0.34 0.42 0.33

Melons 1.58 1.12 0.95

Leafy Greens 3.27 3.06 3.16

Carrots & Tomatoes 1.29 1.27 1.23

Other Vegetables 2.86 2.68 3.01

Total Quantities Shipped for Commodity Groups During Covid-19 Time Period (lbs.)

Commodity Group 2018 2019 2020WA Apples & Cherries 4.59 4.48 4.79

Berries 1.89 1.77 1.81

Grapes 1.78 1.66 1.58

Nectarines & Peaches 0.34 0.42 0.33

Melons 1.58 1.12 0.95

Leafy Greens 3.11 2.93 2.98

Carrots & Tomatoes 1.13 1.06 1.02

Other Vegetables 2.50 2.34 2.61

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Iceberg Lettuce Shipping Point Prices Per lb.

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Summary of Produce shipment quantities and prices for COVID Weeks of 2020 compared to the same weeks in the prior two yearsMid-March through December 2020-2018 2020-2019

ShipmentsAll Mean -12.78% 2.09%

(s.e.) (4.24) (1.65)

Fruits Mean -10.42% 2.61%(s.e.) (9.67) (3.38)

Vegetables Mean -5.56% 3.51%(s.e.) (1.82) (1.37)

Melons Mean -92.71% -13.87%(s.e.) (12.02) (7.91)

PricesAll Mean 9.58% -5.79%

(s.e.) (1.44) (2.41)

Fruits Mean 5.52% 2.53%(s.e.) (2.26) (2.32)

Vegetables Mean 6.80% -16.68%(s.e.) (1.80) (3.57)

Melons Mean 57.14% 53.16%(s.e.) (5.32) (6.10)

Final Remarks on Produce Shipments• Weak or mixed evidence that 2020 shipments were much different than

prior years.• The hypothesis is hard to pin down in the sense we have many numbers

but maybe just one independent data point• Overall 2020 does not stand out as different across the array of crops

and shipments and where it difference looks much like weather or similar normal variation from year to year.

• Some crops, such as melons, may have been left unplanted anticipating labor to be scarce (or maybe other crops just looked better).

• The labor demand versus labor supply impacts are hard to assess yet. Little evidence of widespread idled fields or more crops left unharvest.

• Data are still coming in and we may find more labor shortages or less demand because producers anticipated shortages.

Remarks on Directions Ahead for Agricultural Issues

• Large transfer from future generations of taxpayers to create higher farm income in 2019, 2020 and probably 2021.

• Think of this as compensation to industries for perceived damage caused by the government itself (perhaps for a good cause) for trade disruption or lockdowns.

• A problematic path for policy. Payments for politically powerful grievance does create efficient, effective or sustainable industries or economies .

• Enhanced farm productivity and efficiency remain public goods for farmers, consumers and the economy, but not many $$ for that.

• Perennials like drought, fire, groundwater, infrastructure decay, regulations, trade, farm labor, etc. continue…

Thank youQuestions and Discussion?

dasumner@ucdavis.edu