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Coronavirus
Illustration of farmer with mask Illustration by Jason Raish

Where we go from here

What will the pandemic teach us about crisis management? Seven lessons.

Farmers like to talk about so-called black swan events — situations that are beyond the scope of normal expectations that nonetheless have severe consequences. Sound familiar? That’s how almost everyone is describing the COVID-19 pandemic. But Emily French, managing director for the ConsiliAgra consulting firm, argues that the term feels inadequate given the severe global economic impact it has had so far.

“It’s not a black swan event; it’s an entire zoo,” she quipped in a recent webinar held by the U.S. Soybean Export Council.

In a matter of a few weeks, the pandemic went from barely a blip on the news to dominating every facet of our society, closing businesses and schools across the nation, as most took unprecedented social distancing measures to flatten the curve of those infected and killed by the virus.

Rural America has not been exempted from these sweeping changes. But few will be better equipped to navigate this uncertain climate than farmers and ranchers, says Kansas producer Amy France.

“Farmers live in a constant world of unknowns,” she says. “We put crops in the ground not knowing what the weather will be or what price we’ll get. Uncertainty is our normal. Still, we’ve been asking ourselves — when will we get a break?”

It’s too early to say which of these changes are fleeting and which will have lasting effects. Will handshakes go the way of the dodo? Will personal protective equipment emerge as the next hot fashion trend? Will face-to-face meetings become more a nicety and less a necessity?

Where do we go from here? No one knows the exact destination, but we’re all on the path to find out.

1. Backup plan for employees

Farming is not an idle profession by any stretch — it requires hundreds upon hundreds of hours to get the crop planted, managed throughout the season and harvested. Operations that have a handful of employees may have enough built-in redundancies to weather an absence or two due to illness. But what about smaller farms that lean heavily on two or three people to keep things running?

“Some of my clients are very concerned if the principal head of a farm gets sick,” says Minnesota crop consultant Van Larson. “Most said they will make things work one way or another, just like every other glitch that can occur.”

Kansas farmer Lon Frahm has 17 part-time and full-time employees, and after much discussion, they all agreed to be accountable with one another regarding where they travel on personal time. “We had one of the team on a cruise ship when this hit,” he says. “He came to work, but he stayed outside of headquarters and worked individually until the quarantine time was passed.”

Photo courtesy Lon FrahmOverhead view of people social distanced around a conference table.

Lon Frahm’s employees have been practicing social distancing during meetings and keeping all surface areas cleaned with disinfectant to minimize the spread of coronavirus.

Be sure to call friends and neighbors to discuss contingency plans if you haven’t already done so, adds Iowa farmer Chris Barron.

“We have to depend on each other,” he says. “You may be in direct competition with a neighbor, but collaboration has a massive benefit you can’t put a price tag on right now.”

2. Added safety emphasis

One labor supply twist could work in your favor. With many schools across the country being shuttered for the remainder of the school year, a potential pool of labor comprised of farmers’ children and grandchildren can pitch in around the operation.

However, that introduces an entire new layer of safety concerns, Barron says.“It’s great that they’re able to help out more and are maybe even learning new things,” he says. “But with that comes the responsibility to talk safety and explain things really well. This situation highlights the need for standard operating procedures and improved safety protocols.”

For example, Barron drew up a liability waiver for employees who bring their kids to the farm, which included off-limit areas of the operation, such as the shop or other places that contained possible dangers. Playing in the office or the front yard instead keeps potential accidents or injuries minimized, he says.

Barron also recommends documenting any behaviors or actions that should be changed. “If you write protocols down, they’re more likely to be implemented,” he says.

Mental health and physical health are often closely tied together, he adds. “One or two extra days planting or doing other tasks on the farm is fine in a year like this when stress levels really need to be managed,” he says. “Figure out what you can manage and try to be OK with the rest. You can’t control everything, but you can get rest, eat healthy
and exercise.”

3. Cloudy commodity price outlook

Grain prices took a noticeable hit as the pandemic spread, but the fallout wasn’t as severe as it was in some other sectors. For example, from Jan. 1 through April 13, the S&P 500 lost 15% of its value, with crude oil prices cratering more than 50% during that time.

For grains, corn has seen the biggest decline over the same period, down nearly 17%, largely due to an expectation for historically high acres coupled with waning ethanol demand from sharply lower fuel consumption. Soybeans were down 12%, but wheat’s declines were less than 2%. The University of Missouri’s Food and Agricultural Policy Research Institute predicts grain prices in the 2020-21 marketing year will ultimately be down 5% to 10% after the dust settles.

For now, it may be most prudent to stay the course on your current marketing plans, advises LaVell Winsor, farm analyst with Kansas State University Extension, although tweaks and changes should always be considered.

“Continue to look at your farm financials, and keep those front and center,” she says. “Even if they don’t look as good today as they did, knowing the ramifications of those numbers with the current changes is really important to help figure out how you’re going to go forward.”

Lean on key advisers before making any big marketing decisions, Windsor suggests, whether that’s family members, business partners, accountants, lenders or others.

“Anytime there are two or three or four people that are all focused on the same business, they each can have some input and help make the situation better altogether.”

4. Lending fundamentals still in play

Farmers aren’t alone in the chaos wrought by COVID-19. Ag lenders are also scrambling to keep up. Some, such as Gus Barker, president and CEO of First Community Bank in Newell, Iowa, were also around during the 1980s farm financial crisis. He says comparisons to that era are unavoidable, even if the current situation is quite different.

But farmer-lender fundamentals haven’t changed a lot in the past 30-some years.

“You still need to develop that relationship and be willing to talk about anything,” he says. “You need a give-and-take attitude and be flexible when the situation calls for it. There are a lot of what-ifs and contingency plans we’re making right now.”

Few bankers offer one-size-fits-all solutions, so it’s especially important that they understand the particulars of your operation to map out the best strategies, Barker says.

Interest rates available to farmers remain very low, notes Jackson Takach, chief economist with Farmer Mac.

“I’m not a financial adviser, but if you can borrow at a 30-year fixed loan at the same rate as a five-year fixed loan a year ago, it can look pretty attractive.”

Buying land has had its own wrinkles this spring, from farm auctions moving to a digital format to title search delays in the mortgage market due to county courthouse closures. If you’re about to wade into these waters, expect some delays and be patient, Takach says.

“The loan closing process could take a little longer in this environment,” he says.

5. Government help for ag

The federal government has stepped in with an unprecedented level of assistance for businesses and individuals negatively impacted by the COVID-19 pandemic.

The first round of relief came courtesy of the Internal Revenue Service. This year’s income tax deadline has been extended until July 15. Also, most U.S. citizens received a $1,200 Economic Impact Payment, plus $500 for each qualifying dependent claimed on last year’s tax returns.

Farmers and ranchers are receiving additional aid to the tune of $19 billion. That includes $16 billion in direct payments based on calculations of projected losses, plus $3 billion to purchase U.S. agricultural goods that will be given to charitable organizations to distribute. The Commodity Credit Corporation will get an additional $14 billion replenishment on July 1, which USDA can then decide if and how it needs to distribute.

The first round of aid is guaranteed — with checks landing with farmers by the end of May or early June. Less certain is the government’s Paycheck Protection Program loans. That program was designed to incentivize small businesses for keeping employees on their payroll during the pandemic crunch. However, only 2.8% of all approved applications — just 1.2% of total funds — went to the agriculture, forestry, fishing and hunting sectors. Congress gave PPP another boost of funding April 24, but will it be enough?

But Eric Steinle, attorney with the Martindell Swearer Shaffer Ridenour law firm, warns against being aggressive in taking out large loan amounts. It will be important to verify that the payroll loan was necessary due to the market responses created by COVID-19, not just low commodity prices.

“You’re going to get punished on the back end when you’re looking for forgiveness,” he says. “Be careful on what you include upfront — and that you certainly haven’t misused funds in a certain way that penalizes you.”

6. Business relationships and on-farm logistics

The farmer-retailer relationship has undoubtably changed dramatically this year. Most retailers have moved to an appointment-only model or have closed their doors to customers completely during the pandemic. And some machinery dealerships are considering running split shifts for mechanics to keep exposure minimized, Larson says.

“You call ahead, get loaded and leave,” he says. “But a lot of businesses can be done this way.”

So far, Larson has not heard of a supply pinch at the retail level. To the contrary, he says fertilizer stocks are “jammed to the roof” in many facilities because they planned ahead so products wouldn’t run short again after last year’s historic flooding disrupted the supply chain. More worrisome is if drivers get sick, he adds.

“All of a sudden, that creates freight delivery problems,” he says. “And there are high-risk older workers throughout the industry
— on the farm, at the co-op, at retailers. We’re not long on labor to begin with, and if we have people who can’t work for a couple of weeks, it’s a cascading effect.”

On Frahm’s operation, up to 50 semis per week show up to load out grain. “Realizing this was a major source of potential contamination, we have a new protocol where the drivers do not get out of their trucks and stay out of the scale house,” he says.

Barron has also invested in Lysol wipes for every farm vehicle. Each vehicle is cleaned whenever someone enters or exits.

7. Embracing change for the better

Frahm says he’s fortunate that he already set up a videoconferencing center in his office three years ago and is adept at using the online video tool Zoom, thanks to one of his employees who had to use it for some coursework at Kansas State University.

“I never would have thought I’d actually need a dedicated videoconferencing facility,” he jokes, adding he will continue to use the technology on his operation moving forward.

Change has been on Frahm’s mind a lot. “I’m most interested in what happens when the pandemic goes away,” he says. “It’s certainly sped up a lot of change that was bound to happen anyway. I’m predicting that many of our annual traditions are going to go away. I myself am partial to change and find this is another chance to get ahead of the curve.”

In the meantime, France says a resilient attitude will be paramount no matter what happens next.

“I don’t know how else to be,” she says. “We may not do everything perfect, but we have to do the best we can and adjust when needed.”

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