June 18, 2020
COVID-19 in agriculture – out of challenge comes opportunity
By Matt Weeks
While North America, and the world, begin to slowly re-open their economies and ease stay-at-home orders, the full scope of the impact to the agricultural community is still unclear. In part two of our three part series distilling research about the effects of the pandemic on agricultural businesses and farmers, we explore specific opportunities that have arisen. Our goal is to not only understand the challenges facing the industry, but outline opportunities for companies to pivot and adapt to a new way of doing business.
We are showcasing what we learned in a three-part blog series in the coming weeks. If you missed our first post on changing farmer communication preferences, click here.
The only thing certain is uncertainty
Farmers across North America are worried about the lingering effects of COVID-19 and the future of their farms. Through AdFarm research we found that while 42% have already experienced “a great deal” of impact in their business due to the virus, 58% are expecting “a great deal” of impact to their business in the future. In total, over 83% of farmers cited that they expect their business to be either impacted “a great deal,” or “a moderate amount” in the future. Similarly, in a recent survey completed by Farm Market iD, nearly 90% of farmers cited that they were at least somewhat worried about the impact of COVID-19 on their business.
Among with many other industries, the pandemic has caused a rise in pessimism within agriculture. The Purdue University-CME Group Ag Economy Barometer is generated each month from 400 U.S. agricultural producers’ responses to a telephone survey. In April, the barometer fell 25 points to an index value of 96. This is the first time the barometer has fallen below 100 since October 2016. The profitability concerns associated with the coronavirus and large declines in commodity prices appear to be the driving factors of this drop.
Uncertainty surrounding markets and the economy appear to be the biggest concern for most farmers. In our survey, about 71% of farmers cited that the overall impact to the economy would be the major lingering effect of COVID-19. Other top concerns farmers cited were farm profitability and the ability to market crops and livestock. In the Farm Market iD survey, farmers were asked to list their top three concerns. 77% listed health and safety of family, friends and employees, 69% listed the overall U.S. economy, and 68% listed trade and commodity prices.
Additionally, according to a June 4 webinar poll from SVG Ventures, attendees were asked, “What would you say has been the most difficult challenge for the ag sector during the pandemic?”
- Minimizing disruption to the supply chain 58%
- Workforce availability and safety 25%
- Cash flow 13%
- Customer retention 4%
Reduced markets and cash flow raise concern for farm communities
The loss of markets is top concern for many producers and with that, many are concerned about the future of their local communities. From our producer survey, we found the following as the most critical challenges:
According to a recent Boston Consulting Group analysis on the potential impact of COVID-19, macrotrends will likely prove to be a catalyst for a number of emerging trends in the agricultural market place. These trends vary from impacts for marketing, technology needs, consumer demand, and regulatory and sustainability changes. Among the key findings, Boston Consulting Group theorized that in a post-COVID-19 world, there will be a renewed push for localized supply chains by both consumers and farmers. For farmers, providing a localized supply chain not only services a growing demographic of consumers but allows them to invest in the local community and reduce their dependency on global trade.
Here is the full list of selected trends from the Boston Consulting Group:
From the AdFarm COVID-19 survey, farmers echoed the sentiment, not only to drive towards a more digital future, but to be much more focused on the local community.
“…we will be much more intentional to support small business & the local economy”
Additionally, from the analysis by Boston Consulting Group, low commodity prices will require farmers to focus more on increasing their efficiency and while evaluating shifting crop acreages. We can also expect a shift in input and purchasing behaviors with online sales becoming more popular. With that, there is a growing need for digitalization and automation in agriculture. High-speed internet in rural areas is not a new problem, but shifting trends could make it more important than ever to solve as we see more suppliers and farmers choosing to move to a more digital approach.
Buying globally, selling locally
Among the key ideas from Boston Consulting Group is that the current pandemic may accelerate global input purchasing while localizing product sales.
The accelerating push for online sales of ag inputs is also supported by research from Agri Studies and Purdue University from their Multigenerational Farms Study. From their study of multigenerational farms across the U.S. and Canada (which amounts to just over 50% of all farms in the two countries), there is a defined pathway in which the younger generation takes over the decision-making responsibility for on-farm purchasing and marketing decisions. Most often, that starts with inputs such as seed, feed, crop protection and genetics. With the younger generation producer taking over the purchasing decision for inputs initially, they are increasingly comfortable and expect to be able to research, evaluate and ultimately buy through online channels.
What can agribusinesses do?
There are many things that we can’t control given the current situation, but there are a variety of things businesses can do to help their customers not only during this crisis but to help sustain their success, and yours, in the long term.
Most immediately, ensuring that everyone is implementing best practices in terms of minimizing the spread of COVID-19 is vital to the safety and protection of your customers and yourself. Remaining vigilant and flexible is important now, more than ever. This includes being flexible on timing of payments, pick-up and delivery options, and ultimately being understanding of your customers’ current situations. Open and honest communication and overcommunicating you’re your farmer customers will remain critical. Above all, building and maintaining trust is key for survival.
For our final blog installment, we will look at ways to not only create opportunities to help connect with farmers in this accelerating digital world, but opportunities that build trust and connections.
The future may be unclear, but producers across the world are continuing their work. The economy is slowly reopening and restrictions are being lifted. Change is inevitable, but agriculture is rooted in adapting and adjusting to the times.
Matt Weeks is a Strategic Lead at AdFarm. An agronomist by education, Matt is now helping to drive insights for clients through our AgIntel initiative.