By Andrew Busch and Leah Hamilton
Take a moment to ask yourself three COVID-19 questions:
- What have you done to overcome the shutdown?
- What have you done to adapt to the shutdown?
- What can you do to thrive after the reopening?
Now, project these questions out to every job and sector of the economy. This is the potential change we must begin to understand as we experience the COVID-19 virus outbreak, the country shutdown and subsequent economic reopening.
To address these questions, we begin a new economic series called “O.A.T.”, which will focus on the reopening: Overcome, Adapt, and Thrive. For the reopening, we’ll give you three core components for each sector we analyze: what is the impact now; what trends have been supercharged; and what new directions are forming. These research pieces are not meant to be exhaustive, but to provide an overview of key areas.
We start with the foundation of the economy and life: food. Hunger, or the fear of going hungry, is one of the most powerful drivers of human behavior. It led to a rush to the supermarket and a hoarding of staple foods like pasta, cereal and anything that could be frozen. It can also lead to unusual outcomes like hoarding toilet paper: maybe not so unusual if you have a family of five.
With supermarket shelves emptying quickly, people are worried. They question whether food shortages could result, or if there will be any problems with essential goods and services. Changes to the food supply from COVID-19 are a core concern for consumers. The good news is that non-perishables are unlikely to experience a significant drop in current production. The bad news is that perishables and specialty food items have significant challenges to overcome. Longer term, the agriculture industry will have to innovate and change rapidly to deal with the escalating and complex effects of the COVID-19 pandemic. Like many industries, it’s already changing and taking action.
Overcome: How COVID-19 is Currently Impacting the Agriculture Sector
The pandemic is already affecting the agriculture sector in numerous ways. First, several problems with labor are created when a disease such as COVID-19 sweeps the country. For non-perishables like grains, labor is important, but they require significantly less people to plant, fertilize, weed and harvest than perishables. With this in mind, there are three main factors impacting labor.
First, when workers are ill, they cannot plant, harvest, or process food goods or work at all. 14-day quarantine recommendations mean that even if a person has recovered, they cannot return to work quickly. When this happens on a large scale, labor shortages can result, leaving nobody to work the crops. Or, consumer demand drops for perishable items that can’t be frozen and therefore, must be discarded. The New York Times has reported that “In Wisconsin and Ohio, farmers are dumping thousands of gallons of fresh milk into lagoons and manure pits. An Idaho farmer has dug huge ditches to bury 1 million pounds of onions. And in South Florida … tractors are crisscrossing bean and cabbage fields, plowing perfectly ripe vegetables back into the soil.” (NYT)
Second, when anti-coronavirus measures are in place such as “stay at home” orders, healthy workers cannot easily reach farms, an issue that is occurring in China as well. Time Magazine reports that “anti-coronavirus controls are preventing traders from getting to farm[s] near Wuhan. … the bleak situation … highlights the damage to farmers struggling to stay afloat after the country shut down for two months”. (Time) Some industries in the US, such as apple orchards, rely heavily on seasonal workers from outside the country, and “without an adequate workforce, growers may have to leave trees unplanted and branches unpruned.” (SciAm)
Even if workers are able to get to work, they could be working without adequate protection due to PPE shortages, or attempting to put social distancing measures in place in an environment not conducive to that kind of action. Even though they are classified as “essential workers,” Armando Elenes, secretary-treasurer of the United Farm Workers of America notes that “workers [are] not being provided protections or information. … And that’s gotten workers very scared.” (Guardian) In turn, this could lead to fewer workers being willing to work, and exacerbated labor shortages. On the other hand, Lupe Sandoval, managing director of the California Farm Labor Contractor Association explains that “there are a lot of employers jumping through a lot of hoops right now trying to figure out how to make this happen properly.” (Guardian) This difficult situation puts both workers and farm owners at risk. It also creates a complex calculus between trying to keep the economy and agriculture moving, and protecting workers: a balancing act that could exacerbate workplace tensions or cause social problems in the long term.
Another issue already facing farmers is supply chain disruptions and changes to demand. An analysis performed by the International Food Policy Research Center found that in China, one of the major impacts from COVID-19 is logistics disruption: “especially shortages of raw materials and delivery problems. The stress is particularly acute for livestock farmers: 38.5% of them list “logistics disruption” as the biggest challenge, compared to 35.6% of all agricultural enterprises.” (IFPR)
In addition, demand for staples has rapidly increased, while the shuttering of restaurants and different consumer patterns has led to decreased demand for specialty crops and products. The IFPR also reports that specialty crops “such as some fruits and organic produce grown by smaller-scale farms—generally require more labor. They are also often sold to restaurants and farmers markets, many of which are now widely closed or have reduced service across the country, rather than directly to the grocery stores that are still operating. Even if these farmers are able to continue working, they may have limited places to sell their goods.” (IFPR)
The graph below shows how this new pattern of purchasing behavior has caused price declines for perishable items like milk, as consumers are purchasing staple goods that can be frozen or are more shelf-stable.
Federal Reserve Bank of St. Louis Monthly Raw Milk Price
What Things Are Not Significantly Impacted?
One factor that has been clearly noted is that COVID-19 is not currently creating food shortages. With the above-mentioned labor difficulties, it is possible that food shortages in some specialty foods occur, particularly those that are labor intensive. This could include specialty fruits such as strawberries and blueberries, and as COVID-19 “leads to widespread income losses, fewer consumers may be able to afford specialized or high-value products, including organic vegetables.” (IFPR)
However, shortages of grains and staple products are not expected at all. Ardent Mills, the largest flour miller in the United States, explains that “Our flour milling facilities, bakery and mix plants are operating strong and we are equipped to handle what may come next. … We are working with our suppliers and partners, and at this time, we do not anticipate any disturbance to grain origination or ingredient availability related to COVID-19.” (WorldGrain)
It also currently appears that global food prices are not going to rise. In fact, grain and livestock prices in the US are actually falling. (Bloomberg) This could be due to a number of factors, but the ability of these farmers to produce, virus or no virus, could mean supply remains steady while demand falls from the shutdown. Closing schools, universities, bars, restaurants, and hotels affects demand for food service and all food types, perishable and non-perishable.
Brian Duncan, a farmer and vice president of the Illinois farm Bureau, also notes that “falling demand is especially bad for farmers with perishable products because they can’t “wait this out” by storing their goods … tell me what American consumer’s habits are going to be on the other side of this virus, and I’ll tell you what agriculture will look like.” (MarketPlace)
Whether these aspects of the agriculture sector continue to remain stable is yet to be seen, and greater or different impacts may arise if the pandemic continues. However, it is more likely that different and more complex changes take place, primarily in areas of the sector that are already in flux.
Adapt: Existing Trends Supercharged
Despite the current and acute impacts that COVID-19 is having on the agriculture sector, the industry was already changing in a number of ways prior to the outbreak of the disease. Some of these trends will be amplified, as farmers innovate and push forward new technologies to handle the virus and to reduce the “human” risk factor in their operations.
These trends can be separated into five categories:
- Precision agriculture with smart technologies and equipment
- Genetic crop engineering
- Sustainability planning
- Resilience planning
Each of these will be covered in more detail in turn.
Smart Technologies and Equipment
One of the biggest trends in the industry is the use of smart equipment and AgTech. In particular, the use of driverless equipment, drones, IoT and sensor data, as well as RFID tracking and blockchain, and AI and machine learning analytics, are all becoming increasingly used in the agriculture sector.
A report by Bank of America Merrill Lynch Global Research way back in 2015 predicted that “the agricultural robot market was expected to grow to $16.3 billion by 2020 from $817 million in 2013” and that the agricultural drone market could “generate an additional 100,000 jobs in the U.S. and $82 billion in economic activity between 2015 and 2025.” (MarketWatch) Now, Agribots, driverless tractors and other types of farm automation form an industry that is expected to grow at around 23% a year and to be worth more than $20bn by 2025, according to MarketsandMarkets, an American research firm. (Economist) It is likely this will grow even faster due to the virus, and the accompanying need for farms to become more resilient to a drop in labor supply.
In addition to drones and driverless equipment, sensors are being set up to help manage farms from afar. These kinds of sensors for crop monitoring include cameras, soil moisture sensors, and soil nutrient trackers for determining fertilizer needs. Business Insider Intelligence projects there to be nearly 12 million agricultural sensors installed globally by 2023. Additionally, tech giant IBM estimates that the average farm can generate half a million data points per day – helping farmers to improve yields and increase profits. (BusinessInsider)
In addition to the increased use of these smart technologies, rural areas are already demanding better access to broadband. So much so, that the need for widespread broadband access became a key policy platform for numerous candidates in the Democratic 2020 primary election, and the 2020 general election. (See all our candidate research here) If the use of these smart technologies expands even further, the push for broadband access is likely to intensify.
We can also expect increased RFID tracking and blockchain for crop tracking. This can help suppliers and consumers to know precisely where the crop came from. For example, in the case of a recall of lettuce, not all farmers are impacted, just the ones from the infected crop location.
An additional major trend in the agriculture industry is the genetic engineering of crops. Scitable, a publication by Nature magazine, notes that genetically modified crops are now used for numerous reasons, including “increased crop yields, reduced costs for food or drug production, reduced need for pesticides, enhanced nutrient composition and food quality, resistance to pests and disease, greater food security, and medical benefits to the world’s growing population.” (Nature) As genetically-modified crops become more accepted, farmers are adopting these technologies and techniques, with Vox noting that more than 93% of the corn and soy in the US is genetically modified to some extent. (Vox)
In addition, with the proliferation of AI and machine learning tools, it’s possible to combine analytics technology with crop breeding technology to predict which traits and genes will be best for crop production. This gives farmers all over the world data science tools to determine the best breed for their location and climate and may provide an alternative to genetically modified crops. (ZDNet) These technologies will become supercharged in ways that adapt as the world shifts to accommodate new challenges such as pandemics.
In many farms and agricultural businesses, sustainability considerations and actions are beginning to take more of a forefront in planning. Due to population growth and land use restrictions, farmers now need to produce more food with less land, as well as limited water, and in many cases fewer resources. This means that planning for sustainable land use and sustainable growth is becoming increasingly important.
Sustainable agriculture also includes a system “envisioned in its broadest sense, from the individual farm, to the local ecosystem, and to communities affected by this farming system both locally and globally.” (UCDavis) This means that global considerations of sustainability and resilience could become increasingly important if pandemics continue to arise: sustainability and resilience are intertwined. As global populations grow and food demand increases, sustainable and efficient agriculture will become radically more important. With food supply chains stretching across the world, farmers and suppliers may need to integrate sustainable and responsive approaches to breakdowns in their access to resources, supply chains, and labor, on a global scale.
In addition, farmers and agriculture industry employers (as well as those involved in supply chains more generally) are already creating resilience plans to deal with climate change factors, including supply chain disruptions as a result of natural weather events.
One direction that is already being taken in Europe is slightly different food access and supply processes: “small-scale farmers are demonstrating their resilience and ability to truly meet the food needs of the local population. … [such as] “Norwegians, who are increasingly using Facebook groups to sell their produce directly, and Germany, where farmers are selling directly to local shops that are still able to operate normally.” (Euractiv)
Another factor is that farms may also begin to implement remote work policies for staff who do not need to be physically on the land: Forbes notes that already, “a number of part suppliers and technology providers are trying to do as much as possible from afar before they have to come to the farm. There has been more reliance on remote work.” (Forbes)
On-line grocery store ordering has also significantly increased. Whole Foods has experienced such an onslaught of growth they have temporarily suspended new clients on their delivery service and created a waiting list. (CNN) Combined with machine learning and AI analytics, the increased digitization of food shopping will allow demand to be better understood, predicted and supplied.
Thrive: New Directions
As a result of COVID-19, many of the above trends will take new directions or will be accelerated. In particular, the use of technology is highly likely to increase over the short to medium-term.
With regard to the increase in existing technologies, it is highly likely that the use of agriculture drones will rapidly accelerate. We can already see some of these changes occurring in China as they begin to reopen parts of the economy and try to preserve existing, essential parts of the economy.
For example, CNBC reported that “while the coronavirus outbreak in China has hit many industries hard, some technology start-ups in agriculture are seeing demand rise,” with Beijing Yifei Technology company having received “increased inquiries about agricultural drones and unmanned vehicles.” They also report that “large farms, local governments and agricultural products distributors are buying high-tech equipment as the spread of the coronavirus puts an impetus on reducing human contact.” (CNBC) It is also possible that this trend will be increased if the US tries to reduce agricultural trade reliance on China or other countries overseas.
Driverless equipment is also likely to become increasingly used, particularly if outbreaks of COVID-19 continue to occur, or if social distancing measures are implemented for a long time.
With the rapid development of IoT and sensor equipment, this trend is also likely to rapidly accelerate. The Economist notes that with “the proliferation of farm-management software, it is possible to put more and more data to good use if the sensors are available … . And better, cheaper sensors, too, are on their way.” (Economist) Particularly for specialty crops that may be facing labor shortages, switching to technology-based solutions may be one way out of the problem. The big change will likely come in perishables as this area requires equipment and machine learning to be precise with tasks like understanding where to prune, determining whether a fruit is ripe, and learning how to harvest the fruit without damaging it.
In addition, demand for rural 5G will likely increase, beyond the current demand. If farmers are going to use more technology, their demand for broadband will surge. Better broadband drives demand for better telecommunications such as access to 5G. We can expect the USDA to drive this change and encourage increased lending into this space.
The trend of blockchain and RFID tracking may become more important as well, especially if pandemics become more common. Tracing of potentially infected food supplies could become vital and could allow unaffected parts of the sector (i.e. uncontaminated producers) to continue operating during another virus shutdown. Entrepreneur also notes that a more resilient response to the pandemic (or future pandemics) “would require global platforms to be erected that use sophisticated technologies such as 5G, robotics, IoT and blockchain. … This will also have a knock-on impact on the adoption of self-driving cars and delivery drones … The usual B2B platform suspects such as Amazon and Ali Baba are likely … to compete for the ownership of this more sophisticated supply chain.” (Entrepreneur)
Genetic Engineering Development
Given social distancing for laborers during a harvest, we may see genetic engineering for fruit and vegetable crops to spread ripening over longer periods. This would enable workers to harvest fields in a safer way. For example, some workers could come in for the early part of the harvest, with other workers in the later part of the harvest, or the harvest could be undertaken by a core team over a longer period of time.
Another potential development that could become more widely used is that genetically modified crops have been considered in the past for their potential role in vaccine production. This is because most “modern biomedical advances, especially the vaccines used to eradicate disease and protect against pandemics such as Zika, Ebola and the flu, rely on the same molecular biology tools that are used to create genetically modified organisms.” (The Conversation)
One clear example of this process already in action was a drug used to fight Ebola, called “Zmapp” made from genetically modified tobacco plants. Essentially, “antibodies are made in the tobacco plant’s leaves. When they’re harvested, rather than being made into cigarettes, their cells are popped open and the drug is collected.” (The Conversation) With the increasing likelihood of further pandemics, using genetically modified crops to produce relevant proteins and vaccine or medicine ingredients could become increasingly important. This could help to support new directions in the agriculture industry: directions that help to keep the industry afloat, and fight pandemics at the same time.
Broader Resilience Planning
Going forward, supply chain resilience plans are also more likely to include broader outlook and considerations of impacts coming from human populations, such as border closures, unavailability of workers and migration across states. We may see more redundancy inbuilt into supply chains and logistics, with seed, fertilizer, fuel storage and other critical inputs to protect against another shutdown and potential shortage.
In addition, suppliers, farmers and growers may build in more pathways through which they can deliver and supply their goods, to help to buffer a shutdown in any one chain, store, or access point. Deloitte explains that COVID-19 could be “the black swan event that finally forces many companies, and entire industries, to rethink and transform their global supply chain model,” as it has already “exposed the vulnerabilities of many organizations.” (Deloitte)
This exposure to new risks is highly likely to cause reassessments and new planning within organizations to consider supply chain failures, as well as other resilience considerations that they should take into account. This will also include sustainability factors. The Institute for Agriculture and Trade Policy explains: “As we are in an emergency, we should look not only for top-down solutions and not just ahead, but also reconsider if we have ignored paths that may lead us to a more sustainable, fairer, healthier and resilient food system.” (IATP)
Consumer Behavior Metrics and Changes
As COVID-19 leads to widespread income losses, fewer consumers may be able to afford specialized or high-value products. Depending on how long the pandemic lasts, we may see consumer behavior change on the frequency of grocery store visits to limit exposure. Also, consumers may continue to demand food that is more shelf-stable. This could translate into a long-term reduction in demand for perishables, specialty foods and organic foods unless confidence returns and consumers feel safe.
On-line grocery store ordering has also significantly increased. This trend will also continue when bars, restaurants and other food service companies that are likely to join the ecommerce sector, also increase their digitization and online offerings. Combined with machine learning and AI analytics, this will allow demand metrics to become better understood, increase efficiency and enable producers to see new trends faster. As an example, testing a new product used to require in-person testing for tastes and reactions. Now AI or machine learning is reinventing this process during the pandemic by allowing engagement with consumers in a manner that is safe and effective through its remote, data-driven insight engine. (FoodNavigator)
Reduced Regulatory Compliance
Finally, we can expect to see reduced or relaxed regulatory enforcement to allow for easier delivery of food products and services. As an example, U.S. Secretary of Agriculture Sonny Perdue announced proactive flexibilities to allow meal service during school closures to minimize potential exposure to the coronavirus and to allow flexibility in serving. (USDA) In addition, the USDA’s Rural Development arm has granted authority to lenders that participate in the Single-Family Housing Guaranteed program so they can work with borrowers to ensure people can stay in their houses if they are having difficulty making payments. (USDA)
With pressures coming from multiple directions, the agriculture industry will go through the stages of Overcome, Adapt, and Thrive. It will then bounce back with a combination of supercharged trends and new directions that take place post- COVID-19.
COVID-19 is currently impacting the agriculture industry in numerous ways, including labor shortages, supply chain disruptions, and shifting demand for products.
However, the industry was already evolving in a number of ways as well. Some of these changes will adapt to meet new challenges, and will be accelerated rapidly as a response to COVID-19, necessary to preserve food supply chains and protect people from health risks. These changes will take place primarily in three areas:
- AgTech use
- Supply chain and resilience planning enhancements
- Enhanced data on consumer behavior
To thrive in the reopening environment, the agriculture sector will continue to pursue rapid innovation towards understanding the consumer better, adjusting production faster and creating new products to serve new demand. While all production will benefit, the most acutely impacted (perishable, specialty and organics) will likely see the highest potential improvements.