Farms go from frying pan of trade wars to fire of COVID-19

As 2019 was ending and 2020 was about to launch, Wisconsin farmers like Cal Dalton were hoping things were about to look up.

“At Christmastime things were getting a little more optimistic out here on the farm,” said Dalton, who raises cattle and grows corn at his farm in Endeavor, in Marquette County, taking part in an online discussion last week on the state’s farm economy. “Then COVID hit and it pretty much destroyed our markets.” Prices for corn, soybeans and cattle all plunged.

How long it might take to recover now, and what the new face of farming might look like in a world where the COVID-19 pandemic is likely to linger into next year, if not longer, were the topics on the table during a Zoom call organized by WisPolitics and its offshoot, WisBusiness.

As moderator Pam Jahnke, a longtime Wisconsin farm broadcast journalist, pointed out, Wisconsin agriculture has been struggling for five years with turmoil in the marketplace for products, disruptions brought on by a streak of extreme weather and most recently trade conflicts that erupted when the Trump administration reversed decades of U.S. trade policy with punitive tariffs on overseas goods that sparked retaliation on U.S. exports — most notably by China.

A U.S-China trade agreement finalized early this year was billed as promising relief, but barely two months had passed when the COVID-19 pandemic erupted, bringing much of the economy to a screeching halt — including agriculture. The disruption to farming quickly sent shock waves farther, buffeting farm-related businesses: everything from grocery retailers to bankers, insurers and equipment suppliers were affected.

“We thought we had gotten through the last five years of the downturn,” said another panelist, Dan Smith, president and CEO of the Cooperative Network, which represents 250 cooperative businesses in Wisconsin and Minnesota. “It’s amazing how quickly we lost that optimism when COVID came along.”

The Cooperative Network covers 12 business segments, all with links to farming. “It’s important to realize how closely connected all of our rural businesses and our rural communities are to agriculture,” he said.

The state Legislature has only met once — in mid-April — to pass legislation that would enable the state to accept money from the federal government under the U.S. Coronavirus Aid, Relief and Economic Security (CARES) Act. With the CARES Act funding, Gov. Tony Evers’ administration in May launched a  $50 million relief program providing grants of $1,000 to $3,500 to farms with annual incomes from $35,000 to $500,000. The state will be  taking applications for the program from  Monday, June 15 through Monday, June 29.

Panelist Sen. Janis Ringhand (D-Evansville) said that a group of pre-COVID-19 farm relief bills that passed the Assembly before that body adjourned for the year in February will need Senate action before the legislation can go to the governor. The Senate’s Republican leadership canceled its regular floor sessions after March and has not announced plans to reschedule them.

As the ag industry looks ahead, one immediate need — emphasized by the way more people have been working from home and meeting virtually during the pandemic — is broadband internet in rural areas.

“I talk to a lot of farmers, and they’ve got dial-up, slow speed internet,” said Dalton. Everyone in the broader ag business web — suppliers, distributors and government agencies — needs a broadband internet connection to communicate, added Smith: “It’s impossible to run a business without one.”

Ringhand noted that the Wisconsin 2019-21 state budget passed and signed last summer included $48 million for rural broadband access expansion.

Smith said the combination of trade disputes and the disruption in supply chains from COVID-19 point to the need to strengthen regional and local markets, not just relying on exporting commodities.

And cost-cutting, he added, has reached its limits. “I think it probably gets under a lot of farmers’ skin a little bit when they keep being told to cut costs and be more efficient, said Smith. “Any farmer that is still farming has already done that, and there’s only so much of that that you can achieve. We need profitability.”

Only with better prices, added Dalton, will younger generations be willing to return to farming as a way of making a living.

But with continued uncertainty about the pandemic’s future course, much of what lies ahead for farming, not to mention the state and national economy as a whole, remains uncertain.

University of Wisconsin-Madison economist Ian Coxhead, the fourth panelist, said a major reason for that lies in a series of recent U.S. policy decisions.

Coxhead said trade policies under President Donald Trump (whom he didn’t mention by name) contributed significantly to the plight of Wisconsin farmers in the last few years. The federal government’s management of the COVID-19 pandemic has further endangered the country’s — and Wisconsin’s — position in the world economy, he added

The U.S.-China trade deal sealed in January might offer some short-term benefits, if China follows through on a commitment to purchase more than $11 billion in U.S. agricultural products in 2020 and another $19 billion in 2021, Coxhead said. But that outcome isn’t guaranteed, “because the United States government has decided that bashing China is a good political strategy, and I think that doesn’t really encourage the Chinese to cooperate.”

Moreover, any such benefit would be temporary, he added. “It’s not about establishing the ground for healthy trade going forward. It’s compelling China to do something in the short term, so there’s no long-term benefit that we can see.”

He compared the current federal policy and the China agreement to “a Band-Aid … It’ll come off in the bathtub and they will have to be looking for something else to cover up that particular wound.”

A more sustainable, long-term agreement “would require a very, very different trade policy stance on the part of the U.S. government than we have seen over the last two years.”

But besides a different approach to trade policy, he said, long-term economic sustainability after the pandemic, not just for agriculture but for other sectors of the economy, will depend on a more robust public health response. That could hit the U.S. in two ways, he warned.

Countries in Asia, along with Australia and New Zealand, are ahead of the rest of the world both in their recovery from the COVID-19 pandemic but also in their level of economic integration, and agriculture is among the important exports of some of those countries. As they continue to recover, they will benefit from trade among themselves and with other global trade partners, building on existing relationships.  

“If the rest of the world says, ‘Well the United States is not going to be a very reliable trade partner for both health and political reasons,’ then they have lots of other ways to configure their supply chains and their markets, and that will translate into long-term losses for United States exporters,” Coxhead said.

COVID-19 will be here for a long time, and any notion of having to choose between curbing the disease and helping the economy regain steam is “a false dichotomy,” he warned.

“There’s a real downside risk in saying we’ve got to open up the economy or else people are going to  lose their businesses,” said Coxhead. “Well, people are going to lose their businesses if we open up the economy and the disease is not under control.”

It will take careful management both of reopening the economy — for farm businesses, and for businesses of all kinds — and keeping people safe, he added. “There is no dichotomy between the public health goal and the economic goal.”