August 21, 2020
The new modes of knowledge and information transfer as a result of the COVID-19 pandemic have been challenging but they have also created new opportunities. While face-to-face speeches and seminars are ideal, virtual meetings allow us to reach audiences with diverse agricultural interests worldwide. Today, we’ll sample some of the great questions from recent virtual meetings both here in the United States and globally.
Can you compare this black swan event to anything that has occurred in the agriculture industry in your five-decade career as an agricultural economist?
The answer is quite simple: no! Most other black swan events are the result of an economic, weather or policy event impacting certain segments of the industry or specific geographic regions. The suddenness of the COVID-19 pandemic and the breadth and depth of its global impact on the health, economic and social behavior has been unprecedented. The demand destruction for agriculture and industries in segments of the economy that serve agriculture has been a game changer. People have suggested that this is similar to the 1980’s farm crisis. The pandemic will shift paradigms on how and where business is conducted around the globe.
What lessons has this pandemic experience taught us about the strengths and weaknesses of the agriculture industry, and the ability to navigate a black swan event?
From a macroeconomic standpoint, the Achilles' heel of the agriculture industry has been supply and marketing chain management. The production and processing concentration, with the goal of optimization and efficiency, was quickly exposed. Unfortunately, producers and consumers paid the price. Many agriculture producers were unable to find a market for livestock and other products. The issues with supply chain management led to empty grocery store shelves and consumers paying higher prices when products were available. Similar supply chain issues occurred in technology, medical supplies and other critical goods, which is currently being debated in Congress. The question then becomes, does diversification create resiliency in the agricultural model? Some serving the local markets through small processors are finding this to be very true.
From a microeconomic standpoint, liquidity and working capital are vital parts of the business and personal budgeting process and subsequent game plans. In a world of new possible black swan events with price and increased cost volatility, dry powder through working capital and cash will be a path to long-term sustainability.
Will the food, fiber and fuel consumption patterns change?
Yes, in the short run the focus is on supply management, local products and being transparent. However, the key will be whether these trends are for the long run and what businesses will do to retain customers. Aligning with the marketplace and being agile enough to adapt and change will be essential to long-term business success.