A study commissioned by a coalition of California farm groups shows an industry grappling with massive losses related to the COVID-19 pandemic that will total between $6 billion to nearly $9 billion, or about 18% of the state’s farm gate sales last year.
“The impact is being felt in rural communities throughout the state that rely on agriculture for their residents’ livelihoods,” said Farm Bureau President Jamie Johansson. “We want legislators and regulators to bear that in mind and avoid making farming even more costly and difficult in California.”
State lawmakers and the governor’s administration have been racing through negotiations to pass a budget bill this month and begin to reconcile a deficit projected to be as high as $54 billion. The resulting cuts in spending are likely to hurt critical programs for the industry, and policy advocates are closely watching proposals to further raise fees on farmers. Several major new regulations are also taking effect this year, while more are in the process of being adopted.
Already this year, the industry has lost $2 billion due to both market disruptions and a jump in production costs following the outbreak, according to the report. Factoring in secondary impacts to the broader food economy, the total loss in output value is expected to be $13 billion.
On the jobs side, state unemployment figures for April show a 13% loss for farm, processing and manufacturing sectors statewide. In agriculture, more than 94,000 jobs were lost. Adding in the food service and retail sectors, the number skyrockets to 800,000. A share of those jobs has likely returned since May, however.
Rural regions experienced much higher spikes. Kern, Tulare, Imperial and Monterey Counties are showing ag-related job losses ranging from 27% to 81%.
The report warns of the broader economic disruption this will bring to California’s most vulnerable populations.
“The economic impacts fall disproportionately on impoverished, rural counties in the state,” the authors write. “Impacts to farm jobs, processing, and income tend to fall on workers that reside in economically disadvantaged communities in these rural counties.”
When it comes to the industry, markets that were already seeing broad disruption at the start of the year will experience the deepest economic impacts.
Dairy will be hit hardest, losing up to $2.3 billion, according to the report. The sector began the year on a positive note, with the state completing its first year in the Federal Milk Marketing Order. Dairy farmers were pulling out of a difficult four-year period and beginning to see improvement in milk prices.
With the sudden closure of restaurants and schools during the pandemic, farmers and processors scrambled to pivot supply chains to meet demand spikes from groceries and food banks.
“There was such an enigma around where the demand was and where the supply needed to go,” said Anja Raudabaugh, CEO of Western United Dairies.
Grape growers, meanwhile, stand to lose up to $1.7 billion this year. The California winegrape sector has been facing a severe oversupply issue, following decades of record growth. While the situation was compounded by several factors, the trade war with China played a large role in crippling an emerging market that was seeing 400% growth.
Along with trade uncertainty, the report points out that the economic fallout comes at a time when California agriculture is facing broad disruption on other fronts – from water availability to rising labor costs due to new overtime and minimum wage laws, along with other water and air quality regulations that are raising compliance costs.
In third place following grapes, the flowers and nurseries sector will lose up to $740 million from the pandemic fallout. Though florists were among the first to reopen under Gov. Gavin Newsom’s phased plan, the sector has long been shrinking in California as costs rise along with competition from Latin America.
Anja Raudabaugh, CEO of Western United Dairies
When the impacts of the shutdown first began to sink in at the beginning of March, the state flower commission was quick to announce the sector was “teetering on economic devastation,” with farmers, distributors and retailers facing poor odds for survival. Mother’s Day is traditionally the biggest season for flower sales and keeps those businesses afloat through the summer. The reopening of flower shops came just days before the holiday and at a time when public health officials were advising not to visit older loved ones.
Along with the loss in direct sales, farmers and businesses across the food chain have absorbed a wave of higher operating costs. The logistics involved in moving crops to new markets is a significant factor, but measures taken to increase employee health and safety and prevent further COVID-19 infections have been costly as well. This includes social distancing on packing lines, spending more time on cleaning and sanitizing and purchasing personal protective equipment.
On the opposite end, the report notes that some farmers have seen a modest rise in sales. Rice, processed tomatoes, canned fruit and other shelf-stable products saw a boost in demand, as panic buying cleared grocery store shelves in the first weeks of the governor’s stay-at-home order. Sales for dry beans jumped by 20% during that time.
Another bittersweet glimmer of hope within the report is that California’s competitors in agriculture may be experiencing worse economic effects from the pandemic, increasing demand for California products.
The report acknowledges that many more changes are still to come. For one, the industry raised concerns over access to crop protection materials during the stay-at-home order. That could reveal further disruptions during the summer growing season and add to losses.
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A second wave of the pandemic or localized outbreaks could increase those impacts as well. Other economists have warned of a second wave in the recession, as more businesses supporting retail, restaurants and other frontline industries face bankruptcy. This could cause a drop in demand for the state’s high-value crops.
More economic aid will be needed, the report advises.
“Federal support programs under the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security Act (Cares Act) are welcome relief but provide insufficient funding to offset economic losses,” the authors write.
The 65-page study, the first to tally the coronavirus impacts on California agriculture, was conducted during late April and May and relies on available production, export and pricing data as well as surveys and interviews.
ERA Economics, a consulting firm led by agricultural economists from UC Davis, produced the survey for a coalition led by the Farm Bureau and including UnitedAg, Ag Association Management Services Inc., the California Fresh Fruit Association, California Strawberry Commission, California Tomato Growers Association and Western Plant Health Association.
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