The economic impact of COVID-19 on agriculture and the way we eat
COVID-19 has drastically impacted agriculture and the way people are eating these days. This article outlines the economic impacts in food demand and supply.
This article was originally published on BBC on May 1, 2020 and sourced from Econofact on April 20, 2020.
How the COVID-19 pandemic has dramatically affected agriculture and the way we eat
Impacts of COVID-19 on the food sector are among its most visible and important economic consequences. The effects are driven by a sudden shift to food at home due to social distancing measures, as well as by risks of food shortage resulting from outbreaks at packing plants and among farmworkers as well as restrictions on cross-border travel and trade. For the main agricultural commodities, sharply lower demand for livestock products has outpaced any constraints on supply, leading to steep declines in commodity prices.
For many Americans, the loss of school food and other meal assistance programs has multiplied the consequences of falling incomes, with dire consequences especially for children and the elderly. To monitor impacts on consumption, we need real-time monitoring of retail prices by food group for early detection of price spikes from supply-chain disruption as well as price declines from lack of demand.
COVID-19 hit richer cities first, but hits poorer people harder. The disease spread internationally through air travel to affluent cities but soon reached lower-income neighborhoods and rural communities. Differences in peoples’ ability to avoid infection and obtain care have compounded disparities in previous health status, leading to a much more severe burden of disease in disadvantaged populations. One of the largest outbreaks in the U.S. to date is at a low-wage meatpacking plant in South Dakota. Beyond the direct impacts of infection and illness, much of the economic harm to low-income people has occurred in the food system through sudden simultaneous loss of service jobs and changes to nutrition assistance such as school meals, overwhelming our safety nets such as food banks or the Supplemental Nutrition Assistance Program (SNAP).
Economic impacts of the pandemic are plainly visible in food demand and supply. Before COVID-19, Americans were spending about half of their food budget and getting a third of all dietary energy in meals away from home, through schools, workplaces, restaurants and institutional food service. Shutdowns have closed most establishments, forcing a sudden shift to groceries or packaged meals. As a result, over 10 million food service jobs are at risk while milk and other perishables are going to waste because they could not be repurposed for meals at home. Companies that supply institutional food have plummeted in value, as investors expect demand to stay low for months to come. The largest U.S. foodservice suppliers, Aramark and Sysco, are now worth half of their pre-COVID market valuation, while food retailers such as Kroger and packaged food manufacturers such as General Mills have held their value (see chart). Meatpackers such as Tyson, who buy livestock from growers and sell packaged cuts, declined earlier than U.S. foodservice companies but their losses have been somewhat offset by steep declines in live animal prices due to the closure of processing plants and changes in meat demand.
Federal aid has targeted farmers and food consumers, for example through the Coronavirus Food Assistance Program, but many of the most vulnerable people are food system workers. Those most at risk of illness or job loss include the million or so laborers employed on farms for harvesting and other seasonal operations, as well as the thousands of workers at meatpacking plants and the over 12 million food service workers who work side-by-side or serve customers in person. These are typically difficult jobs done by people with few options and limited savings, so outbreaks and shutdowns are particularly harmful. Many food workers remain on the job and exposed to disease, while COVID-related layoffs have been disproportionately in food services which accounted for 60% of all jobs lost in March 2020. These data reveal the outsized role of food workers in COVID-19 impacts. Not all will qualify for unemployment insurance; many will keep working despite health risks because their jobs are essential for our food supply, behind the scenes and far from the grocery stores and local farms with which most Americans are familiar.
Our sudden shift to food at home, as opposed to meals at school, workplaces, institutions and restaurants, brings a dramatic change in what we eat. In the past, consumption at home has generally been more nutritious than meals away from home, but that could change due to COVID if fruits and vegetables or other perishable foods are replaced with more shelf-stable packaged foods. One fact that has been thrown into sharp relief is the extent to which vulnerable populations rely on school meals and other feeding programs. Expanding these services as well as SNAP and WIC to allow more home delivery of healthier foods could play a big role in sustaining health. The role of diet quality in immune response calls for attention to the mix of foods consumed, and obesity appears to be associated with disease severity among confirmed cases of COVID-19.
The forecasts used by commodity traders in contracts for future delivery clearly signal that declining demand from lower incomes will outpace any reduction in supply for most kinds of food. Prices have dropped most for fuel (ethanol) and livestock products, with little change in the supply-demand balance for staple foods like wheat. Other food group prices are sensitive measures of trends, seasonality, and spatial hotspots where local markets are failing. Different kinds of food have very different price dynamics, and big impacts on the cost of healthier diets.
What this means
COVID impacts on agriculture, food and nutrition are driven by disease transmission and severity. Poor diets, whose most visible consequence is obesity, are associated with harms from COVID-19 and other infectious diseases, in addition to their more direct effect on diabetes, hypertension, cardiovascular disease and some cancers. Epidemiological models have used detailed information to predict the way in which COVID-19 infections spread in specific locations and healthcare systems, leading to changes in policy and behavior to limit the damage.
The effectiveness of response depends crucially on the speed and quality of data collection, updating predictions with new information. Economic analyses using that information reveal much about where, when and for whom our food supplies and nutrition are at risk. Key responses include an expanded and more flexible safety net through SNAP, WIC and other programs; increased protection for essential workers in food harvesting and processing facilities; and close monitoring of food prices to detect price spikes due to supply disruption or declines due to collapsing demand. These measures would complement existing safety nets for all U.S. households, recognizing the distinctive role of food sector jobs in American life.
Written by: William Masters