In the classic 1951 Looney Tunes cartoon “Ballot Box Bunny,” Bugs Bunny and Yosemite Sam are running against each other for political office. As Sam resorts to handing out cigars to prospective voters, Bugs offers Sam a cigar of his own. “Corony, Corony!” yells Sam. “My favorite!” Bugs lights the cigar for Sam, and it promptly explodes in his face.
Not to say that Bugs Bunny predicted the explosion of the COVID-19 coronavirus 69 years ago. But you could make an argument that it’s a pretty accurate metaphor for the way life in general has changed for everyone over the last three months.
Despite the cautionary changes and social distancing mandates put in place to protect human health and flatten the curve of the virus, farming’s status as an essential business mostly meant minor adjustments for growers and has kept tractors and farm equipment rolling through the early stages of the 2020 planting season. In most cases, it’s been business as usual…in a most unusual way.
New Processes and Changes for Conducting Business
In the early weeks of the quarantine mandates, Dr. Calvin Trostle, Texas A&M AgriLife agronomist, led an information campaign to get the ag community on board with the necessary adjustments.
“It’s part of a farmer’s normal social interaction to get together with their neighbors and other farmers over coffee or lunch,” said Trostle, in an April 27 Cotton Companion podcast interview. “Right now, we encourage folks to just keep their distance.
“Our more urban cousins may look at farmers and say, ‘You’re lucky…you’re on a farm and there’s natural isolation in what you do’,” he added. “And that does work to our advantage. But like in weed control, we always say ‘start clean.’ In terms of COVID-19, I guess the message would be ‘stay clean.’ We need healthy farmers in the U.S., and that extends to their employees as well. The more we can keep the agricultural economy rolling, it will help diminish some of the downturn in our overall economy.”
Farm retailers also adjusted to the social mandates while still providing needed services to their customers. A quick snapshot of several retail groups in April showed that many organizations had quickly adopted preventative measures to protect customers and employees, including adopting social distancing recommendations, extra cleaning and sanitizing at their facilities, and limiting customer access. Others also increased digital options to link customers with their local branches for agronomic consultation, ordering crop inputs and scheduling pick-ups and/or deliveries.
Seed and chemical companies made keeping the supply chain open and operating efficiently a primary goal, even while making necessary business adjustments in terms of interfacing with retailers and growers while observing social distancing. In most cases, all paperwork and signatures have been handled electronically, and sales reps are following up with email and phone calls to provide information and answer questions.
“We’re maintaining proper social distancing while still servicing our growers at the farm gate,” said Chiree Fields, Americot Chief Operations Officer. “That’s a tough adjustment for a seed sales force that’s used to personal contact. But we’re making it work.”
University and Extension researchers who are still dealing with sheltering and travel constraints are also making adjustments for in-field studies this year.
“In my particular case, I will need to scale back on some of the on-farm work that I anticipated for this summer,” said Trostle. “I have two projects that I will have to prioritize, and I may have to set some others aside. There will be some cutback, but we’ll try to minimize any impact it may have on producers.”
Economic Recovery Will Take Time
The most painful aspect of COVID-19 in cotton to date, however, remains the economic impact on prices, demand and grower livelihood.
A level of financial relief at the farm level came through passage of the Coronavirus Aid, Relief & Economic Security Act (CARES Act) on March 27 and the Coronavirus Food Assistance Program (CFAP) announced April 17, with additional details coming on May 19. Both programs provided funding to help offset actual losses where prices and market supply chains have been impacted, as well as additional adjustment and marketing costs resulting from lost demand caused by COVID-19 for the 2020 marketing year. But in no way were the programs designed to make growers economically whole.
Cotton Incorporated’s May 2020 Monthly Economic Letter added some context to cotton’s current economic situation:
“Given that much of the world is either still shutdown or in the early stages of re-opening after shutdown, considerable uncertainty remains regarding how long and deep the economic downturn might be and what form the eventual recovery might take. With three months left until the end of the 2019/20 crop year, there is still time for further downward adjustments to consumption estimates and further upward adjustments to ending stocks.”
“We had a long price slide to the first of April when the ICE Futures got down to 48 cents,” explained Dr. John Robinson, professor and Extension cotton economist with Texas A&M University, in the May 13 Cotton Companion podcast. “Then began a recovery in April with a 9-cent rally back up to 57 cents. In the last few weeks, we’ve settled into a range between 55 and 58 cents. We appear to have stabilized.”
Robinson noted that recent weekly sales to the China Government State Reserve was a positive for the market, but also cautioned that fundamentals could still push prices back down.
“There’s not much hedge selling happening,” he said. “And from a speculative standpoint, if you’re a hedge fund manager, you’d be braver than I am to bet the market is going to go lower when the Federal Reserve and other central banks are injecting trillions of dollars into the market. There’s a lot of inflationary pressure on that.”
As far as what’s ahead for cotton as the 2020 crop begins, the short term prognosis is not especially rosy.
“Growers have to go into this year with their eyes wide open and realize that the new crop price outlook is pretty tough,” said Robinson. “Fundamentally, I don’t see how prices are going to climb out of the upper 50s or low 60s. Thankfully we have a safety net with the loan’s price support and PLC’s cotton payment.
“I think it’s going to take well into 2021 before demand for retail apparel and home furnishings begins to get back to normal,” he added. “It will take a long time for consumers to feel confident that it’s safe to go out and spend money on non-essentials. It’s going to take many, many months beyond the assurance that the medical problem is solved.
“This is an extreme situation. It’s unprecedented.”