Despite the upheaval COVID-19 dumped on every sector of the U.S. economy and every aspect of our society and culture, it seems the ag industry overall is poised to emerge from 2020 with renewed optimism and momentum. “After declining farm financial outlooks last spring,” noted the University of Missouri’s Food and Agricultural Policy Research Institute earlier this month, “farmer sentiments are skyrocketing.”

Dennis McLaughlin, McLaughlin Writers LLC, with Ernie Verslues, MFA, Inc., president and CEO; Matt Teagarden, CEO, Kansas Livestock Association; Mark E. Stewart, Ed.D., president and CEO, Agriculture Future of America

In A Year Of Disruption, Agriculture Shows Its Grit, Spunk, and Value

When the U.S. economy took a devastating nosedive caused by the COVID-19 pandemic, the agriculture industry rose to new heights in the eyes of Americans. Gallup’s annual assessment of the country’s favorability leanings toward 25 business and industry sectors showed farmers and ranchers were top guns. Farming and agriculture, already among the highest-rated industries over the years, stepped up to the top position on the medals stand, as Number One with a 69% positive rating according to Gallup. The grocery industry was silver medalist, likely because of its quick recovery from the pandemic’s initial attack on inventories and supply chains. Restaurant, computer and retail industries, respectively, occupied the other positions in the top five. (More information available at Gallup Poll Social Series: Americans' Views of U.S. Business and Industry Sectors, 2020. For more information about industry favorability click here.)

At the risk of coming off Pollyannaish or insensitive to the more than 1.5 million deaths globally from COVID-19, it still can be said that agriculture carried itself nobly, pragmatically and effectively during the pandemic. As Americans’ initial fears for their health and safety gave way to day-to-day concerns about putting food on the table, agriculture, food and transportation industries rose to the occasion.

Moderating a webinar discussion on the food supply chain hosted by the Agricultural Business Council of Kansas City in April, Tom Brand, executive director, National Association of Farm Broadcasting, said consumer jitters over shortages and higher prices for groceries and home goods was misplaced. “Demand is the issue, not supply.” The economic fundamentals of production, inventory, transportation and liquidity were intact across all sectors of the food industry. And remained so as the pandemic crisis deepened.

Speaking to Council members in July, Dr. Dan Thomson, chair of Iowa State University’s Department of Animal Science, stressed that animal agriculture was an essential business. He made a point that COVID-19 forced a streamlining of most animal ag operations and processes, and the ag industry stood up to the challenge. Distributors and grocery store employees and managers also earned their stripes as essential workers, said Dr. Thomson.

Things Looked Good……

……Until they didn’t. At the outset of 2020 optimism reigned in the ag industry, especially over trade, said Matt Teagarden, CEO, Kansas Livestock Association. Japan had lowered tariffs on beef imports from the U.S. to a level where American protein producers could compete with Australia and other beef producing nations. In October 2019, China and the U.S. had reached an agreement to implement the first phase of a renegotiated trade agreement. Meat prices at home were higher, also. “People buy beef when the economy is good,” Teagarden noted.

As COVID-19 cases increased, business, education, social organizations and institutions went into lockdown. March’s ‘turn-for-the-worse’ was worse than anticipated. The effect on ag industry plans and operations, as well on the economy in general, was drastic, said Teagarden. “The losses were steep and severe.” What had been a dynamic economy that was challenging business managers to be nimble enough to keep up with all the fast moving parts, now became, as Teagarden describes it, a challenge to see how quickly the economy could recover.

But first most American businesses readily switched from a focus on first or second quarter financial performance to worker and plant safety. In a March communique to its employees, customers, vendors and distributors, MFA Incorporated stated its first concern was for the security and well-being of its employees and their families and communities. “Although farmers and the rural communities we live in have a long history of being resilient during such times,” wrote Ernie Verslues, MFA’s president and CEO, last March, “the nature of the coronavirus and how easily it can spread is a very real and serious concern for everyone.”

At that April Council meeting, Dennis Rodenbaugh, executive vice president, Dairy Farmers of America, said the immediate goal of his organization at the outbreak of the Covid-19 pandemic was to create a strategy guaranteeing health and economic security for its member dairy farmers, and opportunity as the country emerges from the crisis. Since the dairy co-op was dubbed an essential business and would remain operational, Rodenbaugh explained that within 48 hours of nation-wide lockdowns, 1,200 of DFA’s 6,000 employees were sent home to work remotely. Farmers, truck drivers and other staffers were provided with PPE gear and sanitizers so they could carry on as safely as possible. “Unfortunately, cows can’t be turned off,” he rued, “and gallons of milk had to be dumped.” Going forward, DFA is implementing and devising as many tools as possible to stabilize the market. To that note, KLA’s Teagarden adds that KLA dairy members are presently operating in a ‘strong’ space.

Shutting down operations was not an option, said Verslues. Even as the pandemic-caused slowdowns in production and created a backlog of farm supplies, at the end of the day, he said, “We delivered on our value promise” – which meant the Columbia, Missouri-based regional farm supply and marketing cooperative continued to provide its 45,000 farmer members with quality products and services, as well as wholesale products to agricultural companies.

The initial impact of COVID-19 disrupted MFA, as it did everyone. But Verslues explained his team adopted a proactive strategy to face the situation head-on. Despite some early, temporary workforce curtailment, MFA was fully staffed onsite and remote by June. Looking back, Verslues recalled that other obstacles were cropping up in fall 2019 before COVID-19, such as reduced planting in the wake of catastrophic flooding, and prevent planting policy and initiatives. So MFA was already reviewing its processes to react to market and natural disruptors. “We are always reviewing our processes and contigencies,” Verslues said.

Seaboard Foods’ Kevin Smith, vice president, sales and marketing, said his company had no real playbook for the pandemic or the havoc it raised on an hourly basis. But Seaboard rapidly rolled out a plan focused first and foremost on the well-being of its employees, customers and “society in general.” The blueprint for survival called for curtailing unnecessary travel, customer visits and aligning its safety and business guidelines with CDC policies and recommendations. Seaboard also donated over 30% of its food products to organizations providing nutritional safety nets for people in need nationally and globally.

Emerging Innovation

In detailing other steps they were taking to mitigate Covid-19 damage to the U.S. economy, all the speakers (Rodenbaugh, Smith and Nick Ebert of Sysco) at the Council’s April meeting said their companies were making special appeals to grocery retailers and food service restaurants and drive-thru outlets. All three disclosed that part of their outreach included an appeal to retailers to review “limited quantity” purchase policies – underscoring the idea that producers had product, and the issue was not supply, but demand.

Rodenbaugh described a DFA campaign to encourage food service companies to increase use of dairy ingredients by an ounce or two in their portions of ice cream, milk shakes and cheese toppings as way to decrease dairy farmer raw product inventory, and reduce dumping. Rodenbaugh stressed that dealing with retail grocers required a respectful approach in a stressful time. The key, he said, was “to let store managers make stocking decisions while encouraging them to keep up with demand and manage their labor to accomplish that end.” The supply is available, he emphasized.

As food service operations were closed and allowed only to serve take-out fare, Kansas City-based Sysco realized its styrofoam containers were not suitable for diners wanting to carry-out traditional full-course family meals. Nick Ebert, vice president of sales for Sysco, said his company came up with a number of container designs using better materials. Sysco is expanding its food service customer model in the future to reach out to retailer grocers like Albertsons and Kroger.

The critical lesson from this Covid-19 pandemic, said Seaboard’s Smith, is “as we move toward normalcy, we have to plan for other Covids, and be prepared to pay for them with liquidity, strong P & L’s and strengthened supply chains.” He added it is not easy to predict pandemic outbreaks, but “the economy can be financially prepared using technology and applying what we’ve learned from this one.”

Or to put it another way: risk management has to be near the top of the list of any ag enterprise’s strategic plan. KLA is making sure it understands how each of its members does business. “Our members operate their businesses differently, and setting guidelines for risk management can’t necessarily be universal,” said Teagarden, adding that it is difficult to anticipate how to prepare them for natural, financial or biological disasters.”

Going Forward

Farm income is recovering from last spring’s coronavirus-driven declines, say surveys conducted by Kansas City Federal Reserve Bank. “An influx of CFAP government payments and higher prices for agricultural commodities provided greater support for farm finances in the third quarter and seemed to limit demand for financing,” said Kansas City Fed economists Cortney Cowley and Ty Kreitman.

“Although farm income generally remained low, rates of loan repayment stabilized and farmland real estate markets remained strong,” they wrote “The third quarter was the first time in seven years that bankers reported a decline in the credit needs of farm borrowers in all districts.”

Pat Westhoff, director of the University of Missouri’s Food and Agricultural Policy Research Institute recently noted: “This has been a phenomenal year with all sorts of market developments [appearing] every month; we think we've got things figured out; and then the next month, something new happens.” But after declining farm financial outlooks this spring, farmer sentiments are now climbing, according to Purdue University’s Ag Economic Barometer. It’s director Jim Mintert said, “Since bottoming out in April at a rating of 96, it has been rising pretty consistently, and [in October] it set a new record high at a reading of 183.”

Agriculture’s situation still is not business as usual, but KLA’s Matt Teagarden suggests the light at the end of the tunnel is getting brighter. The rapid development and introduction of COVID-19 vaccines could lead to a “relatively quick recovery of protein demand.”

Source: Chuck Abbot, Successful Farming magazine; Columbia Daily Tribune, Misouri; Agricultural Business Council of Kansas City, April, 2020, Newsletter; University of Missouri’s Food and Agricultural Policy Research Institute

2020: From A Different Perspective

From Mark Stewart, President and CEO, AFA

While ag businesses, suppliers, distributors and transporters were hustling to address demand pressures and shore up weak points in their supply chain, another agriculture group of future agricultural industry leaders were exposed to what might turn out to be one of the more unique learning opportunities it will encounter.

Agriculture Future of America, based in Kansas City, Missouri, provides first class leader and career development experiences for highly motivated young men and women. AFA programs are built through partnerships with organizations, individuals, universities, communities and foundations. But just like the rest of the world, AFA had its feet put to the fire when COVID-19 disrupted normal routines and challenged it to adjust to conditions it never anticipated.

“We did not have any plans to roll out new programs or expand, but we did have plans to introduce new strategies and prepare for our 25th Anniversary,” said Mark Stewart, Ed. D., president and CEO of Agriculture Future of America. He also noted AFA planned to expand programs to address equality and inclusion principles, and introduce them into AFA’s staff training and development syllabus.

But first things first. AFA immediately adjusted its operations model to get online and go virtual. “We were able to offer some webinar-style discussions about careers and topical issues for students through our partnership with Merck Animal Health.,” Stewart said. But in July, AFA conducted its first virtual presentations when it went virtual with its Crop Science Institute curriculum. Preparations to join the digital/cyber medium included selecting online program platform technology to house events as well as finding creative ways to engage industry partners with students, he explained.

With what AFA learned from such events, its staff chose a different online platform to host its Leaders Conference event in November. “We tweaked some processes with our application and selection to ease the experience,” Stewart said, “and we thought creatively about program design since it would be all virtual.” Ultimately, AFA was able to carry out most of its programs and continue its operations despite the pandemic.

Lessons Learned

AFA has seen two silver linings emanate from the pandemic. “One,” Stewart pointed out, “we knew in the future not all of our of best talent wouldn’t reside in Kansas City.” He added that it wouldn’t make sense for all of the AFA staff to be located together in one place. “Second, we had talked for years about a virtual add-on or complementary element to our in-person experiences.” Stewart elaborated: “The year 2020 was a catalyst in moving these discussions forward faster, and for that we have much to be grateful for as it has drastically changed our outlook on the future.” What’s more, Stewart said, AFA is shifting its mindset from weathering the storm to looking for opportunity in it. “We’ve realized just how much we can do. We forged ahead with some critical hires, we went full speed into our next strategic plan with the mindset that this was the greatest opportunity for us to think differently and innovate. Ultimately, we have learned that even in the midst of great disruption, uncertainty or fear, there is great opportunity if met with optimism.”