By Jennifer Dorsett
The ongoing coronavirus pandemic is expected to reduce U.S. gross domestic product (GDP) by $2.5 trillion and employment by 12.2 percent over the next year, according to a recent study conducted by Texas A&M AgriLife.
Texas A&M’s Cross-Border Threat Screening and Supply Chain Defense (CBTS) Center worked with Arizona State University and Victoria University in Australia to get a better idea of the economic impact of the coronavirus on U.S. agriculture.
Although researchers knew there would be substantial economic consequences from the pandemic, Patrick Stover, vice chancellor of Texas A&M AgriLife, said the detailed study helped outline both short- and long-term effects.
“This analysis gives us a critical and realistic evaluation of how the pandemic has, and will continue to, impact our nation’s and the world’s food supply,” Stover said. “It will be critical that we work together to elevate food system concerns and develop solutions that address the economic consequences to serve as a foundation for lasting recovery.”
This July, researchers completed initial quarterly economic projections for the period of March 2020 through February 2022, according to Texas A&M CBTS Director Greg Pompelli.
While the report estimates the COVID-19 pandemic will reduce U.S. GDP by 11.9 percent over the next year and reduce U.S. employment by 19 million full-time jobs, Pompelli noted the researchers found a smaller economic impact on the U.S. food and agricultural sectors.
“The resulting recession had a relatively small impact on the overall demand for farm products,” Pompelli said. “Still, COVID-19 caused income declines in all food and agricultural sectors.”
Food supply chain disruptions were felt early in the pandemic, caused by disruptions from temporary meat processing facility closures, issues with transportation of goods and changes in the volume and types of food orders.
Farmers and ranchers were faced with increasing retail prices and falling commodity prices. Pompelli said although some of those impacts could not be fully modeled in the study, researchers expected a 5.2-percent decrease in real U.S. farm income this year and a modest 0.76-percent decrease in 2021.
This is in direct contradiction to the U.S. Department of Agriculture’s latest farm sector income forecasts, which show an increase of 3.6 percent in farm income for 2020.
Pompelli explained the difference was due to direct federal government payments, which have increased 64 percent in 2020. Without the assistance, real farm income would be substantially lower this year.
Other findings showed COVID-19 unevenly impacted the agricultural economy, with livestock operations experiencing more negative effects than other commodities.
Over the next several months, the teams will work together to re-estimate economic impacts of the coronavirus pandemic after taking policy actions into account.