From delays in picking and processing produce, to slowdowns or cancellations in shipping, the coronavirus pandemic is causing a number of nightmares for agricultural trade around the U.S. and the world.
Before the pandemic, there was good progress being made on the U.S.-China Phase One Agricultural Deal, with China beginning to offer tariff waivers for some imports from the U.S. But once COVID-19 took the spotlight, everything changed.
鈥淚f we look at the first few months worth of numbers, the January/February data, those numbers are running 50-60% behind, significantly behind,鈥� said Jason Grant, director of the Center for Agricultural Trade at Virginia Tech.
鈥淲e should be around 6.5 billion in these first few months, and we鈥檙e right about 3 billion. So we鈥檙e quite a bit behind, and I鈥檝e got to believe the biggest reason for that is this pandemic, which is slowing up the supply chain,鈥� Grant said.
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One of the biggest agricultural good exported from the U.S. to China is soybeans. In February, soybeans were running only 10% what they normally are. That鈥檚 when China was experiencing some of the strong effects of this pandemic and was on lockdown.
The lockdown impacted the volume of shipments going to China and then had a domino effect. It affected how many vessels could return from China and be reloaded to go back. The delays started mounting.
Grant said for China to reach the bench mark levels for Phase One of the trade deal, they would have to purchase immense amounts of product later in the year to catch up. That鈥檚 something he thinks is unlikely to happen.
With perishable items, delays mean unusable food, and that鈥檚 hurting the suppliers, who are already struggling with other difficulties.
鈥淎griculture and food industries are deemed essential,鈥� Grant said, 鈥渂ut if workers, shippers, packers, through the whole supply chain, if they fall ill, whether you are deemed essential or not, it is going to cause delays in that supply chain.鈥�
Areas where things are likely to go wrong, according to Grant, include whether there is enough labor to pick the produce, wash it, inspect it and get it shipped, not to mention extra precautions in place because of the pandemic that are slowing down a very time-sensitive supply chain.
Another issue is that many farms and ranches have large singular contracts for their products.
Likewise, many countries have large contracts with single suppliers for their goods. When there is a slowdown or stoppage anywhere on those contract lines, its impact is extremely detrimental.
For many area farms, that impact is being shown in produce that can鈥檛 be sold.
Farms that had contracts to supply school systems or restaurants are seeing the demand drop dramatically during the shutdown. For countries that rely on one business or region for their perishable supplies, the slowdown in their supply line is leading to massive shortages.
That鈥檚 why Grant thinks after the pandemic, we will see many changes in the world of agricultural trade.
鈥淚 think it will be a natural reaction of policymakers to reevaluate their supply chains and potentially diversifying that,” Grant said. 鈥淚 think it will force policymakers to revisit just how reliant we are and certainly in China how reliant they are and Europe as well on a particular country, just in case, in times like this.鈥�
Grant believes local food providers will do likewise, assessing whether they can rely on just one market for the sale of their food.
In the end, Grant believes the trade relationships will continue, but they may look different.
鈥淚 think the question will be how reliant are we on one specific country for imports or for consumption,鈥� Grant said. 鈥淎nd how reliant are we on a local food system level, on particular restaurants, particular grocery stores or a particular school system. It’s going to cause a lot of business owners to reevaluate their supply chain with a risk management perspective in mind.”
