American Farm Bureau Federation chief economist John Newton says Congress should approve an additional $50 billion in CCC borrowing authority for ag as commodity prices plummet.
John Newton, chief economist at the American Farm Bureau Federation, has been working with Congress since late last week to try to get some sort of ag-related stimulus package through Congress. Specifically, agricultural groups are seeking an increase in the U.S. Department of Agriculture’s borrowing authority up to $50 billion under the Commodity Credit Corporation.
“Farmers need to know that USDA is going to have their back,” he said in an exclusive interview with Feedstuffs. “We've seen commodity prices fall pretty sharply across the whole sector.”
Specifically, the deterioration in commodity values has been devastating. Live feeder and fat cattle prices were down 20 to 30%, ethanol May futures were down nearly 40%, Class IV milk prices down nearly 30% and at one point lean hogs were down more than 20%.
“I believe that once we turn a corner on this virus, once the demand picks up, these commodity prices are undervalued and they’re going to pop back up,” he said.
He noted when you look at data on consumer spending, consumers spent $1.7 trillion on food in 2019, and about $680 billion was spent in restaurants and $620-$630 billion spent at the grocery store. Yet, the cuts of meat that people are buying at the supermarket is different than what they would buy at restaurant.
“What we’re actually seeing the last two weeks is that restaurant demand has been moved to the grocery store. So that’s obviously going to have an impact on the type of commodities and the type of products that people are buying,” he said. “I think this, this thing could potentially have a long tail, and we're going to need to evaluate what the ultimate impact has been once we start to see a recovery on what that's doing to commodity prices.”
Newton added, “I think we're, we're still very early in this baseball game that we're playing. And I think once we turn the corner, we'll start to see and watch just how we start to pick the pieces back up and get this economy started up again.”
In this fourth episode in our series on agriculture and COVID-19, Feedstuffs policy editor Jacqui Fatka talks with Newton about Farm Bureau's efforts on Capitol Hill, and the broader market implications of COVID-19 related to the food and ag industries.
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