Covid-19 has introduced chaos to food commodity prices

Farmers are staring down a tough spot.
Farmers are staring down a tough spot.
Image: AP Photo/Martin Meissner
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Want an idea of what chaos feels like? Consider the US farmer.

Since mid-January, futures prices of many agricultural commodities in the United States have destabilized as Covid-19 and its economic impact spread around the globe. Between Jan. 14 and April 23, the price of corn plummeted by 19%, live cattle by 30%, and lean hogs by 45%, according to the American Farm Bureau Federation. Under normal circumstances these fluctuations would hover in the single digits.

The chaotic lines on charts like the one above can be connected to circumstances created by the coronavirus. There’s a glut of milk because the restaurant and food services industries are at a standstill. Hog and beef prices dropped because supplies are backing up as meatpacking plants close due to worker illnesses. Corn prices have fallen to some of the lowest levels in a decade, in part, because there’s less demand for the ethanol that’s mixed into gasoline; the cars and trucks it fuels just aren’t on the roads.

Every commodity has multiple end-users. One potato farmer might typically sell all of their goods to McDonald’s for french fries, another might only sell directly to Whole Foods, and a third might typically sell to restaurants in their geographic region. Each requires certain types of packaging and preparation. When the economy shuts down—in this case requiring food service, restaurants, and some food production plants to shutter—it forces farmers to scramble to figure out what to do with their products.

“Farmers are pretty agile, but to completely pivot a supply chain like that when you’ve dedicated resources for a specific end user is difficult,” says Shelby Myers, an economist at the American Farm Bureau Federation.

Farm health, at least in the US, was already in a rough spot. If prices don’t stabilize, it could put the global food system in uncharted territory.