URBANA, Ill. — The National Corn Growers Association (NCGA) is working to get a handle on the short and long term effects the COVID-19 pandemic will have on the U.S. corn industry. A new analysis commissioned by the NCGA examines the price effects on corn since the pandemic arrived on U.S. shores. 

“That analysis shows a 16 to 20 percent on average price decline for corn and a $50 per acre revenue decline,” according to Brooke Appleton, vice president of public policy for the NCGA. “Additionally, the analysis projects a $17 per acre PLC (price loss coverage) payment for the 2019 crop, but we keep in mind that the PLC program only pays out on base acres. It’s important to stress that these are only estimates for the 2019 crop, and we could see these losses increase as we continue through the marketing year.”

Appleton revealed the results of the study during an April 24 webinar hosted by the University of Illinois farmdoc team. She also offered insight on how the United States Department of Agriculture will distribute its $19 billion coronavirus relief package for farmers and ranchers. The significant price decline for corn associated with the pandemic illustrates the need for the relief package, which will bring $16 billion in “direct” payments to farmers and ranchers, along with $3 billion allocated by USDA to purchase meat, dairy products, fruits and vegetables from producers affected by demand disruptions.

“Of the $16 billion available for producers, $3.9 billion is for row crop producers. Producers will receive a single payment determined using two calculations, the first being price losses that occurred between Jan. 1 and April 15. Producers will be compensated for 85 percent of the price loss during that period,” Appleton explained. “The second part of the payment will be expected losses from April 15 through the next two quarters, and will cover 30 percent of expected losses.” 

Qualified commodities must have experienced a five percent price decrease between Jan. 1 and April 15, which “won’t be a problem” for corn growers who have lost up to 20 percent of profit in that period, according to Appleton.

“We still have some outstanding questions on eligibility for this direct payment program and on what methodology USDA will use to set the price per commodity. We’re still not sure how the $3.9 billion will break down between the (row crop) commodities, and we’re not sure what the formula looks like for determining losses. We expect to see some of these details coming in the next couple of weeks,” she added. “In the meantime we will continue to flag concerns and questions to USDA from our farmers.”

In addition to the $3.9 billion designated for row crop farmers, the relief package will inject $9.6 billion into the livestock industry, around $2.1 billion into specialty crops, and $500 million to growers of other crops.

Nick Paulson, an agricultural economist with the University of Illinois, offered speculation on how the $3.9 billion allocated for row crops could be distributed by the USDA. Assuming implied losses of $6 billion for corn, $2 billion for soybeans and $750 million for cotton, Paulson projected payments of $2.6 billion for corn, $875 million for soybeans, $320 million for cotton and around $155 million for other crops.

“We can look at this round of payments as being associated with old crop or 2019 losses,” said Paulson. “If we look at a period concentrated on when COVID effects have created some of those price losses from March to the end of the marketing year, we are looking at 40 percent of the corn in the market at this time, about a quarter of the soybeans, 13-14 percent of the wheat and about 21 percent of the cotton. If we calculate futures price declines and apply them to the cash prices we saw in January, and then are accounting for portions of these crops that are marketed since January, and are directly measuring losses, we are looking at about $6 billion for corn.”

How much of the losses corn can attribute to the COVID-19 virus cannot be reasonably calculated, added Paulson, who in 2019 was named as a senior economist at the Council of Economic Advisors working on agricultural trade.

“These are rough estimates for the damages these crops have suffered on the price side,” he said. “USDA might have to apply haircuts to some of these numbers for other crops to fit in. Based on the time period and the price losses during that (January-August) time period, I feel like these are decent estimates.”