COVID-19 is expected to reduce the U.S. gross domestic product, GDP, by $2.5 trillion and employment by 19 million full-time equivalent jobs over the next year, according to a Texas A&M AgriLife coordinated study.

Woman buying few pasta packages during COVID-19 pandemic indicated by mask.

This spring Texas A&M’s Department of Homeland Security, DHS, Center of Excellence Cross-Border Threat Screening and Supply Chain Defense, or CBTS, teamed up with Arizona State University’s DHS Center of Excellence, the Center for Accelerating Operational Efficiency, and researchers at the Victoria University in Australia to examine the economic impacts of COVID-19 on U.S. agricultural sectors. 

While certain the pandemic would have a significant impact on the U.S. economy, Greg Pompelli, Ph.D., Texas A&M’s CBTS director, said the researchers used this project to gain a clearer picture of the pandemic’s shorter- and longer-term impacts on the U.S. food and agriculture sectors in comparison to other critical sectors.

“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,” said Patrick J. Stover, Ph.D., vice chancellor of Texas A&M AgriLife, dean of the College of Agriculture and Life Sciences and director of Texas A&M AgriLife Research. “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.”

To help understand these impacts, researchers utilized a model of the U.S. economy that included a special emphasis on the major food and agriculture sectors. The team used quarterly economic data in their model of the U.S. economy to determine the effects of the pandemic and the impacts of related policy responses on the U.S. economy and ag sectors.  

Research predicts impacts

In July, the researchers completed their initial quarterly economic projections of the immediate impacts and recovery that may be experienced by the U.S. economy and agricultural sectors between March 2020 and February 2022. 

“As we all witnessed, COVID-19 and measures taken to slow disease spread harmed lives as well as the economic prospects of businesses and communities worldwide,” Pompelli said.

Their findings estimate COVID-19 will reduce U.S. GDP over the next year by 11.9% or $2.5 trillion and reduce employment by 12.2% or the equivalent of 19 million full-time jobs.

However, the report concluded that compared to most other sectors such as tourism, air transport, education, restaurants and lodging, the U.S. food and agricultural sectors will experience smaller economic impacts because they were not subject to shutdowns and reductions in aggregate consumer spending brought on by job losses.

“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.” 

Recession impact on world food security

The U.S. is not alone in facing difficult economic times, according to the authors of the report, including Pompelli; Peter Dixon, Ph.D., director, and Maureen Rimmer, Ph.D., professor, Centre of Policy Studies at Victoria University in Melbourne; and Ross Maciejewski, Ph.D., director, Center for Accelerating Operational Efficiency, a DHS Center of Excellence at Arizona State University.

The World Bank, according to the Global Economic Prospects Report, June 2020, predicted COVID-19 created a global recession that is considered to be the sharpest contraction in our lifetimes and affected the economies of more countries than were harmed by the Great Depression of the late 1920’s.

“Sadly, the COVID-19 recession will have important humanitarian and food insecurity implications, and, through reduced global consumer incomes, could affect U.S. agricultural trade prospects which will be critical to the recovery of major U.S. agricultural sectors,” the report stated. 

COVID-19 impacts to agricultural sectors

Significant impacts caused early on in the pandemic included supply-chain disruptions such as the closure of some meat processing facilities, mismatches between supplies of some goods and demand caused by school/restaurant closures, transportation problems and shortages of farm labor.

Some producers lost access to traditional marketing channels and consumers discovered they periodically could not find desired goods. These challenges led to unusual situations where retail prices increased, but prices paid to producers declined, or worse, producers could not find a channel to sell their livestock or produce. In some areas, these problems forced producers to destroy or dispose of their agricultural products.   

While some of these could not be fully captured by initial modeling efforts, Pompelli said, based on their estimates, the researchers expected a 5.2% decrease in real U.S. farm income this year and projected a .76% decrease in 2021. However, USDA’s latest estimate for real farm income – Farm Sector Income Forecast – September 2020 – shows an increase of 3.6% to $102.7 billion, the highest level since 2014. 

The primary difference is that direct federal government payments, which are a combination of commodity program payments and special assistance aimed at offsetting to trade and COVID-19 events, to farmers increased 64% in 2020 to $37.7 billion. Without that support, real farm income would have been substantially lower in 2020. 

The researchers also found that the economic impacts of COVID-19 were not uniform across agriculture. The team estimated livestock operations would experience more negative effects, and, in fact, USDA’s latest figures show that animal product receipts in 2020 are down just over 8.1%.  However, for crops, cash receipts are expected to increase 6.9%.

As noted, the federal government attempted to offset the COVID-19 disruptions through the Coronavirus Food Assistance Program that was designed to provide up to $16 billion in direct payments to farmers and ranchers affected by the coronavirus pandemic, although to date only about half of this amount has been distributed. In addition, USDA’s Farmers to Families Food Box program purchased $3 billion in fresh produce, dairy and meat to help Americans in need. Charitable organizations, local, state and other federal efforts were initiated to support hunger relief efforts as the pandemic increased the number of people who had to rely on food banks.

What’s next

While the researchers cannot predict if a second wave of the pandemic will hit the U.S., their current projections align with other forecasts about the likely path an economic recovery in the U.S. will take.

The researchers found that although the U.S. economy will steadily recover, GDP and employment going into 2022 will remain about 5% below where they would have been in the absence of COVID-19. 

Their simulations also show a real depreciation in the value of the U.S. dollar, which is a bit of a silver-lining for the recovery of export-oriented U.S. agricultural sectors, such as grains and oilseeds.

Early evidence suggests their simulations were correct as the dollar has depreciated about 10% against a market basket of six international currencies since March. In addition, since May, the dollar has also depreciated almost 4.5% against the Chinese yuan and declined a little over 8.3% against the Brazilian real.  

Pompelli said a weaker dollar means U.S. produced goods are cheaper on international markets, and that helps U.S. exports even if many countries are still in a recession.

USDA’s most recent agricultural export estimates from the Outlook for U.S. Agricultural Trade AES-113, Aug. 26, project a $5.5 billion increase in U.S exports in fiscal year 2021, reversing the slight decline experienced this year. Given that the Federal Reserve’s low interest rates are designed to help stimulate the economy, most observers expect these policies will remain in place for several years.

In the next few months, the research team will re-estimate the economic impacts of COVID-19 by updating the influence of policy actions. They will also work with the Food and Agricultural Policy Research Institute at the University of Missouri to examine the impacts the pandemic has had and is expected to have on major U.S. agricultural commodities and trade.


a. Acknowledgement. This material is based upon work supported by the U.S. Department of Homeland Security under Grant Award Number 18STCBT00001-03-00.

b. Disclaimer. The views and conclusions contained in this document are those of the authors and should not be interpreted as necessarily representing the official policies, either expressed or implied, of the U.S. Department of Homeland Security.

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