Arizona Agriculture's Ag Experts Talk about COVID19
If you are on social media, you’ve seen all the memes regarding the COVID-19 pandemic, as declared by the World Health Organization a couple of months ago. Some are funny. Some are sad. Some are encouraging and heartwarming. All are a way to cope with this odd, and at times, terrorizing new normal we live in.
My favorite, “We’re discovering we can live without celebrities and sports stars, but we can’t live without farmers,” perhaps sums it all up. And maybe just maybe, it makes us realize the food supply system is much more complex and important than anyone in America ever imagined, certainly paused long enough to consider.
Empty grocery shelves? Shortages of food staples? Lines around the corner to wait and get into the store? Nope. Not talking about Russia or a developing nation. These are scenes in America right now. And, you’re not waking up from some nightmare.
A lot is happening on the ground out on our Arizona farms and ranches. And different sectors in agriculture are being impacted differently. Farmers and ranchers continue to work 24/7 to maintain America’s food supply. And, yes, we are having disruptions in the supply chain; not supply though or another way to put it quantity. We’ll have meat in the meat case, but perhaps not the variety of choices we are typically used to. Even this is temporary.
But we are in a panic including stealing from farmers. “I have to tell you, Julie, I’m pretty stressed right now,” said retail farmer Frank Martin of Crooked Sky Farms and Maricopa County Farm Bureau member. “We have had another break-in at the farm where they have stolen 20 dozen eggs and produce. We have had a lot of orders lately; a good thing because we don’t know how much longer the farmers markets may go on. The problem is people are not very patient at all as they think we can get large orders out with a two-hour notice, or they just drive in and want to pick something without calling. We are trying to maintain a 24-hour advance notice but may need to extend it to 48 hours. Well, that’s my midnight rant, I’ve got to get a little sleep and be ready for the market in a few hours. Thank you, Julie.” The text came to me at 12:48 a.m. in the morning, sleeping soundly, unlike Farmer Frank who had been dealing with a break-in.
My regular conversations articles touch base with experts and ask them questions. This time, considering my topic, I wanted a broad swath of input from more than one voice. So, the main question I asked all my experts, “What do you anticipate might be the impact of the COVID-19 in the agriculture sector?”
Arizona Agriculture Overall Perspective
Our health, our security, our liberty and freedom depend on our ability to feed ourselves. As the Director of the Arizona Department of Agriculture, I can tell you we have plenty of food in Arizona and the nation. So, I’d encourage Arizona families not to panic.
We need to follow the guidance of the Centers for Disease Control (CDC). For anyone running out and buying the stores empty, we have lots of food in America. We produce more food than any country in the world. We in Arizona have millions of gallons of milk produced each week in our dairies, our egg ranches produce millions of eggs each day. There is plenty of beef to go around. While we encourage families to buy only what you need, the bulk buyers are influencing the empty shelves. In the meantime, stores will catch up.
I’m trying to tell our Arizona families our food system will catch up with us, especially if we will just use some common sense and avoid panic. I’m sharing with people I talk with to consider where we would be if we were dependent on other countries for our food supply. This COVID-19 pandemic underscores the need to protect American agriculture. And, when pandemics like this happen or other emergencies, we can feed ourselves. God bless America!
Mark W. Killian, Arizona Department of Agriculture Director
The Winemaker’s Perspective
I don't normally disclose our data, but in this rare time I think it's good to let others know how things are going - we are after all a community of growers, and in these times it's critical for us to operate as a community and care for one another, and that means one another's businesses.
Flying Leap is weathering the ongoing pandemic remarkably well, but I don't know how much longer this will continue. Since hysteria broke out last week, our retail is off by -15% company-wide, and our wholesale program has decreased by nearly -50%. Since 1/21/2020 (the date the pandemic was announced to the public), our gross sales are actually up +2.3%, but this has taken a strong downturn over this past weekend (3/14/2020). Recent announcements by governors in at least five states so far that restaurants, bars and wineries will be forced to close has wreaked havoc. Remember, restaurants and bars are among our primary customers, so when our customers can't sell product, neither can we. Not surprisingly, our wholesale business to bars and restaurants has dropped to a trickle. One thing keeping us afloat is that wholesale sales are only 22% of our gross revenue, so even though this revenue stream is drying up, its overall impact to our business isn't catastrophic. However, 60% of our revenue comes from our wine and spirits tasting venues, and if our governor forces us to shut down our tasting rooms we will be in a scenario where we will have lost 82% of our revenue.
Here is what we have done in response to these uncertainties. First, we have taken immediate companywide measures to reduce our labor costs by 57% as of this morning (3/17/2020). We did this by reducing salaries, hourly labor rates and work schedules to conform to a labor level we consider to be "minimum, maintenance-only," focusing our reduced labor resources to those activities in our value chain that generate the most revenue. Our staff understands these are rare circumstances, and all have expressed a willingness to sacrifice. Also, our owners, I included, have gone down to $0 salaries until this crisis passes. We have submitted a letter to our bank requesting deferment of debt payments.
Third, we have started paying our suppliers 50% payments when we receive bills. This has eased our cash flow constraints. The key right now is cash, cash, cash. We have tried to innovate, and this morning we implemented a wine and distilled spirits home delivery service program, where we will deliver wine and spirits (minimum purchase required) right to our customers' doorsteps so that they don't have to come in to our venues.
I know that everyone out there is probably doing similar things, and I know that our hardship is shared across the market. I want everyone at the farm bureau, its staff and membership to know that our hearts and prayers are with each one of you. This is a time when all of us need to put our differences and competitive natures aside and take care of our own. Last night, my daughter-in-law called me in tears, as she has no way of simultaneously taking care of her children (who are home now that schools have closed) and working. I calmed her, ensured her that we as a family would care for one another. The same must be true of our business community. We must take care of each other, and we as a people must get through this time. Let's collaborate, share ideas, support one another, and let's keep this wonderful country of ours going.
Mark Beres, President and CEO of Flying Leap Vineyards, Inc and Arizona Rub
Well first, we must be milking cows every day regardless of a pandemic or not. And even outside the pandemic, rain has impacted milk production, down a bit. Class 1 (fluid milk) Shamrock, Kroger and Safeway customers, have been taking a large amount of extra milk. United Dairymen of Arizona (UDA) is effectively moving it through the plant because of the demand. Our other dairy products are a different story and mean we must understand what’s happening with different sectors in retail. For example, dine-in restaurants are suffering.
As a result, we have concern for our other dairy products. While class 1 milk sales are through the roof (the gallon of milk you buy at the grocery store, for example), UDA processes much more than class 1. And because much of what we process goes onto retail eating establishments that includes cheese to McDonald’s for example, massive stockpiles of product are not moving right now. This is maxing out UDA’s warehouse. What we can move goes out at a significant discount for example, powdered milk at $.80 to .90 cents versus the $1.15 it normally brings.
Schools are a concern too. Our schools depend on lots of dairy. So, the longer the shutdown of schools the greater our concern. There is plenty of milk for all the products and there’s plenty of milk to provide for the schools. [In the meantime, as the crisis continued, Arizona dairy farmers for a period were forced to dump milk because there was virtually nowhere for it too go.]
The disruptions have changed the supply lines significantly. So, some areas in the dairy supply chain might be a bit more robust, where other areas of the diary supply chain may suffer. People in tough times return to staples, your basics and that typically includes milk.
We’re pivoting to unusual requests too. The UDA team tells me that one of our customers asked for a larger supply of condensed milk. So, we are accommodating them. Ultimately, we are being as fluid as our fluid milk, working to adjust our distribution and deal with product overwhelming our inventory if not moving. Whatever the customer wants they get.
Paul Rovey, former president of DMI and board member of United Dairyman of Arizona
The Cotton Farmer’s Perspective
In the last several weeks we’ve seen a drop in the cotton futures market. This is likely because many of the world’s mills are in China and other Southeast Asian countries and operations there have been interrupted. On the good side, another report indicates additional export sales are occurring because the cotton price has fallen so much.
The global market needs cotton, but buyers are timid to make major moves, as then the cotton needs shipping. Then once the cotton gets where it needs to go the buyer needs to be assured, they will have a workforce available to utilize the cotton in the mills.
On our farm every acre has something growing on it right now. Since there is no harvesting currently this is a quiet time of year. With everything planted we’ve not seen any delays with input supplies.
At the same time, things are eerily quiet in the office. No phones are ringing, any industry group meetings I normally am attending, and other meetings are cancelled.
Our customers for our forage crops, particularly the dairy industry, have been really hit hard in recent years with low prices. The milk prices had just started to move up when this hit, now the price has declined again. When the dairy industry isn’t making money, it is hard for them to buy any feed.
I’ve been talking with my son, Ross, about ‘Black Swan’ events. If this isn’t one, I don’t know what is. A Black Swan event is one that usually occurs out of nowhere and that no one has anticipated. At this point it’s hard to tell what the disruptions are going to be.
How far does it go? If we watch the stock market each day it doesn’t make people feel very secure. It’s hard to extrapolate what all the problems are going to be. People seem to be concerned about what’s not on the shelves, but most of the distribution system is working very well. Having said that, what happens if it doesn’t?
For our farm, we still plan on operating as originally planned, especially since we only get one chance a year to adjust your inventory and that’s when you put the seed in the ground. Some businesses can adjust weekly, daily or hourly. Our horizon is yearly.
We get one chance a year and that’s when we know what we’re going to pour into the planter hopper, or not. If prices are too low to even think you can get your variable costs back to think you can contribute something to your fixed costs.
We continue to do cotton and forage crops. We plant all our cotton as a double crop, no till after wheat. The wheat we will be harvesting as forage since grain prices are so low, which means we harvest it as green chop. We sell it as silage to the dairies. The wheat silage is a low water use crop since we grow it in the winter.
We’ve also been keeping our employees working with some time on the clock even though there isn’t much to do on the farm in the cooler months. We also provide them with housing and utilities. We work hard to keep our good people.
My friends in the vegetable business are held to a tighter and tougher timeline in getting product to our tables. Nothing is better for your immune system than Vitamin A and the other vitamins in our fresh vegetables. In today’s environment, we all need to keep our bodies in good shape.
Ron Rayner is a co-owner of A Tumbling T Ranches in Goodyear, Arizona. The farm produces alfalfa, cotton and wheat.
The Rancher’s Perspective
We have a four-section area of our grazing rotation named “Corona” Pasture. Consequently, given the current national health emergency, we have instructed all ranch hands not to ride there. On a more serious, but related, note, my recent testimony before a U.S. House of Representatives Homeland Security Subcommittee argued for a wall to protect border ranchers from drug packers, felons, cartel scouts and other undocumented crossers. These folks are never checked for tuberculosis, coronavirus or any other diseases while laws require cattle crossing from Mexico to be quarantined and checked for disease.
We will continue to raise cattle as we always have with sound ranching practices to ensure Americans continue to have access to Arizona’s wonderful beef, pandemic or not.
Jim and Sue Chilton, southern Arizona ranchers
The Arizona Farm Bureau President’s Perspective
Currently, the production of food in this country is strong as farmers continue to follow the cycle that mother nature dictates and not the volatility of the financial markets. There are ample supplies in frozen storage facilities and raw agricultural products are being shipped to stores and food processors as they always have. In addition, continued restrictions on public gatherings will likely have an impact on demand for some farm products and shift supplies to grocers and away from restaurants and other similar commercial markets, helping to adjust the flow of goods to match demand.
“However, farmers don’t control the integration of the rest of the supply chain and other factors could disrupt distribution including higher than expected demand at retail establishments and other policy decisions related to the pandemic. For example, Mexico’s decision to severely restrict the border to legal worker crossings could impact the supply chain for leafy greens and other fresh vegetables. In Yuma County and Imperial County, where we produce 85% of the U.S. supply of leafy greens this time of year, we will still need 40,000 to 50,000 harvesters working each day in vegetable fields. Of those, 15,000 harvesters cross daily into the U.S. from San Luis, Mexico to come work harvesting lettuce, broccoli and cauliflower.
“The limiting cancellation of routine immigration services will undoubtedly have an impact on the availability of fresh produce, not because we aren’t able to produce it, but because we already have a labor shortage in agriculture, and this will exasperate that shortage. If we can’t get produce out of the field, then we can’t restock the grocer’s bins or your plate.
“As Arizona farmers and ranchers, we’re committed to doing our best to supply to local, national and global markets. In agriculture, we are our brother’s keeper in good times and bad. We commend the work of all those who continue to toil to make sure our food demands are met and pray for a speedy resolution to this global pandemic.”
Stefanie Smallhouse, Arizona Farm Bureau President and a rancher, with her husband Andy, in southern Arizona
The Agri-Business Perspective
It does not take official declarations by authorities to illuminate the fact that Agriculture is an essential industry, at least not for the folks engaged in the food chain as a producer handler or possessor or distributor.
But the sooner that is stated legally and the barriers in the food chain removed and reduced the more certain our society will feel about what is absolutely the most uncertain of circumstances.
Agriculture production and the people engaged in what otherwise is considered a legacy industry by the average citizen is now clearly being understood as the very fiber that makes a society’s fabric.
I am certain that US agriculture and the incredible folks that produce our feed, seed, food and fiber in this State and our Country can meet the challenges of COVID19.
Eric Wilkey, Arizona Grain President
The Produce Farmer’s Perspective
Duncan Family Farms would like to express our heartfelt support for all our community members near and far that are suffering the consequences of the Coronavirus pandemic. Our agricultural communities across the Unites States are comprised of strong individuals who are accustomed to dealing with diverse challenges on a day to day basis. These people know how to keep America fed in good times and in tough times. The good news is the crops in our fields will keep growing. It is just vitally important we keep our team members safe and healthy so we can continue to harvest and distribute product to the stores and to our local communities.
Duncan Family Farms is committed to maintaining a safe and secure workplace so that we can accomplish our mission of producing clean, healthy, life-giving food while contributing to an improved environment and giving back to our community. At Duncan Family Farms safety has always been our first priority and we will continue to be vigilant to ensure that these measures will help all our team members, partners and community members to stay safe and healthy as we navigate through these unprecedented times. We are confident that the agricultural communities in the state of Arizona and across the nation will continue to supply ample food for all.
Arnott Duncan, Duncan Family Farms