The pandemic’s Long-Term Impact on the Agricultural Sector
Over this past year, Covid-19 has had a detrimental effect on a number of industries and made it evident just how vulnerable our world economy is to disruptive events. It has also made us as a society more grateful for many things we used to take for granted, like going to a restaurant or merely out for a stroll.
While HVA could report that there has been a surge of interest among investors in the agricultural sector and that the world’s 7.8 billion people still need to eat, farmers across the globe were seriously affected. As a whole, the agricultural sector suffered a 4% decrease last year as a result of the pandemic. That may seem low compared to the global airline industry that saw a 66% downturn. However, the agricultural industry is 12 times bigger than air travel and therefore affected far more livelihoods and value chains. Agricultural work cannot be done via Zoom.
Many farms are now gearing up so as to better be able to handle future pandemics and at HVA we are doing what we can to help mitigate and create preparedness plans for our clients. With most pandemics that have affected mankind coming from the domestication of animals, we are focusing heavily on the livestock sector.
We of course do not wish to sound like doomsayers, but we do have a fiduciary responsibility to caution our clients about impending risks. With unsanitary wet markets still exposing people to carcasses from wild animals and lax bio-security measures at thousands of livestock farms the world over, new influenza strains will likely develop, and we may see the next pandemic sooner rather than later. While the pandemic has to date resulted in more than 2 million casualties, virologists contend that it was far from being as lethal as it could have been. Farmers would therefore do wisely to take significant precautions to prevent the spread and mitigate the impact of the next virus outbreak.
The main problem in agriculture is that one can furlough staff, but one cannot hit the pause button. Crops don’t stop growing, dairy cows don’t stop producing milk and livestock don’t stop eating just because there’s a lockdown. It’s business as usual. One notable event that made headlines in the United States was that slaughterhouses stayed open and workers ended up infecting one other. The rationale was ostensibly that meat production was indispensable for survival, but in reality, it was that the cows had to be slaughtered one way or another. Feedlots couldn’t keep feeding cows or kick them out of overcrowded feedlots to roam the streets. They had to be slaughtered.
Another major problem with agriculture is that in order to keep costs down and enable consumers to afford food, almost all agricultural ventures depend heavily on migrant workers. When these were prevented from travelling, it adversely affected food production. As with the slaughterhouse example in the U.S., farms in Europe could not close down when tens of thousands of seasonal workers from Eastern Europe were prohibited from travelling, resulting in governments having to subsidize recruitment of local youths seeing as the farms could not afford to pay local youths livable wages.
Will the agricultural eco-system, which is greatly dependent on human capital, now shift in favor of more automated equipment such as robotic vehicles, drones and the like? That is possible. Progress is rarely linear, and it often takes an adverse event to galvanize people into action, especially farmers who are somewhat slow adopters, preferring to stick to the tried and true. For dramatic shifts to occur, many things need to fall into place: technology needs to be affordable and available. Just because you invent a car doesn’t mean that millions will buy them. You also needed road infrastructure, capital and affordable production before the industry could take off. As computing power, AI, IOT, solar power and drone technology has advanced considerably, these factors can all converge at once and a big shift indeed occur so that people are taken out of the equation. However, in developing countries, agricultural work creates employment for millions and technological shifts will likely be limited to a greater reliance on mobile IT-based platforms such as the agronomical software applications that HVA has been using to advise remotely.