Farmers and other agribusinesses have the important responsibility of food production. But it’s a tough job. Like the rest of the nation, the Southeast was hit hard by the COVID-19 pandemic. This was particularly evident from March – May 2020, when food supply chains were severely disrupted. Consumers responded by packing their pantries, triggering dairy, meat, paper goods, canned goods and produce shortages. At the same time, temporary business closures resulted in loss of customers and revenue for some agribusinesses.
At a recent American Farm Bureau Federation virtual convention, Federation President Zippy Duvall said COVID-19 showed how fragile a just-in-time distribution system can be in time of crisis. He added that the virus will continue to dominate headlines for at least the first few months of 2021.1
In spite of the lingering pandemic, supply chain constrictions have loosened, and some businesses have re-opened. But the next few years will be challenging. The Agriculture industry will face some highs and lows, including Southeastern producers.
The agriculture price index is increasing.
Agriculture in the Southeast reflects the overall conditions of U.S. farm production. Farming outlooks are dependent upon movements in the agricultural price index, which measures the prices farmers and other agribusinesses command for crops and various other goods.
The U.S. agriculture price index has steadily increased in the last few months. Currently at $102.18, the index is eclipsing the $88.95 price from one year ago. This is a change of 5.00% from last month ($97.32) and 14.87% from one year ago.2
Industry profits for the past several years have come in at ranges just under four percent (3.5 - to 3.8%), aided in part by productivity improvements like farm machinery, irrigation and new technologies. Higher crop yields and greater efficiency in the food supply chain are also expected to support revenue growth over the next five years. Overall, industry revenue is expected to increase just above one percent (1.1%) annually through 2025.3
Crops are a mixed bag.
The United States Department of Agriculture (USDA), forecasted nationwide crop cash receipts at nearly $204 billion in 2020. Feed crops (29%), oil crops (20%), all other crops (16%), fruits and nuts (16%), and vegetables and melons (10%) were expected to lead sales.4
Tomatoes, onions and sweet corn were the leading vegetables produced in the U.S., accounting for 53% of all vegetables produced in the U.S. Sweet corn is an up-and-coming crop for Georgia, with a value of $138 million.5
How did other traditional Southeastern crops fare and what is on the horizon?
Peanuts. Production of peanuts, a leading crop in Georgia and popular in South Carolina, rose to approximately 6.13 billion pounds in 2020 – an increase of around 11% from the previous year.6
Although, the USDA predicts reduced fruit and nut production, peanuts could be poised for continued growth in 2021. This would likely be due to pandemic-driven demand for peanut-based snacks — particularly peanut butter — and programs that emphasize healthy eating. Rising corn and cotton prices could also fuel an increase in peanut prices.7
Pecans. Pecans haven’t been profitable for U.S. farmers in the last few years, although demand has been high. Growers teamed to form the American Pecan Council with a goal of increasing demand. Further aided by plant-based diets, their efforts to change perception and consumption of pecans appears to be slowly paying off.
Domestic consumption is inching up and buyers are purchasing more product in anticipation of potential food supply chain challenges. Wholesalers are also taking advantage of inventories, at low-moderate prices, available directly from farmers.
Total U.S. pecan production in 2020 was 302 million pounds. Georgia, the leading producer, contributed 142 million pounds.8
Cotton. Like other industries, the pandemic wreaked havoc on the cotton supply chain. The USDA reported that cotton production dropped 4.8 million bales to approximately 14.4 million in 2020 due to COVID-19 concerns, its effect on manufacturing, and reduced demand.9 The Southeastern U.S. is a major contributor to global cotton production, with Texas leading the way. In 2020, Georgia produced about 2.2 million bales, while Alabama contributed 735,000 to the year’s total.10
In years immediately prior to the pandemic, cotton prices lagged. However, with availability of vaccines and hope for recovery, prices increased 13.14% in 2020 versus 2019.11 A demand for cotton products and a lower global cotton stocks-to-use-ratio is expected to continue the upward pricing trend.12
Soybeans. Global demand for soybeans is increasing. Last year, U.S. soybean production increased about 15% from the previous year to just over four billion bushels.13 Georgia produced 3.90 million bushels, an increase of 56% from 2019.14
The rising demand for soybeans is driving up prices. February 2021, the price rose to $13.72 per bushel, a year-over-year increase of almost 65%.15 This upward trend will likely continue in 2021.
Peaches. Georgia peach production dropped by about 28% in 2020 vs. the previous year, while South Carolina’s dropped by seven percent.16 These drops in production were largely due to weather and shrinking acreage. Overall, the USDA forecasts cash receipts for fruit and nut production in the U.S. will drop by a little more than nine percent in 2021.17
Blueberries. The U.S. is the leading blueberry grower in the world. But while consumption is increasing, prices recently suffered because of temporary buyer shutdowns during the pandemic and reduced export activity. Weather also impacted blueberries, but only to a lesser degree due to growers’ efforts to mitigate crop loss. A flood of product from Mexico is hurting Southeastern growers, of which Georgia is a major producer, resulting in requests for Section 201 investigations.
Production of some crops will be better than others, but cash receipts will grow by six percent this year according to the USDA. Feed crops, at a projected total of $64.7 billion and oil crops at $50.4 billion, are expected to be major drivers of this increase. Cash receipts for fruits, nuts, vegetables and melons are forecasted to fall by 10% and six percent vs. 2020, respectively.
No matter what the industry serves up, Southeastern agribusinesses will continue to play a significant role in feeding the nation. Farmers and other growers must be prepared to adapt to market fluctuations – whether pricing, demand or supply – to keep cultivating successful businesses. Learn more about how Synovus Agriculture Banking can help grow your business.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
The Fence Post, “Ford/Duvall: Farm Labor, Food Supply Chain, Internet, Diversity Big Issues,” January 12, 2021
YCharts, “Agriculture Price Index,” January 2021
IBISWorld Agricultural Report, September 2020
USDA, “Cash Receipts by Selected Commodity: 2012-2021F,” February 5, 2021
USDA, “Southern Region News Release,” February 12, 2021
Statista, “U.S. Peanut Production Volume, 2000-2020,” January 22, 2021
The Peanut Grower, “Thanks to Other Crop Prices, the Market May Firm Up” February 1, 2021
USDA, “Pecan Production Up 18% from 2019,” January 21, 2021
Brownfield Ag News for America, “Cotton Production Down, Rice Up in 2020,” January 13, 2021
Statista, “Leading 10 U.S. States for Cotton Production in 2020,” January 22, 2021
Macrotrends, “Cotton Prices: 45-Year Historical Chart,” February 11, 2021
USDA Economic Research Service, “Cotton and Wool Outlook: February 2021,” February 11, 2021
Statista, “Soybean Prices: 45-Year Historical Chart,” February 8, 2021
Georgia Crop Improvement Association, “Georgia Corn, Peanut and Soybean Production Made Gains in 2020,” January 20, 2021
Macrotrends, “Soybean Prices: 45-Year Historical Chart,” February 8, 2021
Ag Information Network of the West, “Peach Production 2020,” October 14, 2020
USDA, “Cash Receipts by Selected Commodity: 2012-2021F,” February 5, 2021
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