America’s economy is showing signs of recovery from the impact of the coronavirus pandemic, but any economic surge is likely over, according to a quarterly report from CoBank’s Knowledge Exchange.
“Economic data prior to the recent resurgence of coronavirus cases has shown a consistent, steady improvement in the U.S. economy, coinciding with business re-openings,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange division. “But traditional economic data can go stale remarkably fast in the COVID era, making high-frequency economic indicators an essential tool. And those indicators are signaling a plateau, followed by a possible downshift in the economy.”
One bright spot created by the coronavirus is that economic recovery may now favor rural communities, CoBank says. “Unlike previous recessions, low population density is now vital for economic resilience in the face of COVID-19.”
Kowalski said that while the recent bounceback in the U.S. economy is real, “It is also fragile and likely to moderate.”
Collective job growth in May and June of 7.45 million jobs points to a consistent, steady improvement in the economy. But, Kowalski warns, “all of this data also reflects conditions prior to the late-June early-July resurgence of coronavirus cases.”
In specific comments about grains, CoBank’s Kenneth Scott Zuckerberg said grain has been moving and basis has generally tightened since April 1. With both positive and negative volatility depending on the month and specific grain, he called the second quarter “eventful for the U.S. complex.”
“While futures prices for corn, soybeans, and wheat are lower year-to-date, basis is generally stable or improving,” Zuckerberg said. “Corn basis has tightened as U.S. fuel ethanol production began to recover following the demand shock of COVID-19 in mid-March. Interestingly, corn basis is somewhat disconnected across certain regions of the Midwest Corn Belt as more corn purchases are cost effectively transported by barge.”
CoBank’s report says the meat and poultry industries also continue to recover from this spring’s disruptions, though chicken plants endured far less COVID-19 disruption in the second quarter than either beef or pork. CoBank estimates chicken production down just 1% during the second quarter, while red meat production is estimated down 10%.
Beef processing, CoBank said, is now operating at 95% of capacity with all facilities back online. The beef sector is now focused on demand, with traffic at foodservice establishments continuing to improve, but social distancing restrictions and consumers’ reluctance to venture out of their home for non-essential trips have hampered a full recovery.
“This means ongoing challenges for the dine-in, full-service sector, which especially hurts the beef complex,” CoBank said. “With tens of millions of Americans losing jobs during COVID-19 and government payments appearing to decline in the coming months, beef prices will likely be further tested this summer.”
Despite the disruption, CoBank projects beef production to increase over prior year.
“Fed cattle weights have hovered 5% to 6% above prior-year levels in May and June and will likely continue well above normal through the summer,” CoBank said. “We now expect US beef production to grow 1% in 2020, down from previous estimates of 2% growth.”