Impact of COVID-19 on Iowa Agriculture

A global pandemic has impacted nearly every sector of American life, including a bedrock of the Iowa economy. We explore the impact and future of Iowa agriculture on this edition of Iowa Press.

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Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Iowa PBS is supported in part by Wells Fargo. Fuel Iowa is a voice and a resource for Iowa's fuel industry. Our members offer a diverse range of products including fuel, grocery and convenience items. They help keep Iowans on the move in rural and urban communities. Together we Fuel Iowa. I'm a dad. I am a mom. I'm a kid. I'm a kid at heart. I'm a banker. I'm an Iowa banker. No matter who you are, there is an Iowa banker who is ready to help you get where you want to go. Iowa bankers, allowing you to discover the genuine difference of Iowa banks.

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For decades Iowa Press has brought you politicians and newsmakers from across Iowa and beyond. Celebrating nearly 50 years of broadcast excellence on statewide Iowa PBS, this is the Friday, May 8 edition of Iowa Press. Here is David Yepsen.

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Yepsen: The coronavirus outbreak has wreaked havoc on the food supply chain throughout American agriculture. Iowa farmers have scrambled to find market destinations for eggs, pork and beef as processing capacity and restaurants remain shuttered, all while our state's largest COVID-19 workplace outbreaks come in meatpacking plants. Joining us to discuss the situation are Neil Hamilton, Professor Emeritus and Former Director of the Drake Agricultural Law Center and Mike Naig, Iowa Secretary of Agriculture and Land Stewardship. Gentlemen, welcome to the show. It's good to have you both with us.

It's great to be here David and Erin.

Yepsen: Joining us across the table is Erin Murphy, Des Moines Bureau Chief for Lee Enterprises.

Murphy: Well, gentlemen, I want to first get a sense of the issues at the meatpacking plants that David talked about at the top. Secretary Naig, tell us what is the latest going on there?

Naig: Yeah, this has been a dramatic disruption to our processing capacity in the state of Iowa. So really over the last several weeks we have roughly had anywhere from 30% to 40% of our processing capacity has been offline either in the form of a plant shutdown completely or slowing down their processing capacity. So any given day we're running 40,000 to 50,000 head short on pork processing capacity. So that backs up on the farm. You create a backlog of animals that unfortunately we are having to look at some very tough decisions in terms of what to do with that backlog. So, good news, I think we've seen a couple of the plants that were shut down brought back online. They're going to run slower than they normally would but we're starting to see that picture change a bit. We still have an issue on the farm though.

Yepsen: Neil Hamilton, are they safe?

Hamilton: The workers?

Yepsen: Yeah.

Hamilton: Well, you hope so. I think we have to wonder how we ended up with so many of them sick before that became apparent. And I certainly have concerns, I'm a resident of Dallas County, why it took us so long to actually know how many workers were ill at the Tyson plant and even today we have packing plants in Iowa that say well, it's not our policy to release the number of workers who are infected. Well, this is a public health concern. These people go home into their communities and where they live and I think it's an issue that the state needs to address.

Yepsen: Mike Naig, what about that? Are the workers safe? Furthermore, how do we know that they're safe?

Naig: I think that is the question. Ultimately if the plants are going to run it will be because workers have confidence that they can work safely. So what does it take to do that? You've got to provide the testing to help folks understand, and this is for management to understand how much of a workforce do they have? Do they need to exclude some workers that are positive? Can they work with those who are negative or have antibodies? But that's only a point in time picture. You've got to do more. You've got to have mitigation steps in place, dividers and personal protective equipment. All of those things have to work together. But the state of Iowa has been very aggressive in providing testing at packing plants. As of today something like 8,000 workers have been tested. We've got whole plants have workforces that have been tested both for the viral test and the antibody test. That's a great start, but then you've got to do these other pieces too. And largely we're seeing that happen.

Murphy: I wanted to go back to -- so that is what is taking place now. To Neil's point about how we got here, do we have a sense at all of whether plants were taking preventative steps before these outbreaks occurred? Or where they not necessarily prepared for this? Were they caught off guard by this pandemic?

Naig: Well, I know that mitigation steps have been put in place in plants. I know that to be true. Now, when and what could they or should they have seen coming, I don't know exact timelines there. But I know that mitigation steps have been put in place. The President invoked the national or the Defense Production Act last week and with that comes some guidelines from CDC and from OSHA that are directed specifically at meat processing plants and that is what we need, we need those guidelines, we need PPE, we need mitigation steps and we need testing. That is what is happening to try to bring confidence back to that workforce.

Yepsen: Neil Hamilton, by definition they weren't good enough, the measures that were in place. Aren't we just stuck with meat plants being bad places to work? You go back to Upton Sinclair and The Jungle, this is not a pleasant process and it has always been fraught with complaints from workers, it's messy work. So aren't we going to be living with this despite what is being done?

Hamilton: Well certainly let's hope there are ways that we can make the jobs less unpleasant and perhaps safer. But, David, it's true that these were never jobs that necessarily you or I or our colleagues sought out. As a result I think that is part of one of the reasons why you see the nature of the workforce. In many of these packing plants they're refugees and immigrants, perhaps a significant number of them undocumented and these are workers that unfortunately people have spent recent years demonizing and if there's something good that is going to come out of this process it's that we've identified or we're recognizing how critical these people are to our agricultural system and to making the food continue to flow.

Yepsen: What is your reaction to that?

Naig: Well, they are essential, that's absolutely true. I agree, Neil, if there's something good that can come of this it's that we all will know even more so how important and how essential food and agriculture is. Look, the fact is you've got a supply chain that is seeing a disruption. And what is the result of that ultimately? Tremendous economic hardship for producers, but way more than that, you've got consumers that are now experiencing some shortages or less choice at the grocery store. We know that this is essential infrastructure.

Yepsen: And to that point is the meat coming out of today's meat processing plants safe to eat?

Naig: Yes it is, absolutely.

Yepsen: How do we know that?

Naig: Because all of the mechanisms that are in place to inspect the food safety aspects of what is coming out of a plant are in place. USDA, FSIS oversees this, they had been talking about contingency plants for, they've got workforce that have tested positive and that has been impacted and they have contingency plans in place. There's no food safety issue related to this.

Yepsen: Neil Hamilton, do you agree with that? Is it safe to eat this meat?

Hamilton: Certainly I believe that it is and that's everything we hear and that is good news in this process.

Murphy: Secretary Naig, are you concerned the impact that this could have on overall demand for meat? Even after things are back up and running could this be something that people start to move away from and demand has a more long-term impact?

Naig: Well, I certainly hope not. Look, I think we certainly have seen a spike in demand for the staples that we all want and need, milk and eggs and bread and meat at the grocery store and I don't believe this has a long-term effect of people not wanting to consume meat. So we are all anxious to see this normal order restored to that supply chain and to once again be able to fully meet -- look, we've got enough supply on the farm by the way, it truly is an issue of getting it through the system and getting it into where consumers want to buy it.

Yepsen: Neil Hamilton, what about that question?

Hamilton: Well, I think one of the things the crisis has done for us, it has illustrated a number of things about the structure of our food system that maybe we didn't recognize. And one of them was this divide between the institutional supply chain and the retail supply chain and the fact that people are buying their food at a grocery store and consuming it at home and not going to the restaurants, not eating at institutional settings has been what has caused a lot of the backup and the lack of demand and some of the need to destroy food. Meat consumption may not change but it will be interesting to see whether or not where we eat it changes and whether or not the restaurant industry recovers, whether people are more comfortable cooking at home and that could have a longer term impact.

Yepsen: But we already see, Mr. Secretary, we already hear from consumers that they are reluctant to go back to the restaurants that even are opening. What is done about that?

Naig: Well, first of all, Neil is spot on. We've got a processing disruption that is impacting pork producers and cattlemen, but we've got a massive market disruption that is impacting folks like our egg producers and our dairy producers in that things that were intended for a food service supply chain, they don't automatically, they're not packaged in a way, they're not delivered in a way that it automatically just fits over into the grocery store. There's been some things done to try to make those connections in terms of some rollback of some regulations with labeling that FDA has implemented. But there is also an opportunity to take some of those products intended for the food service supply chain and route them into food banks and food pantries and that is happening as well.

Yepsen: So when can we expect the price of beef to go down in the grocery store? That will make people quit eating beef.

Naig: I think it's a supply and demand type issue, isn't it?

Yepsen: (laughs) Mr. Secretary, the New York Times had a story this past week that quoted a poll that one-fifth of American mothers said they did not feel their children were getting enough to eat, almost 20%. This is America. How did we get to a point where you've got kids going hungry, farmers destroying their crops, dumping milk, euthanizing pigs? How did we get to this point?

Naig: Unprecedented market disruption caused by -- we're talking today all about agriculture, right, food and agriculture. But we know that this is impacting every part of our economy, the reaction to, the response to shutting down our economy, extraordinary measures being taken to combat COVID-19, but it absolutely is impacting the food and agriculture supply chain, it's impacting farmers. It is hard to get your head around the fact that you've got food insecurity on the rise, you've got demand at the grocery store, you've got limitation on even how much meat you can buy and yet we've got excess supply on the farm and you just can't get it there because of the processing disruption.

Yepsen: Neil Hamilton, how did we get to this point?

Hamilton: Well, certainly one of the other things that has contributed to it that we didn't necessarily appreciate was the significant role that the public schools play in providing nutrition to children. And you close them down, they aren't there for the lunches, they aren't there for the breakfasts, the buddy bags to go home over the weekend and while schools have labored to try to make that available that has been a significant source of that food that is no longer available. You see these videos of the lines of cars at the food banks and this is a national embarrassment for us in terms of our inability to be nimble enough to provide the food to those systems.

Murphy: Well, speaking of the different things this has impacted even within agriculture, ethanol is another one that the industry is struggling with people are driving less obviously so they're using less gas and the price of gas has plummeted. How serious is that issue for ethanol producers right now?

Naig: Well, look, this is a disruption that you've got a massive economic disruption. We're shutting down economies. Is it surprising then that jobless claims are up and food insecurity is on the rise? We need to and we're all anxious to reopen an economy and get back to work and go to the restaurant but those things aren't just going to automatically happen and happen overnight. One of these, again, massive disruptions, how many times can I say that in an interview, but is the lack of traveling that we're doing whether in the air or on the road, it has resulted in a 50% reduction in the demand for transportation fuel which has dropped the demand for ethanol. You've got most of that industry has shut down or rolled back in production.

Murphy: How many plants have been hurt so far?

Naig: Most. Every plant is disrupted. Many are shut down. And we just, we're fighting to make sure that there's an industry to restart on the other side of this.

Yepsen: What about that, Neil Hamilton? Is this toast for this industry?

Hamilton: Well, I'm not sure if it's toast, but I do think that, again, one of those realities that it helped illuminate was the fact that, this may not be popular to say, but the market for ethanol is an artificial market and it is largely created by the Renewable Fuel Standard that requires ethanol to be blended. Most of us in Iowa have benefited and Iowa agriculture has benefited greatly from ethanol in terms of land values and a demand for corn. And we're certainly seeing the impacts of that going away. But at the same time the issue of how it recovers and the role that it plays in the nature of our fuel system going forward, it was always being opposed by the petroleum industry and even the Trump administration has been somewhat episodic in terms of their support of it, in terms of the small refiner’s exemptions.

Yepsen: Don't electric cars figure into that? Electric car sales are going up. That's a whole new wrinkle in this debate.

Hamilton: For both ethanol and for gasoline. We didn't, again this may not be popular to say, but we didn't necessarily develop ethanol sector because we needed gasoline, we developed it in large part because we had such a surplus of corn. We have this amazing ability to produce and produce more than maybe we have traditionally used. And so whether it was exports, high fructose corn syrup, ethanol and looking for ways to use this ability to produce corn. And who knows whether one of the impacts of this might be is it an opportunity for us to maybe take our foot off the accelerator of production at least a little bit and perhaps think about what the land may need.

Yepsen: Mr. Secretary, we've got way too many questions, never enough time. I've got to change subjects. The Trump administration, President Trump has talked about a price fixing investigation. Attorney General Tom Miller and other Attorneys General have said the same thing so you've got republicans and democrats. What is your take on where that stands?

Naig: Well, particularly as it relates to the cattle market I think there is absolutely, it's important to pursue an investigation and to understand where we stand. And so we've talked with AG Miller about this and certainly with our congressional delegation. So I'm supportive of understanding where we are. You talk to cattlemen, you're going to want to go back and look at the situation starting back around Labor Day and all the way through this, it's not just what has happened in the past couple of months. And so I think it's important to assess where we are. I've talked to Secretary Perdue about this on a couple of occasions. I know that USDA is engaged in looking at this as well. So I think it's absolutely something -- there's going to be a lot of time to look at what has happened in this COVID-19 situation and how the market shave reacted and shame on us if we don't study that and understand what is happening in the market dynamic.

Yepsen: Counselor, Ag Law Center, have they got a case?

Hamilton: Well, this is an issue that has been around for decades, the whole question of captive supply and the impact that the packers have on cattle. You may remember the Obama administration, Secretary Vilsack, Eric Holder, they came to Ankeny, they began a whole series of field hearings where they were going to wheel out a new antitrust investigation in the meat and the grain sector and poultry and in a year or so it kind of fizzled out. Currently the court's interpretation of packers, Packers and Stockyards Act, makes it very difficult for cattlemen and women to receive any relief in terms of the complaints that the livestock sector are manipulating prices. I think the stark difference between what you see in terms of live prices and what is at the meat counter that makes people go, hold it, this doesn't make sense. How does this gap exist?

Murphy: Secretary, you noted earlier that farmers are, hog farmers in particular are having to make some really tough decisions right now with excess livestock and whether to euthanize some of them. Is the department playing any kind of a role with those farms?

Naig: We are. And so right at two weeks ago now I stood up at a resource coordination center, it's an incident management team structure within the department, but in this case we wanted to make sure we were pulling together all of the resources that farmers would need as they start to think about these tough choices. And so we were working together with the Iowa Pork Producers, with the Pork Industry Center up at Iowa State Extension, the idea being, and this goes back to a lesson that we learned coming out of the 2015 high path Avian Influenza outbreak, is that I want the ability of a producer that is having challenges or has questions to be able to get on the phone with somebody and that somebody will stick with them through whatever they end up going through, that they'll always have a number, they'll always have a name that they can connect with. Again, the idea being that if they've got questions about euthanasia techniques that we can help with that. If they've got questions about disposal that we can bring the resources or connect them with the DNR. And if they have mental health challenges or if there are financial challenges that they are experiencing that we can again connect them to the right resources. So we stood that up a couple of weeks ago with the express intent of trying to help livestock producers as they get through this. This is a tough time.

Yepsen: Neil Hamilton, switch gears. As we come out of this pandemic the world is going to change. What is the future of agriculture going to look like? What should it look like?

Hamilton: Well, those are important questions that you're asking. Clearly we're going to be continuing to eat. We're only as far away from agriculture as our next meal. It's hard to know when we come out of it in terms of what the tail is. I began teaching at Drake back in '83 as we were sliding into the Farm Crisis and you were here and you remember what that was like and it didn't get better in a year, right, it took a while. And it's hard to predict what maybe some of the downstream impacts of what we're going through right now in terms of restructuring in the livestock industry. And so what it needs to look like is I think we need to find a way to make the system more resilient, a little more nimble, we maybe have learned a lesson of the impact of having only a handful of large scale packing plants that control such a large part of the livestock sector that they're real bottlenecks. But that's just one piece of it.

Yepsen: Mr. Naig?

Naig: I think our word is resiliency. I'm glad Neil said it.

Yepsen: What does that mean?

Naig: It means, resiliency, we think about it in terms of a conservation ethic and soil health and sustainability on the farm. Resiliency means something from a financial standpoint, resiliency within our food and agriculture supply chain. Again, shame on us if we don't look back at this time, when we get through this, and I agree with Neil, this thing has a long tail on it, we're building supplies of grain, for instance. Half of our corn produced in Iowa goes to an ethanol plant. We're shut down ethanol right now. So we're going to build out the carryout. We've got livestock production that will roll back, 20% to 25% down on egg production in the state of Iowa, 10% maybe plus off on dairy. Each of these sectors will roll back and we'll have less demand for feed and grain. So this has got a long tail. We will not fix this, the ship will not right in the next few weeks or even a couple of months. We need to have a longer view. But then let's understand what has happened and what some of the shortcomings might be that we have just experienced.

Murphy: So that is looking ahead, let's bring it to right now, and you mentioned the '80s Farm Crisis, Mr. Hamilton, and I've heard others compare it to where we are right now, starting to feel similar to that. How do you feel? Are we in the same territory as what we went through in the '80s?

Hamilton: Well, they're different in that we built our way into the early ,'80s with a run up in land values and high interest rates and borrowing money against land to cover short-term losses. This came on us all of a sudden. But losing money is losing money and if your farm isn't particularly well set in terms of having a cash pad, if you're more vulnerable in terms of -- and this could be one of the differences. Back in the '80s certainly there was rented ground but a lot of people farmed their own ground. In this situation you have lots of large scale operations that own some ground but farm a lot of land for other people. And if those operations go under or have challenges then that ripples through that whole series of landowners in terms of who the new farmer is, what the land rent is, and we haven't even gotten to what that impact could be. But that is where the Farm Crisis of the '80s really had a long-term impact is how it affected land values and the structure of ownership.

Yepsen: Mr. Secretary, we've only got a couple of minutes left. What is this going to do to state and local tax revenues? Do you have any sense -- we know it's going to be bad. How much of a budget cut is your department going to have to take at the state level?

Naig: What I would say is it has to have an impact, right, it has to have an impact because we've seen such a disruption to the economy. We'll get a better look at that here as the legislature comes back in.

Yepsen: But you don't have a figure yet?

Naig: I don't have a figure yet. But I think, look, the fundamentals are different, to Neil's point, I think as we come into, coming into this situation, you're right, we worked into the '80s, this situation was upon us, we were in as a state good financial health at the beginning of this and so that also will matter as we go through this as a state.

Murphy: Just about a minute left. The federal stimulus package is being put together, you talked about the legislature coming back. What help does your department need from either of those entities?

Naig: There are still needs. The assistance that Congress approved for farmers is a good start and we need that assistance out as soon as possible direct to farmers. There are some missing pieces of that. Eggs have largely been left out of the purchase program and we need them to be involved. The food service side of that, the liquid egg part of that is important. We need help with these producers, these pork producers in particular, that are looking at euthanizing and disposing of animals. We need direct engagement of USDA to help those producers offset some of those costs. So a really good start. There's more work to be done in terms of assistance. And then a longer view of what does it take to help reboot and grow agriculture into the future.

Yepsen: Only about 30 seconds left. What do you think the federal government needs --

Hamilton: Well, one of the things, one of the easy things that Congress could do and USDA could do is increase the availability of food stamps and the SNAP program. We don't have to send people in lines to food banks. We have a very effective and efficient food assistance program in terms of the SNAP program. And certainly one of the issues you'll see debated in the next week or two is the democrats in Congress wanting to insist that we expand SNAP benefits to make them available to people on a short-term basis. That is an easy and direct way to feed people. And we've got a grocery store system that they can go use them at.

Yepsen: I've got to end the show because we're out of time. Thank you both for this conversation.

Hamilton: Thank you, David. Thank you, Erin. Mike, good to see you.

Yepsen: And we'll be back next week for another edition of Iowa Press at our regular times, Friday night at 7:30 and again at Noon on Sunday. For all of us here at Iowa PBS, I'm David Yepsen. Thanks for joining us today.

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Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Iowa PBS is supported in part by Wells Fargo. Fuel Iowa is a voice and a resource for Iowa's fuel industry. Our members offer a diverse range of products including fuel, grocery and convenience items. They help keep Iowans on the move in rural and urban communities. Together we Fuel Iowa. I'm a dad. I am a mom. I'm a kid. I'm a kid at heart. I'm a banker. I'm an Iowa banker. No matter who you are, there is an Iowa banker who is ready to help you get where you want to go. Iowa bankers, allowing you to discover the genuine difference of Iowa banks.