Stephen Devadoss collaborated with other researchers to explore the pandemic’s effects on farm labor force and its influence on production and received a grant from the USDA to examine the impacts on dairy due to the farm bill and insurance programs.
In January alone, the Emabeth Thompson Endowed Professor in the Department of Agricultural and Applied Economics in the College of Agricultural Sciences & Natural Resources released results of a research project that examined the effects on fruit and vegetable production in light of the ongoing and widespread proliferation of the pandemic in the farm labor force, then received a near-half-million-dollar grant from the United States Department of Agriculture to examine the impacts of the 2020 Farm Bill and insurance programs on the U.S. dairy industry's economies of scale and dairy farm consolidation, along with the sector's profitability and foreclosure levels.
Fruits, vegetables and COVID
The results from the fruits and vegetables study was part of a report from the Agricultural & Applied Economics Association titled "The Effects of COVID-19 on Fruit and Vegetable Production" written by Devadoss and William Ridley from the University of Illinois at Urbana-Champaign.
"Though much attention was paid to labor shortages in meat processing due to COVID-19, we thought it's important to look at labor-intensive crop productions, particularly vegetable and fruit production," Devadoss said.
According to the study's authors, COVID‐19 has had unprecedented effects on the U.S. economy, in large part because of its effects on workers. Within food and agriculture, these effects pose the greatest threat to the production of labor‐intensive commodities, in particular fruits and vegetables, the production of which tends to require large numbers of workers for harvesting and packing.
The researchers econometrically estimate the effects of COVID‐19 on fruit and vegetable production as the U.S. agricultural labor supply is adversely affected by this pandemic. The major crop losses include $16 million in lettuce, $5 million in apples and $4 million in grapes.
Among the study's findings was anticipation that disruptions to the labor force in fruit and vegetable production will cause millions of dollars in lost production, with the heaviest losses concentrated in large fruit‐ and vegetable‐producing states such as California, Arizona and Washington.
These losses are incurred across several important commodities, including lettuce, apples, grapes and strawberries, the production of which tends to be located in areas hit hard by the epidemic. In the research team's county‐level analysis of production effects, millions of dollars of losses are concentrated in only a handful of major fruit‐ and vegetable‐producing counties.
Putting the findings in context, however, it is clear the industry is unlikely to be subject to widespread production losses, even in extreme scenarios. Millions of dollars in losses for a multibillion-dollar industry are not trivial, but neither are they cataclysmic.
Devadoss' new research project, "Dairy Policies, Economies of Scale, and the Changing Structure of the U.S. Dairy Industry," received a nearly $500,000 grant from USDA.
"The dairy industry is an important part of West Texas agriculture," Devadoss said. "This project will help us undertake research to study and find solutions related to the problems faced by the dairy farmers. Even under normal economic conditions, small-dairy farmers face numerous difficulties.
"With changing structure of the industry and the problems exacerbated by the COVID-19 pandemic, it is important now, more than ever, to work on research to solve dairy farmers' economic challenges."
Devadoss said the project falls within the realm of his research related to risk management in agriculture. It is supported by the USDA's Agriculture and Food Research Initiative Foundational Program and will run for the next four years. It will be directed by Devadoss and Jeff Luckstead, an associate professor of agricultural economics at Washington State University.
In these tough times, many dairy farmers are having difficulty coping with an onslaught of financial losses arising from structural changes due to low milk prices, high feed costs, consolidation, economies of scale and demand fluctuations for milk products.
Today, U.S dairy policies such as Dairy Margin Coverage aim to manage risk by insuring against fluctuations in market margin (the difference between average milk price and feed costs). The 2018 Farm Bill authorized the Dairy Margin Coverage program, which is a voluntary risk management program for dairy producers.
Meanwhile, the Dairy Revenue Protection insurance policy mitigates risk faced by the dairy farmers. It is designed to insure against unexpected declines in the quarterly revenue from milk sales relative to a guaranteed coverage level.
Devadoss and Luckstead plan to develop a theoretical model of risk-averse dairy farms that are heterogeneous in size to study the implications of dairy policies, structural transformation toward larger farms and dairy survivability. They also will econometrically estimate the multivariate distributions of regional and national milk prices, feed price index, productivity distribution, cost function, economies of scale and heterogeneous dairy models.
In addition, the research team is set to analyze the effects of Dairy Margin Coverage and Dairy Revenue Protection on optimal input use, production, economies of scale, survivability of dairies, coverage level, coverage percentage and program payments as well as examine the basis risk and regional effects of Dairy Margin Coverage and Dairy Revenue Protection and provide policy recommendations.