COVID-19 forces economic shutdowns

Mar 20, 2020  | 4 min  | Ep4531

COVID-19 has brought many parts of the American economy to a halt.

Thousands of businesses have been shut down as millions of workers are temporarily sent home to wait out the wave of cases now hitting the public. With millions of people working from home, the economic dynamic has changed and demand from many sectors of the economy is evaporating.

The restaurant industry is taking the largest hit. In many places, the few customers who are eating out have begun to switch to less profitable take-out. Dozens of states and cities are limiting restaurants to “curb-service” only in an attempt to limit the people gathering in close proximity. 

Schools across the country have been closed for an extended spring break. Children who qualify for free and reduced meals were unintentionally cut-off from some of the only food they receive during the day. Many school districts have rallied in support and are providing drive-up meals and groceries in an attempt to feed hungry children who may be missing meals at home. 

The virus relief bill that passed Congress this week, included over one billion dollars in additional public nutrition funding through various programs. The measure allocates additional dollars to SNAP households with children, and is also helping to replace meals children are not being served at school.

The jump in unemployment caused by businesses being shuttered has increased demand at the nation’s food banks. 

Stephen Kreins, Operations Manager, Queen Anne Food Bank: "Yeah, we've been seeing our clientele go up in the past week and our volunteers have been staying home because of the coronavirus and there has been actually less food as people have been hoarding. That hasn't hit us as hard as the volunteers."

Many food banks are receiving a windfall of produce from wholesalers who had originally aimed their fare at now-closed restaurants.

A lack of workers is also slowing activity at U.S. ports. Employees who are sick or quarantined are unavailable to unload cargo ships, which is causing a ripple effect throughout the economy.

The Labor Department released numbers showing a 33 percent increase in unemployment claims this week, to 281,000. But daily reports from states are indicating a rate of claims 10 to 20 times larger than normal, filings that were not included in Thursday’s report.  

The combination of dropping domestic demand and a price war between Saudi Arabia and Russia caused a more than 40 percent drop in crude oil over six trading sessions. The price fell below $20 per barrel for a short time on Wednesday. The collapse in the oil market has slammed the price of ethanol far below the cost of production, and plants currently operating are either slowing production or shutting down entirely. Ethanol prices fell to an all-time low of $1.03 per gallon on Monday. Analysts foresee a 15 percent to 20 percent drop in gasoline consumption over the next few months, which would reduce corn demand by 120 to 170 million bushels.   

Creighton’s March edition of the Rural Mainstreet Index saw a drop to 35.5 from February’s 51.6, well below what the Index calls “growth neutral.” More than 60 percent of bank CEOs surveyed expect the COVID-19 epidemic to produce a recession in their area.

Ernie Goss, Creighton University: “We’re going to see a downturn in the rural economy, I don’t think it will be nearly as significant as in the urban economy. Nonetheless, we are talking about, for example, cattle prices, pork prices, corn prices, soybean prices, the list is long, those prices are low. The fact is, your input prices are low, but your output prices are even lower. So farm income for 2020 is not nearly as bright as we thought it was going to be and I think we are going to have to do some belt tightening out there.

 

For Market to Market, I’m Peter Tubbs.
 

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