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>> Well hi everyone, and thanks for tuning in for this webinar. As you know, a lot has changed since we first started organizing it and promoting it, so, everybody's had a busy and stressful few weeks. Thanks for making the time to tune in this evening. I'm John Bovay, and I'm an assistant professor in the Department of Agricultural and Applied Economics at Virginia Tech.

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I have my colleagues Charlotte Emlinger, Olga Isengildina-Massa, Patrick Kayser, and Ford Ramsey will be joining us in a little bit. So I'll go ahead and get started with my portion of the slides and then we'll move on to my colleagues. I'd like to have a question or two after each of our presentations and then we'll have more Q&A at the end.

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So my presentation this evening is about the stimulus package that was passed by Congress last week and also about some recent and pending Virginia agricultural policies, or policies that affect agriculture. But I'm going to first talk a little bit about COVID-19 and some of the economics of COVID-19.

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And then we get into those other two topics. As a as a disclaimer of course, this presentation does not constitute legal or medical advice. So, you know COVID-19 is pretty much all that's been in the news for the last month or so. But I just wanted to share with you some of the most recent data.

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So this graph shows the number of new confirmed cases per day by country. It was updated us night, and you see that the U.S. has, just yesterday, had more cases than, more cases confirmed in a single day than any other country in the world and that number continues to rise.

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We are approaching Spain and Italy, which have had the most number of deaths per day. Around 500 deaths on the last day before this data was updated, so it's a very serious problem. And there, you know, attention is being paid to it for very good reason. In Virginia it's not quite as big a problem yet as it has been in other states.

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You can see most of the counties and cities in our state have had fewer than 20 cases reported so far but a few of the more urban areas are seeing cases doubling every 3 to 5 days, or even more quickly than that in Norfolk and Ablemarle County. So of course earlier this week Governor Northam issued a Stay-at-Home order where we are allowed to leave for various reasons, it's not nearly as stringent as in other countries.

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But this is definitely affecting our daily lives and is affecting economic activity a lot also. And of course many businesses and all K-12 schools have been closed for more than a week also. So, as I said, I'm going to talk with you a little bit for a few minutes about some of that early, preliminary economic studies about COVID-19.

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So these are papers that have just been released on the web. They're not, they're not peer reviewed yet but they're by, each of the three papers I'm going to be talking about for a minute are by quite reputable authors at institutions like Federal Reserve, Northwestern, and MIT. This paper talks of, it's a simulation of the macro economic effects of containment policy on one economic variable, which is total consumption- total spending.

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These authors find that an optimal containment policy would reduce total consumption by 14 percent for the nation for about a year and about 1.5 million people would die. And these are based on many epidemiological assumptions and also assumptions about the possibility that vaccine will be developed. On the other hand, they find that if there were no containment at all, there would be still a 9 percent reduction in consumption, while another quarter of a million people would die.

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And so there are many different epidemiological models out there and this is one that ties epidemiology to economics. Another paper looked back in history at evidence from the 1918 flu pandemic to study how interventions like social distancing affect long-term economic growth. So this paper found that that flu pandemic in 1918 reduced manufacturing output by 18 percent and that the areas that were the most affected by this flu pandemic remain depressed for another 5 years.

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However, the areas that closed schools and churches and theaters and essentially imposed social distancing, similar to the way we are doing today, experienced fewer deaths and long-term economic growth. They found that starting interventions last 10 days earlier increased manufacturing employment by 5 percent the next year. And so this kind of shows how, it shows deaths on the horizontal axis and change in employment the following year on the vertical axis, and you can see that with more deaths there was, there was an effect that lasted beyond the actual outbreak of the flu that year.

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The 3rd paper that I just saw, again these are preliminary papers, talks about the effects of COVID-19 on gender equality and the authors talk about how women are more likely to be employed in jobs that are heavily impacted by the pandemic. They're less likely to be in jobs that are labeled "critical" or to be able to telecommute and because women provide the majority of childcare for married couples so isn't nearly all of it in single parent households and there are various factors that mean that they're going to be providing more childcare under the pandemic conditions.

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Women are going to be disproportionately burdened by the pandemic. However, the authors say that in the long-run, they expect some improvement in terms of gender equality due to both increased work flexibility, improved ability to telecommute, and also due to changing gender norms. So I'm going to spend the next few minutes talking about the CARES act that was passed last week- coronavirus aid relief and economic security, which also referred to as the stimulus package.

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As it relates to agriculture, $2 trillion dollars was the total amount of the stimulus package and $23.5 billion of it is set aside for farmers. So this is this is pretty important and could be a very important source of farm revenue for the next year or more. $14 billion are allocated to the commodity credit corporation to be used to make part payments to farmers who have been hurt by COVID-19.

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This is the same corporation that dispersed funds to farmers during the trade war of the last 2 years. In addition to this, $9.5 billion is going to be allocated to the USDA Secretary Perdue to be used to support farmers who produce livestock, dairy, and specially crops, and also producers who support local food systems.

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In addition to this, a couple of things that are related, definitely not quite as important in terms of the financial value, this bill sets aside $100 million dollars for world broadband grants through USDA's reconnect program, and it also provides a little bit of a tax incentives for farmers to donate commodities to charity.

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Of course, checks and direct deposits have been making a lot of headlines, I just provide this information here to stress that there are income limits on this, and also that the amount you receive will be based on your 2019 tax return if you have filed it, and if you haven't filed your 2019 tax return, it will be based on your 2018 tax return.

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There are a couple of really important components of this for small businesses, which most farmers are. So the Small Business Administration has, now has a paycheck protection program and these are loans that businesses can take out to cover payroll, rent, mortgage interest, and utilities if they keep all employees on the payroll for eight weeks, and I believe if they rehire employees who they've laid off in the last couple of weeks, they'll also be eligible for it and then and then keep them on the payroll for another eight weeks.

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You are only eligible to apply for this until June 30th, you're eligible if you have fewer than 500 employees, and this includes hospitality and food businesses with fewer than $00 employees in a given location. Lenders are going to be able to begin processing applications tomorrow and these loans are going to have a maturity of two years an interest rate of 0.5 percent.

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And again, the entire loan amount will be forgiven if employees are kept on the payroll for eight weeks and the money is used for these purposes. So the loan amount is calculated as your average monthly payroll in 2019 times 2.5 up to a total of 10 million dollars.

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Each employees salary has a cap, so that is, that is, if you have an employee who's making more than $100,000, you have to use cap of $100,000 per year for that individual employee. In the middle of the side I've given details about the loan forgiveness, so they anticipate that you have, that you have to spend 75 percent of the loan on payroll to be eligible to have the entire amount paid back., And again this program is only available through June 30th so they're only allowing each company to get one loan.

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There's another loan program, which is an expansion of an existing loan program. These loans are called economic injury disaster loans and are issued directly by the Small Business Administration at 3.75 percent interest. I've included a lot of details here. I've also included the link, and I'm not going to go through it all right now in the interest of time but the presentation will be made available in a day or so, so I encourage you to go back and look at it.

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The one important thing to note here is that you can, it's either or, so you can get this EIDL loan or the paycheck protection program for the purpose of covering payroll but this one is available until the end of the year. There are some additional tax incentives for small businesses.

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Businesses that don't take out an SBA loan may receive a tax credit for keeping employees on their payrolls. This credit would be for 50 percent of employees wages up to $10,000 in wages per employee per quarter but you must document a 50 percent reduction in gross receipts relative to the same quarter of the previous year.

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There's also an option to defer the 6.2 percent payroll tax until next year and you can pay in 2021 and 22. I going to talk for just a minute about farm labor. Some farmers have expressed concern about guest workers not being able to cross the border during the pandemic but the Department of Homeland Security has issued a statement indicating that agricultural guest workers are considered essential and they are going to be allowed to cross the border despite any other restrictions on border crossings.

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They've also indicated that in-person interviews for H2A visas will be waived. And also it's worth noting that the U.S. consulate in Mexico is still operating. So there may be some difficulty with getting guest workers during a pandemic but The Department of Homeland Security has made it a priority.

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And then talk for just a few minutes about some of the pending Virginia ag policy, some of the bills that are awaiting the governor's signature. So one of the big things on the radar for people in the ag community recently has been the Chesapeake Bay Phase 3 WIP- Watershed Implementation Plan.

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So the the legislation says that if the targets have not been met by December 31st, 2025 then operators of cropland of more than 50 acres in the Chesapeake Bay watershed are going to need to maintain and implement an approved nutrient management plan and also that any person who owns property in watershed and they have 20 or more bovines are going to need to install and maintain stream exclusion practices sufficient to keep all of the animals out of, all the bovines, out of all perennial streams in the Chesapeake Bay Watershed.

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But again, this is 6 years down the road and it will only be required if Virginia does not meet its targets by the end of 2025. This is bill also specifies that there is going to be a stakeholder advisory group, and that DCR will need to develop a portable stream fencing practices that will be included as part of their best management practices cost share program.

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Another important one is to define milk to mean animal products but not only milk for example. And this is very important for the dairy industry, but it will not become effective until several other states in the Southeast pass similar legislation. So it remains to be seen how it's going to be enforced and whether it's going to be enforced.

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Farmers' markets and road-side stands are, from from this point forward, going to be exempt from paying meals taxes or county food and beverage taxes if their income from such sales are below $2,500 dollars per year. And the last thing I have here is the Minimum Wage Act, which I think has also made a lot of headlines.

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So effective January first next year, the minimum wage is going to increase from $7.25 an hour to $9.00 and then for the next several years it's going to increase by dollar or two per year. But of course it's really important for the ag industry here in the state is that it eliminates the exemption for farm laborers and farm employees.

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So that concludes what I'm going to talk about this evening. I'm very very happy to take a question or two right now and then we'll move on to the second presentation and we'll have more questions at the end. I think... I think everybody's muted. I'm sorry I didn't realize that.

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If anybody's having trouble unmuting yourself, you can... Maybe I need to unmute you. Ok. Any questions? I've just... Ok, I'm glad to see some somebody corrected me. The final version of the minimum wage bill in fact kept the exemption for farm workers so, so the minimum wage, the new minimum wage law does not apply to farm workers.

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All right, well I think on the second presentation now. So Patrick. Would you like to start with the hemp presentation? Yeah, that would be great. I'm trying... John, this is this is Ford. We're going, Patrick and I are gonna split the hemp talk. Yeah, yeah. He told me that, so go ahead, and can you can you share your screen for that presentation?

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Yes. Everybody see this? I'm sorry everybody, I'm trying to mute you but I don't know why it's not allowing me. Now everybody's muted. John, in the meantime this is Gonzalo Ferrerra from the Department of Dairy Science. I put the question there in the chat, are you taking the place of Jim Pease in your department?

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I am not going to claim that I could replace Jim. I may be doing some of the some similar things to Jim but I am not his replacement. I can't replace him. I can understand that but in my understanding was, or is, that Jim was related to all the policy, so would you be taking that role?

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Yes. I should've introduced myself. I'm sorry. I'm, my expertise is ag policy and ag regulation and so I'll be doing research and extension around those areas. Great thank you. Sure. I'll go ahead and get started with the hemp presentation. My name is Patrick Kayser and Dr. Ramsey and I are going to present on the topic of hemp today.

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In late February early March we traveled across the state for a series of workshops for hemp producers and interested parties where we talked about the hemp market outlook and situation, and we're going to split that presentation up today. I'm going to get a started with an introduction of the legislation that reintroduced this crop and show you some of the production data that we have so far.

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So the 2014 farm bill, not the most recent farm bill, reintroduced commercial hemp production in the United States through state pilot programs and pilot programs allowed state departments and institutions of higher ed to legally grow hemp for research. And the map on the left shows that states adopted pilot programs at different times.

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In some states with heavy row crop production were last or did not adopt pilot programs at all. I want to talk about two states in particular, Kentucky and Colorado. These states have the largest and oldest pilot programs and most states use Kentucky in Colorado's legislation and administrative procedures as a template when they developed their own programs.

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And although many states had a lot in common, there were differences in the support and management of the pilot programs. So for instance, all pilot programs are required some sort of THC testing for compliance with the 0.3 percent THC threshold. However, states differed on the THC testing procedures and sampling done and the costs associated with that.

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So in my mind a benefit of this pilot program era was that it identified challenges that emerged and needed to be tackled for this crop to succeed commercially and some of those challenges are access to credit markets, dealing with interstate commerce, collecting and sharing basic market info. The most recent farm bill, the 2018 farm bill, moved the industry beyond pilot programs and allowed the USDA to develop regulations for hemp and legalized production outside of the pilot programs.

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And the number of planted acres in licensed him growers and processors increased dramatically. The map on the left is hemp production density at the county level for the 2019 growing season, when that was the first season after the farm bill was signed. The states with the largest number of planted acres recorded are Colorado, Kentucky, Montana, Oregon, and North Carolina.

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And the trend we continue to see is that production is concentrated in states with established medical marijuana production or in tobacco growing regions that are agranomically suited for growing hemp. And there's a caveat to these maps that I just showed you. And here is the map of Virginia and North Carolina because that's probably what we're most interested in here but the caveat is that these maps reflect FSA data and not all growers participate in FSA programs so the planted acreage here is underestimated.

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Now claiming acreage is also reported by state pilot programs represented here by the blue bar- you can see the planted acres are much higher. So for this slide, I just want to emphasize that the collection and sharing of basic production data still has a long way to go.

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Now before I turn it over to Dr. Ramsey, I'll briefly describe the global production of hemp. Just as in the US, global production of hemp is also increasing. Europe as a major international supplier of hemp for the Us market, and both Europe and Canada's hemp industries began about two decades ago.

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Canada's production has been volatile throughout the years. But improved processing technology, government financial support, and research has allowed production trending upward since 2008. And lastly, it's believed that China is the world's largest industrial hemp producer. China's official production statistics shown here are rumored to be grossly under reported.

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By as much as 800 to a 1000 percent. And if you're interested in this topic there is an excellent paper published this year in February of this year called the "economic viability of industrial hemp in the United States," it's written by Tyler Mark and others at USDA's ERS.

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And I would encourage you to check that out. So Ford, you can take over here if you'd like. Sure. I'll try to share my screen. John, can you make me the... I don't know whichever so the screen can share. Ford, I think your screen is being shared. It is?

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I think so, yeah. Ok. Ok, so I'm going to talk a little bit about the economics of hemp. There was lot of interest in, there was a lot of interest in hemp in 2019 because we saw such high prices for production and for CBD oil. As many of you know, that there are couple different end uses for hemp- you could grow it for fiber, grow it for grain, but by and large most interest was in growing hemp for CBD or growing it for oil.

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And we've seen so much price movement in this market, I think it's fair, or safe to say that beyond the start of 2020, this is going to be a real rough and tumble ride. There's going to be as many losers as there will be winners in this. The key statistic to look at is the stock price and for CBD the, the price that you really want to pay attention to is percentage of CBD per pound of hemp, and most of the budgets in agranomic studies that I've seen seem to indicate that you can reliably get about 6 to 8 percent CBD per pound.

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Now you can see from the chart here that last year, at the beginning of 2019, we were slightly above $3.00 per percent CBD. January 2020, we're down below a dollar, so there's been a massive decline in the price per percent CBD and that's really had a major effect on the revenues that producers can expect.

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Though, if you're an extension agent, you probably, depending on where you are in the state, have some interest in hemp production, and the way it's looking right now, you know, I'm not sure many people are going to be making money in 2020 unless they've got a real solid contract.

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Now there are some alternative products that I've listed here but these are really minor products. The the major way we would be getting any net revenue out of hempis gonna be out of CBD. Now the input costs vary a lot depending on what type of production model you're following.

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Some of the best budgets I've seen for hemp have come of the University of Kentucky and they're put together by Tyler Mark, an economist there- Patrick mentioned him earlier- and the most relevant production models probably for Virginia are the plastic culture model and then also what's being described is the tobacco model for hemp production.

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The input costs are going to vary a lot depending on what type of model you're using. The seed and transplant costs is probably the biggest chunk of the input costs for industrial hemp and as we're going along EPA and VDACS have been reviewing pesticides and germicides and those sorts of things.

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So I want to focus a little bit on this enterprise budget comparison here. So what this shows, there are three different state budgets- Tennessee, In State, and Kentucky, they're all hemp that's being grown for CBD using a plastic culture model. The one I would put the most stock in is the Kentucky budget.

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I think they put the most work into their budgets out of these three and you can see that the return over expenses per acre is $2,000 dollars here, but the budget that's on the slide is assuming your $1.50 cents or percent CBD. Like I said, we're now down around maybe $0.80.

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I've even heard $0.60 per percent CBD so any, any kind of profit opportunity is rapidly deteriorating in the hemp markets. In fact if you look at the at the current prices per percent CBD, the tobacco production model is actually generating a negative return. So while the market outlook, I think, for industrial production is not very good going into 2020, one maybe nice thing is that there are now federal crop insurance policies available for industrial hemp.

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These policies work like your standard crop insurance policies, you can get policies for production for CBD, for production for fiber or for grain, you can choose among different, amongst different practices, so, you know, transplant, direct seeded, whether you're harvesting the whole plant or just the flour and so on.

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Unfortunately, everybody's already made their decisions on the insurance by this point. The sales on that closed on March 15 but it's likely that this program's gonna come around next year as well. So just to give you a quick example of what was being assumed under those crop insurance policies, so for CBD transplant where the whole plant is the oil, basically biomass production, RMA was assuming around 1,600 pounds per acre as the yield and these were all for Accomack County, Virginia, just to give an example.

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Like normal crop insurance policy, you have different coverage levels, you can, you can choose and so basically what you're doing is you're you're going to have a yield guarantee and if you fall below that you don't guarantee you're gonna get the payment through the program. Actually most places in Virginia you could purchase a policy, there are only a couple counties and some of the independent cities where you could not purchase the policy.

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Now one thing that was maybe somewhat interesting about these policies made them a little different than normal federal crop insurance policies is there is a minimum acreage requirement, so it's 20 acres for grain and fiber, it's five acres minimum for CBD production, so probably most of the production in Virginia last year would not have met that five acre requirement.

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You're going to need at least one of year of production history and another interesting part about the hemp crop insurance is that you need to show that it's being grown under a process or contract. Now whatever price you're getting in the contract is not actually the price per loss of production in the crop insurance policy, that's that's the key point to note, but you do have to have a process or contract to get the insurance policy.

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Standard crop insurance, you have your normal causes of loss- adverse weather, earthquake. And the, interesting note, but in the federal policies you are also covered in case of a volcanic eruption as well. What the insurance does not insure against is if you have levels of THC in excess of 0.3 percent on dray-away basis.

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So if THC is too high, you're not going to get any payout on crop insurance since you failed to follow the terms. In the processor contract, you are not going to pay out and then post-harvest infection by same old East fungus is also not going to be covered and that has been a problem with some of the hemp.

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If you have a problem, so if you have somebody who is participating in this pilot program and they noticed some loss, same as what any other crop insurance policy, you know to file an adjuster within 72 hours of discovering the damage. So to give a little a little summary on this, I think there's a lot of interest in 2019 in industrial hemp.

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You know, we have people saying 'well this is going to replace tobacco production in south side, this is going to be something that we're going to be able to produce on small acreage and we're gonna have very high return per acre'. As we go into 2020, I don't think that's that's the case.

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If you just look at stock prices, there's no way that this, at least in terms of revenue, is going to be a replacement for tobacco. Nonetheless, some people are probably going to be interested in experimenting with this crop. We're seeing increased production that increased supply is driving down the prices, so you're getting real close to break even points in terms of what the prices are.

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There are new insurance options available so if someone is growing this and is really making a go of it, I would suggest they look strongly at those crop insurance options. And, there's a survey that I put together with Clint Neil in our department and it was sent out through VDACS to try and get a look at what the contracts in Virginia looked like last year and we're just getting that data back and so hopefully we're gonna have some data to turnaround and present everybody on what hemp markets looked like last year in Virginia.

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So I'll be happy to take any questions or Patrick can take any questions also. This is again, Gonzalo Ferreira from Dairy Science. I saw some where in one of the presentations the word silage, is that been tested already in cattle? Has it been, so what was question whether it's been tested?

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Yes, it is it allowed to feed to cattle, do you know? I don't know, but I would assume that you could. I don't think it is yet actually, VDACS was at, had a lot of these hemp workshops, and I believe that the lady who presented for VDACS said it was not allowed yet.

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Thank you. I would think it's probably coming though if it's not allowed. I should, I should mention even beyond the industrial hemp the Virginia legislature looking at, is looking at some studies for legalization of marijuana so just complete legalization. We also got a question: did Virginia growers for the most part get paid for last year's production yet?

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That's, that's a very good question. This is why we did a survey, to try and see if we could get a better idea. I can only tell you what I've heard anecdotally, which is that some of the folks who got in early and had solid contracts with reputable companies, some of them probably did make a good amount of money.

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Now, I don't think their contract this coming year looks the same as it did last year, however, there were a lot of people, there are a lot of people now in Virginia and North Carolina who are sitting on last year's hemp crop, and just have not been able to sell it or they have been going out and kind of selling it piecemeal and in small batches, but that is, again, just purely anecdotal.

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But I've heard it enough times that it makes me think that maybe it's going to become, that it's more than anecdotal. All right I think we can move on to Charlotte's presentation, Dr. Emlinger and then we can take some more questions on any topic at the end. Thank you very much, can you hear me?

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So, I'm Charlotte Emlinger, I'm Assistant Professor in the department of applied and Agricultural Economics at Virginia Tech, and my work deals with international trade so my presentation today will be on the currant and future challenges of the international agricultural trade. Well, when John, since John's invited me to make his presentation today so many things have changed, so at the beginning I was planning to focus on the big deals and trade opportunities, but with the COVID-19, so many things changed so I will merely talk about this crises and its potential impact on international trade.

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So off course in my presentation, there will be a lot of question marks. So my presentation will be in three parts. First, I will still speak a little bit about the situation before the COVID-19, about the trade was and trade deals. Then I will try to discuss what is currently happening on the world market, and I will try to show you that it's a bit both a supply and demand crisis, and then I will conclude by discussing what could be the future after this COVID-19 crisis and maybe have some ideas about the potential reorganization of world trade.

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But first I wanted to show you this picture of the evolution of the US agricultural export. So, since the beginning of the century, what I want to show you with this picture is two things: first, that American agricultural exports increased a lot since the beginning of the century, it's more than doubled the total export in value, and the second big point is that when we put together China, Japan, the European Union, Mexico and Canada, it accounts for more than half of the total American exports in the agricultural and food sector.

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And it was even more in the past in 2014, so it's just to show you how the relationship with these countries is crucial for agricultural exports in the US. So before the COVID-19, the big issue was trade wars. So, China implemented retaliatory tariffs for American exports these tariffs increased, make difficult the access to the Chinese market for almost all the sectors in agriculture.

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As you can see in this picture, the global level of tariffs was 41 percent and it was even more in some countries, for some products like cotton or meat, but this trade war was not only with China and the European Union, Canada, Mexico, and Turkey also implemented retaliatory tariffs during this period.

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So when we look at which products were concerned more precisely by this trade war, so here I show you the value of agricultural trade that are targeted by these tariffs, by this increase tariffs, you can see that it's mainly Chinese tariffs that correspond to the ag value of trade and that soybeans, pork, dairy, sorghum, cotton, and cattle were the most impacted and most targeted products and represented the biggest amount of of trade.

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So I'll I take this opportunity to to show you the result of a study I did with some colleagues of the agricultural trade center at Virginia Tech about the impact of these trade war. So here it's a figure that we present the estimation of the impact of this trade war on US exports.

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So until vertical axes you have the impact of these tariffs of these additional tariffs implemented by these different countries so the lower the bubble is, the greater the negative impact, Ok? And on the horizontal axes, it's the value of exports before this trade war. So what we can see here is that meat, and oil were the sectors where the impact was higher.

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Particularly the retaliatory tariffs from China that impact this trade and that the oil sector is the most impacted and also the most important in the US exports. So, this period before this crisis, these latest two years was not only a period of trade wars but also a period of trade deals.

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So last October the US signed an agreement with Japan. This agreement will improve the market access of Japan for American products by reducing tariffs for some products, in particular in the meat sector and it will also totally eliminate tariffs for some of the products. The famous agreement, the US-China Phase One, that was signed last month is also an important agreement that was signed in that it will have, it will improve the access of the Chinese market for US products because China made a commitment of purchasing additional value of product as compared to 2017.

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So 12.5 billion of agricultural product this year and 20 billion next year. So the other aspect of this deal for agricultural products will be the recognition of some standards in the food industry. So, this is a deal that was signed last month but still it's there is a big question mark on the application of this deal and whether China will be able to comply with these commitments.

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We, well we don't know for a moment. So, these trade deals and trade war was a big point before the COVID-19 and now this crisis so I will try to just make a brief summary of the economic situation in the agriculture sector. And highlighting the impact on world trade so first the COVID-19 in the US but all over the world is first a demand crises, a demand shock, first a decrease in income for, again in the US, but all of the world.

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A lot of people cannot work so they don't have an income and there was also at the same time a shift in purchases with a kind of panic buying of basic products and also reduction of activity linked to tourism and restaurants that also creates a demand. On the world markets, several countries closed their border and prevent all imports by that but on the world market it's also the logistic issues that are the most important.

[00:50:23]
A lot of harbor reduce their activity as Shanghai or Manila and for example Hong Kong in March, its activity was only 10 percent of its usual activity in this month. Furthermore, the cargo traffic also is really reduced, so a lot of difficulty to transport goods and a lot of countries that closed their borders.

[00:50:50]
So these demand shocks, again, happen in our market in the US but also abroad in all countries and so this reduction in demand should have an impact by lowering prices. At the same time there is a supply shock, a supply crises due to both the pandemic and the containment policy.

[00:51:14]
So it's not my point here to say whether these impacts are due to the pandemic or the containment policy but the result is that all over the world, again, not only in the US, there is an inability of labor or walkers that will make the harvest for some crops very difficult in the following months.

[00:51:38]
In particular, in places where there is strict containment policy. The COVID-19 introduced disruption in the supply chain so it makes the access to inputs very difficult in some places, and furthermore, on the world market, several countries have taken measures in order to restrict the export of several goods in order to keep the food for their population, as Russia for example yet for rice.

[00:52:06]
So for the moment, even if I would say that there is no supply shock in the world market in terms of availability of food, I could say is that without any drops, there would be an impact still on world supply and it will affect prices. The question whether, as we have both a shocking demand and supply, what will be the overall effect on prices is hard to say.

[00:52:31]
I think that Olga will give some insight in few minutes but what I would like to say that this impact will be very different according to the products. Ok, it's really hard to have only one story for all commodities and all products because, according to whether they are just Apple products or high-value added products that will be more impacted on the demand side, whether the product is very stable or can be stored, whether the production is mechanized or relies on labor and also or whether goods depend on the world market or not.

[00:53:11]
So there will be very different effects according to the products both due to demand and supply shocks. So to conclude, what will be the world after this COVID-19 crises is really hard to say. We can only imagine what will happen after the crisis as we don't even know when it will end.

[00:53:34]
Of course there will be a rebound, the question is when and the level of, the magnitude of this rebound. And of course it will depend on the policies adopted both in the US and in all countries. The thing I can say is that in all the crisis, trade flows are more sensible than compared to GDP and activities so there is a chance that the rebound will be first in GDP and activity in production, and then on trade because trade is more sensible to all shocks.

[00:54:11]
But the other point is that I think that the COVID-19 crisis also showed both to countries to firms and to different sectors, the vulnerability of supply chants and interdependencies. So it shows some firms or some countries that it could be a danger to be too dependent on foreign trade, whether to export their goods or to import inputs, for example, and it also showed the fragility of some relationships.

[00:54:46]
We can see now with some countries this idea to close their borders to stop imports or to stop exports and in particular for medical supplies so it show that this superintendency could will not a very good thing for countries and so it mainly questions the globalization. So we can assume that we won't come back to the situation that was before the COVID-19 in terms of trade.

[00:55:19]
We can imagine that there will be changes into behavior your firms that will, for example, diversify their supplies. Or maybe we decide to relocate production, in particular for goods that are strategic, like food, or some countries can decide to implement protectionist policy in order to foster their own production of agricultural products.

[00:55:45]
And this crisis also makes assumptions in terms of implementation of the deal with China, the famous Phase One, and it's also the case for all the other deals. So that's what I will say, again a lot of question marks, and I cannot really say more than that but they will be very happy to take your questions.

[00:56:20]
I have a question on the Phase One trade deal actually: Did the deal specify which products and how much was gonna be purchased of each product or was it more or just 'Ok we're going to buy this much and it needs to be from this list of products'?

[00:56:43]
It specifies a list of products. So the big thing is that it's specified in value, not in volume, so as it will be changing price, it's really important to have in mind that it will be in value and the other point is that these purchases will be mainly done by state-owned enterprises so they will be able also to choose a price, Ok?

[00:57:14]
But It's defined by a big category of goods. Ok. Yeah, I was just interested because I know that tobacco, which is obviously important in parts of Virginia, was really hit hard by the tariff action. Even though you only had a 20 percent tariff, or something like this, on raw tobacco, tobacco sales in China are by a state monopoly and the state monopoly interpreted that as 'buy zero' so they bought nothing.

[00:57:56]
But tobacco was included in the trade deal so I was curious about that. Thanks. Yeah. The thing to understand is that with this deal, is that it doesn't go away all the tariffs. You know, they put some waiver on these retaliatory tariffs but it doesn't make them disappear, because they are still here.

[00:58:28]
Other questions? Thank you. Thank you, so it's also going to be interesting, kind of the compounding of COVID-19 with the trade war and it's going to be hard to say if the trade war was beneficial in the long term because of this then impact from COVID-19 would you guys agree with that?

[00:59:04]
Yeah, totally. In fact it's really hard and it will be very hard for us trade economists to disentangle the effect of the trade wars, trade deals, COVID-19 because I'm sure that the behavior of countries and firms will change after that and the rebound will be lower I think as compared to production and activity so we make these assessments of the trade war with the agricultural center and we will plan to continue to work on that but it will be hard to see the impact of this deal this year because of the COVID-19.

[00:59:51]
Thank you. Well I think we'll move on to our fourth presentation, fourth and final presentation, and we can have a few more Q&As afterwards so Olga and Patrick will conclude. All right good afternoon everybody, or good evening already. I'm happy to share some thoughts about grain and cattle market outlook, I just wish I had some better news for you guys.

[01:00:43]
As a summary, we have some pretty significant headwinds in the corn market with the effects of COVID-19. We're no longer traveling, there's been a huge drop in demand for gasoline, which also results in a huge drop in the demand for ethanol. We're hearing about ethanol plants shutting down all over the place and that's, that's been a huge drag on corn prices as you will see later on in my presentation.

[01:01:20]
Soybeans, I have better hopes for soybeans because of potential for stronger exports. As Charlotte discussed, we have a lot of challenges in the logistics of exports but with the way the prices have been going, everything is on sale now. All of our commodities offer huge buying opportunities to our foreign consumers.

[01:01:50]
It's just a matter of going through the logistics of getting these commodities on vessels and getting them to our consumers. We have the same story in wheat. Wheat is actually doing quite a bit better than corn and soybeans. We have tightening stocks domestically. Internationally we see a lot of countries imposing export restrictions on wheat because this is considered a strategic source of food.

[01:02:29]
So as the countries are trying to protect their domestic sources of food, they are imposing these export restriction, which should work out well for American wheat exports. As far as cattle and beef go, we have completed the expansion. I don't anticipate seeing fabulous growth in meat markets as we've seen in the recent past.

[01:03:02]
We have a lot of meat supplies and we have uncertainty in demand. Previous speakers have been talking about a drop in income as a result of the recession, as a result of the fact that a lot of people are losing their jobs. Well, beef and meat tends to be one of the most sensitive commodities to changes in income because they're relatively expensive and after some point people are just not able to afford that.

[01:03:40]
But, we still have our Phase One agreement on the books, right? And there is hope that this agreement will materialize at some point. We've been getting some good news that Asian markets is are trying to open up slowly and we hope that this process will continue and things will get back to normal sooner rather than later.

[01:04:10]
At the end of the day, we do not travel, but we eat. So it's not clear whether we'll be eating steak, chicken, or beans. It depends on how and much money we will have, how many of us are able to maintain our jobs, but that's going to be kind of the story for the future of our commodities.

[01:04:38]
If we go back a little over a month ago, this comes from the ag outlook forum at the end of February and already at that time we were expecting some weakness in the corn markets due to expanded plantings. At that point in time we were expecting corn plantings this spring to be around 94 million acres, which would cause, naturally, some weakness in prices.

[01:05:11]
Well this number was revised a few days ago when we got the results of the prospective plantings report and this number is now up to 97 million acres that has caused additional weakness in the corn markets. However, keep in mind the perspective plantings report is based on the survey collected in the first two weeks of March when the world looked very different.

[01:05:44]
I don't necessarily anticipate this 97 million acres to materialize quite to the extent that was predicted in the prospective plantings report. Soybean acreage is expected to be a bit lower than 85 million acres down to 83.5 million acres. And wheat is down from these estimates only slightly to 44.7 million acres.

[01:06:13]
And these plantings are anticipated to decrease corn prices. Soybean prices are remaining essentially unchanged and wheat prices are going to be a bit stronger for the 2020/2021 marketing year. So that was a month ago, where are we now? This looks like a free fall. This was the time of the outlook forum.

[01:06:48]
Since then we've had prospective plantings report and the COVID-19 effect on the market that has been just sending our corn prices down in the gutter. If we look at it in terms of the balance sheet, if we try to put everything together, this is our historical information in the last 3 columns we have some forecasts for 2021.

[01:07:21]
This first column comes from the outlook forum; this is one month old. These are that updates from the perspective plantings report that increase our plantings and result in a much larger supply. So if our supply is much larger, even if we keep the expectations for the consumption or used to be the same as we had a month ago, prices are already going to be negatively impacted and the stocks are going to be higher than what we anticipated.

[01:08:05]
Unfortunately, there is also this third column and this third column reflects my thoughts about what we're really going to see in terms of supply and demand. So as you can see here, I don't anticipate as having 97 million acres. I think it will be closer to 94, which was originally anticipated, but this will be the best acres so the yields are going to be a strong, which means that we're going to have the production that is bigger than what we anticipated a month ago but not as huge as what the prospective plantings report suggests.

[01:08:52]
The worst part of this equation comes on the bottom, so on the bottom we have feed and residual. In terms of feed, our livestock, our herd, I don't see any expansion of the herd so I'm expecting we're going to spend similar amounts on feed as we did in the previous year.

[01:09:16]
I don't see a whole lot of growth there, so we still have the domestic demand but I don't see it expanding. What the bad part here is ethanol and this number is right now anybody's guess. Because it depends on how long the situation is going to last in terms of travel restrictions and things like this because that's what's driving this number.

[01:09:51]
However, on the other side, because corn is becoming so cheap, it should become more attractive to our international buyers. At this sale price I'm hoping will see a stronger exports to other countries, which should give us a little bit of cushion on the use side. So that's what I am observing in terms of the supply and demand framework.

[01:10:24]
Another way to form price expectations is to look at the futures prices. So for the corn marketing year we can look at the simple average between December, March, and May contracts and these were the closing prices of today. So that adds up to 360. We subtract 30 cent basis here for the Midwest region that gives us the national price of about $3.30 and then we need to keep in mind that Virginia prices that are about $0.30 higher than that.

[01:11:01]
So where does that take us? Somewhere between this and this scenario. What about soybeans? We have four contracts- November, January, March, and May that would cover that marketing year. We average that; it gives us a $8.55. Again we subtract $0.30 to give us an estimate of $8.40 for marketing year average price.

[01:11:32]
And we know that Virginia price is typically about $0.05 lower than that. Let's talk more about soybeans. At least this doesn't look like a free fall; there is a bounce here, there is hope, there is potential for exports, there's potential for the demand for feed use and there is potential for the markets opening up.

[01:12:02]
So if we look at the balance sheet for soybeans, again the same approach- this is historical information, this is where we were a month ago, updates from prospective plantings. In perspective plan is we were expecting to do the reduction in acreage, again with corn prices as bad as they are now, i'm expecting maybe we'll have a little bit more soybeans because of just that.

[01:12:40]
Again it will be a few more a few more acres of soybeans on good land so we will have our production somewhat in line with what we expected. Before, I would say it would be higher than what we can get from the prospective plantings report. But we'll just have to wait and see on that.

[01:13:11]
So, with soybeans, I guess the story is always the same, right? Charlotte, it's exports, and we've seen our export struggle especially in 18/19. There's been some recovery in 19/20, the current year and then we do have commitments based on the Phase One agreement so hopefully this is going to materialize, especially since our consumers can get it at a very attractive bargain price.

[01:13:55]
So it's again a matter of working out the logistics, getting those exports out and to our consumers. So in terms of the price, anticipation price forecasts, implications from $8.80 to $9.00 to somewhere around $8.30. And our futures markets are more consistent with the situation and around $8.40 range.

[01:14:41]
So that soybeans. Our wheat markets have probably been affected the least. We've had a drop, that we observed in every other market. We reached the floor here on March 16th and we've had a very healthy rebound that has slowed down only recently. So again, wheat represents food, food security with other countries restricting their wheat exports.

[01:15:21]
I'm optimistic, but let's look at what we have inside the balance sheet. This is where we were a month ago with prospective plantings we didn't have a whole lot of change so the production is slightly lower but not a whole lot lower and then the biggest number the biggest expectation here is exports.

[01:15:52]
I believe the domestic demand is going to be maintained, it's just a matter of how we're able to navigate this trade environment and how are we able to get our wheat out to foreign buyers. And as you can see in the prices, we are somewhere around $5.50-$5.60 range.

[01:16:20]
As far as cattle goes, as I mentioned, we have finished the expansion, which means the production may decrease slightly. We have a lot of current supplies that we need to get out there, get into the retail system. You might have seen in the beginning of the COVID-19, the demand for meat increased by something like 79 percent in retail stores so that definitely helped clear a lot of storage and it's a matter of getting the products from the processing plants now to retail environments to keep things moving.

[01:17:22]
The biggest danger if year is the recession, the biggest danger is where will our incomes go, and the prices reflect that. Prices are struggling, prices are weaker due to this market uncertainty associated with demand. But as you can see here, the forecasts are not particularly weak. Relative to last year's prices, we are anticipating some decrease, but that decrease, at least in my mind, is not substantial.

[01:18:05]
And this is kind of where the market is. After the drop, it's trying to recover; it's struggling. There is a lot of uncertainty and if there is one thing I could tell you for sure, it's we are going to see a lot of volatility, a lot of uncertainty in the market until all of this clears, because no matter how many presentations we can give you, we just don't know yet exactly how bad and how long this is going to last.

[01:18:46]
And on that depressing note, I'm going to stop and ask you for questions. This is Mary, this is a question for Olga. Olga, of all the products that you look at, which do you think is affected the most for the coronavirus? Corn, because of ethanol. And there is no bottom in that market.

[01:19:34]
I mean, I put gas two weeks ago and my tank is still full. Olga, this is Gonzalo from Dairy Science again. Can you expand a little more on the meaning of ethanol plants shutting down? I mean I saw in your numbers you're estimating, I think it was like an 18 percent decrease in the demand.

[01:20:07]
That was a guess and that guess depends on how long this will last, right? But we had one ethanol plant Virginia that's been down for a while. What's scary now is, I think there's only a couple of ethanol plants left in the Midwest that are still operating. Gasoline is just so dirt cheap that it's hard to compete with, it's hard to, we still have the requirements to blend in ethanol but there's just no demand out there.

[01:20:45]
Does that answer your question? Yeah, yes it does. I'm thinking as a dairy farmer feeding DGDs. Yes, it will be hard to find. That's what I've been hearing. I want to, I wish I could know a little more on how bad is it actually going to be. Well, it's not good already, and I just don't see it turning around in the near future.

[01:21:29]
I think given the lack of access to DGDs, you have bargain prices for corn and soybeans so there you have it. Maybe. Thanks. There's a few questions on the chat I'll present. What is Senator Grassley is potential impact on investigating meat packer gouging live cattle prices? Actually, let me, I had a question that was the exact same as this actually.

[01:22:08]
This is the first time I've ever heard the term reverse price gouging frankly. But I was hoping you could expand a little bit on why we see live cattle prices so low even though the demand for meat if the grocery store was so high. Well I think the price is a drop in anticipation of the drop in demand.

[01:22:43]
So, it takes a while to take the cattle and process and put it through the system, and so where this system is going to be a couple months from now is not exactly clear, right? I have not heard a whole lot about this case in all honesty. Senator Grassley I think suggested to the attorney general that perhaps they should launch an investigation into whether the packers were not paying enough to the farmers and he termed it reversed price gouging.

[01:23:43]
Well I think we've always had that feeling that the packers are not paying enough, right? And the packers have had some pretty healthy profits last year during some periods and then some margins were inverted during other times of last year. So what we've got to keep in mind when we're thinking about packers, my biggest concern is they may be running into labor issues.

[01:24:23]
So Charlotte mentioned that labor issues would be some consequences of what we are facing now. I don't see labor issues to have huge impacts on production agriculture because it's highly mechanized. But, if it effects the packing plants, we're going to be in trouble because if you remember the situation that we had last year when we had a fire at a packing plant that just destroyed the markets for a week or so because there was just no capacity to process the supply that was going through the system.

[01:25:13]
So that's something to potentially think about and hope that it doesn't happen. We have another question, 'do you see a shift in demand to ground beef instead of higher value beef cuts being supportive of cow cows versus feeder calves?' Potentially. I think with lower incomes that might very well happen.

[01:25:53]
We have about five minutes left so I'd like to encourage anybody to ask questions about any of the four presentations. And if we don't have any questions, again I appreciate you all tuning in and thank you for participating and please, you know, thank think the other four speakers who contributed their time this evening.

[01:26:28]
This was great. Stay safe. Thank you, everyone. Take care. Thank you so much. Yes, you have our contact information. Please reach out with your questions, we are available these days around the clock essentially, electronically. Yeah, and I also say that we're going to, conditional on the technology working, this recording will be available afterwards online somewhere and I will be sending out an email with that link and then you can you can get our email address there and look us up online.

[01:27:33]
So absolutely willing to talk to you about these issues any time. Thank you. Yes, thank you.