The following economic impact assessment was compiled on March 18, 2020 for the National Sustainable Agriculture Coalition by Dawn Thilmany, Becca Jablonski, Debra Tropp, Blake Angelo, and Sarah Low. More information about the authors can be found at the end of the document. Last updated March 21, 2020.
Across key local and regional
markets (i.e., farmers markets, farm to school, food hubs serving other
institutions, and restaurants) we expect to see up to a $688.7 million decline
in sales leading to a payroll decline of up to $103.3 million, and a total loss
to the economy of up to $1.32 billion from March to May 2020. Without immediate
mitigation, we may lose many small, socially disadvantaged, and beginning farms
and the important markets they serve.
Explicitly Include Local Food and Farm Businesses in Small Business Support Programs: Declare local farm and food assets as key community assets. Require emergency food assistance dollars flowing to communities to support local farm and food businesses. Explicitly integrate local farm and food business into all small business, workforce and emergency payments/loan programs.
Expand Incentives for Small Food and Farm Businesses to Move Online: Aggressively encourage farmers to integrate online ordering/sales platforms, as increasingly states (e.g., CT) are requiring practices that limit customer interaction.
Accelerate Waivers and Expand Flexibility for Current USDA Programs: Leverage congressional and executive authority to waive limitations on the reach of feeding programs’ ability to purchase food from local and regional suppliers. Relax expenditure limitations so that current USDA award recipients can innovate and rapidly respond to community needs, e.g., Michigan reported that due to lost sales at schools, their Michigan Farm to Freezer program is shifting to freeze items for other markets. Expand and add flexibility to the LAMP and Value-Added Producer Grant Programs so future awards incentivize innovations that enhance rapid responses to future supply disruptions.
Among the businesses facing
losses as a result of COVID-19 are the farms and ranches that sell through
local and regional food markets. Social distancing measures such as the closure
of universities, schools, restaurants, and local food markets (e.g., farmers markets,
farm stands) will result in significant shifts in where food is sold or
acquired, and subsequently, markets for farms and ranches. The Congressional Research Service estimated
local food sales at $11.8B in 2017 (Johnson 2019), with nearly 8% of U.S. farms
and ranches (159,000 operations) participating (USDA NASS 2017). The vast
majority (85%) of participating farms and ranches are small. Further, about one
in four beginning farmers and ranchers use local food markets to differentiate
their product (and get prices above commodity pricing) (USDA NASS 2018). Census
data from 2007 and 2012 show that beginning farmers that had local food sales
had higher average survival rates across all sales classes (Low et al. 2015),
and that local food markets can support profitable operations, even at the
lowest sales categories (Bauman et al. 2018).
Projected impacts by selected market, based on
March-May period of social distancing:
This short brief provides a
preliminary attempt to estimate economic losses to the local and regional food
sector in the U.S. and additional guidance for policymakers as they evaluate
solutions that will minimize negative impacts to small businesses and rural
1) Farmers Markets
Using estimates from the 2017 Ag Census
and recent USDA ARMS data, we estimate $2.4 billion in sales through farmers
markets. Since it is an early part of the season and some markets may continue
to operate with social distancing
measures, we assume 10%, or at maximum 25% of annual
sales will be lost.
Assuming a 10% loss in market sales
resulting from COVID-19, there would be a $240 million decline in sales, leading to a
$36 million decline in payroll given estimates of the labor share of
revenues paid by farms marketing to local markets.
Assuming a more significant 25% loss in
market sales resulting from COVID-19, there would be a $600 million decline in
sales, leading to a $90 million decline in payroll paid by farms
marketing to local markets.
The multiplier effect of a loss of
$240-600 million in sales would lead to an estimated loss to the community economy of:
$460 million- $1.15 billion based on the USDA AMS Local Food Impact
Other Important Issues to Note regarding Farmers
March-May season of the market year is mostly a start-up phase, particularly
outside of the Southern U.S. and California, so the range of lost sales was
hard to forecast, and the range of 10-25% of annual revenue was deemed
reasonable to present as an estimate. In contrast, if the early season for a
market is cancelled, it may be a tipping point leading some marginally
performing markets to close for the whole season (or permanently).
8% of local food
farms had an online marketplace in 2015. These farms had higher local food
sales and value-added sales, suggesting online is a viable platform for food
farms that could be expanded. Technical assistance for developing online
platforms and additional broadband infrastructure could both help with this
supply chain disruption but also buoy future food farm sales.
2)Farm to School
Based on data collection from state farm
to school coordinators, and state agencies, we estimate a 10% loss in farm to
school sales resulting from COVID-19. Total farm to school purchases were $789 million during the 2013-2014
school year. We assume that 1/3 of these sales were direct from farms ($263
million), whereas the remaindermoved
through an intermediary (e.g., food hub, DOD Fresh, $526M). For the
intermediated sales, we assume that the farm received 70% of the price the
school paid ($350M) after subtracting the distributors’ mark up. 10%
loss of $263 million + $350
million = $61.3 million.
Given estimates of labor share of local
farm market revenues, this would equate to $9.2 million in lost payroll.
The multiplier effect of a loss of $61.3M
in farm to school sales would lead to an estimated loss to the community economy of:
$120.3 million based on the USDA AMS Local Food Impact calculator:
Other Important Issues to Note regarding Farm to
March-May period of the school year represents the smallest overall portion of
farm to school purchases, particularly outside of the Southern U.S. and
California, thus lost sales for farms would have been worse if the outbreak had
occurred during a different part of the school year.
are mixed in how school vendors/supply chains are impacted by the shift from
school meals to emergency feeding programs. However, even most states that
report using the same suppliers in the emergency feeding programs as in the
schools, there appears to be a change in preference to shelf-stable,
non-perishable items which farm enterprises and food hubs are less likely to
3)Food Hubs Serving Other Institutions (Beyond Farm to School) and Restaurants
With the majority of states completely
closing restaurants and universities (and dining halls) for 30 days (or more),
we assume significant losses in sales (20% of annual sales)
Direct sales by farms to restaurants and
institutions other than K-12 schools (Universities) are an estimated at $40
We assume most sales moved through a food
hub as an intermediary. Extrapolating from numbers reported in the 2017 Food
Hub survey, approximately $108 million was sold to restaurants and caterers and
$30 million was sold to Universities.
Again, for sales through hubs, we assume that the farm received 70% of
the price paid ($97 million) after subtracting the distributors’ markup. 20% loss of $40
million + $97 million
= $27.4 million.
Given estimates of labor share of local
farm market revenues, this would equate to $4.1 million in lost payroll.
The multiplier effect of a loss of $27.4 million in restaurant and
institutional sales would lead to an estimated loss to the community economy of:
$52.5 million based on the USDA AMS Local Food Impact calculator: https://calculator.localfoodeconomics.com/
Other Important Issues to Note Regarding Food Hubs
Serving Other Institutions (Beyond Farm to School) and Restaurants:
At least 14
states have already closed or limited restaurant operations, according to the
James Beard Foundation.
Given the rapidly evolving
nature of the virus, as well as government responses, we utilized the best
available information to formulate our scenarios and estimate potential
U.S. Department of Ag, National Ag Statistics Service, 2017 Census of Agriculture
U.S. Department of Ag, National Ag Statistics Service, 2015 Local Food Marketing Survey
U.S. Department of Agriculture, National Agriculture Statistics Service/Economic Research Service, Agricultural Resource Management Survey
Bauman, A. G., D. Thilmany McFadden, and B.B.R. Jablonski. 2018. The financial performance implications of differential marketing strategies: Exploring farms that pursue local markets as a core competitive advantage. Agricultural and Resource Economics Review. 47(3):477-504.
Low et al. 2015. Trends in local and Regional Food Systems. Report to Congress. U.S. Department of Ag, Economic Research Service, Administrative Publication Number 068.