Corona Virus and the Farm Economy (Part 1)

Wine Purchasing Habits Might Change Because of Corona Virus

By Tim Hammerich with AgInfo.net

How will food supply and demand change as a result of the Corona virus? Consumers in uncertain economic times will adjust their purchasing habits, even for essentials like food. This according to UC Davis Economist Dr. Daniel Sumner, who says different agricultural products will be effected in different ways.

“You do have to think about it commodity by commodity. Which ones are most sensitive to income.  Which ones aren’t,” noted Sumner.

“Let me just give you a quick example from the wine industry. The premium wine industry here in California, which means the grapes that are grown along the coast. Higher proportion is sold in restaurants. Higher proportion is income sensitive. And people that still want to drink wine, they now drink it at home,” explained Sumner.

“They’re a little worried about their job. They say, ‘gee am I going to get laid off?’ whatever. ‘My company’s not making any money’. ‘I don’t get my bonus’, whatever.,” said Sumner. “They move down and move in the direction of Central Valley wines. So you could have the Central Valley wine industry be better off at the same time, the coastal wine industry is hurt. And we saw that in a recession 10 years ago,” Sumner said.

Dr. Sumner says staple goods are more likely to see strong demand while those perceived as luxury items may struggle. This is especially true for products that are sold through restaurant or food service channels.

California Drought Hurts More Than the Ag Industry

Source: Shan Li; Los Angeles Times 

The California drought could dampen employment growth in coming years and have a ripple effect on several industries in the state, according to a UCLA report released Wednesday.

Economists said in the quarterly forecast that arid conditions in 2013, the driest year on record for the Golden State, could diminish the fishing and manufacturing sectors in the state. However, the effect depends on whether the drought is “normal” or the beginning of “a long arid period.”

California’s employment could be suppressed about 0.2% during the next few years because of the drought, the report concluded.

“If the drought is like the ones we had before, which are plentiful in California, then the data suggests it’s not a big deal economically,” said Edward Leamer, director of the UCLA forecast. “If this is really a climate change, that is a different story.”

Even without the weather factor, Los Angeles, among other cities, is grappling with major problems with its job market.

Among problems plaguing cities: the high cost of housing, congestion, lack of skilled workers and an unfriendly environment for businesses, said William Yu, an economist at the UCLA Anderson Forecast.

“It should not be surprising that a business is less likely to start up, relocate or expand its business in a city who is business unfriendly, especially when there are many other business-friendly cities from which to choose,” Yu wrote in the report.

Over the next year, however, UCLA economists do expect the state’s economy to continue growing.

The current drought in California not only affects the agriculture industry, but California as a whole. Individuals should take the initiative to conserve water during this tumultuous time.