How to Navigate Business Decisions Amid COVID-19

As you navigate the uncertainty surrounding COVID-19, follow this business advice. ( AgWeb )

The coronavirus (COVID-19) pandemic is changing life as we know it in the U.S. Beyond the grave health implications, the uncertainty caused by the global virus is causing major ramifications in every corner of the global economy. 

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What do we know? “An economic slowdown is inevitable,” says Tim Koch, chief credit officer, Farm Credit Services of America. “There is no doubt this will hit our industry.”

For perspective, take a look at how the grain market is moving relative to other markets, suggests Elaine Kub, market analyst and author of “Mastering the Grain Markets.”

“Almost all of the assets have been moving together,” she says.

Since Nov. 1, Kub reports:

  • The stock market is down 25%.
  • Corn prices are down 15%.
  • Soybean prices are down 10%.
  • U.S. dollar is up 5%. “When the dollar moves higher, commodity prices tend to move lower,” she says.

Kub says soybean prices have been more resilient than corn because of livestock feed demand. Corn prices are more vulnerable because the outlook for the ethanol market is dire due to less gasoline demand. (Read more: Ethanol Plants Are on the Verge of Shuttering Production; Here’s Why)

The good news, Koch says, is the U.S. government is mobilizing to preserve essential industries, and agriculture falls into this category. (Read more: Government Says Ag is Critical)

Yet, the unknowns greatly outweigh the knowns. 

“We don’t know the duration of this disruption and what future actions we may need to take,” he says. “We also don’t know the global response and the impact to U.S. food and ag policy.”

Koch provides this advice for farmers as they navigate the uncertainty surrounding COVID-19.

  1. The status quo might be the best short-term course of action. Avoid making big decisions, if possible. 
  2. Take immediate steps to preserve your cash. This could involve delaying major expenditures or using marketing tools to lock in profits.
  3. Be opportunistic. Oil prices are at historic lows, for example. Can you lock in your costs for fuel? Interest rates have also fallen significantly. How would restructuring your loans add to your working capital?
  4. Communicate with your business partners. Discuss your marketing plan. Ensure suppliers can meet your needs.

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Farm Credit Services of America is hosting a weekly webinar series entitled: COVID 19: Understanding its impact on ag. Learn more.