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Economist: Nation may be on lockdown for some time


Last updated 4/13/2020 at 11:40am

Montana University Extension held its weekly Solid Finances webinar Thursday, covering the status of COVID-19 and how it has affected the hospitality and agriculture industries in Montana and beyond.

Bureau of Business and Economic Research Associate Director of Health Research Robert “Tino” Sonora said the situation in Montana regarding the pandemic is unique for many reasons including the relative inaccessibility of health care.

“The state of Montana has the lowest percentage of people with access to health care. Only 35 percent of working people have health care provided through their employers,” Sonora said.

He said the most rural parts of Montana also face difficulties with people having to travel long distances for health care.

Sonora said the national growth rate of COVID-19 is still high, with the rate of cases growing by about 18.5 percent every day, with the number potentially doubling every third day.

He said Montana’s growth rate is higher at about 25 percent. He said he expects the number of confirmed cases to rise as testing becomes more widespread.

Sonora said, despite this growth rate, being a largely rural state has advantages and makes statewide spread more difficult.

He said he thinks the U.S. is “far behind the eight ball” on its handling of the pandemic, and speculation that the virus will be hurt by the warmer weather are unfounded.

“We may be on lockdown for quite some time,” Sonora said.

“Spain didn’t take it seriously enough so now they’re seeing a rapid increase in the amount of case,” he added. “So, we kind of followed a Spanish model, and hopefully we’re not going to follow it anymore.”

Sonora said 14 percent of employed Montanans lost their jobs in the last three weeks, brining unemployment 20 percent in the state.

He said this represents a 2,600 percent rise in those claiming unemployment, though he said this was in the middle of the pack when compared to other states.

He said the Congressional Budget Office is predicting a 28 percent drop in GDP during the second quarter as a result, largely, of COVID-19.

But Sonora said the news for Montana isn’t all bad.

He said the Institute for Health Metrics and Evaluation estimated that Montana would see between 14 and 35 deaths over the next two to three months, which is extremely low compared to many other states.

He also said the health care system has enough beds to handle the current situation.

However, he said, the inter-state bidding war for medical equipment is driving up the prices for the supplies the state does need.

“The state model, of every state being able to do its own thing, probably doesn’t work in this kind of environment,” he said, “We need to have a holistic countrywide policy… there’s no borders with this thing.”

Sonora said the country should be thinking first and foremost about the health of its citizens not just for its own sake, but for the sake of the economy in the long-term.

“What happens when you have better health is, in the long run, you have a better economy,” he said.

Sonora said the CARES Act and additional economic relief packages will be important with the high number of small businesses in Montana, but added that the federal response has been too slow.

Impact on tourism

Norma Nickerson of the Institute for Tourism and Recreation Research said COVID-19 has had devastating effects on the hospitality industry.

This echoed what Sonora said earlier in the presentation when he said 65 percent of the 700,000 jobs the U.S. economy lost were in that industry.

Nickerson said based on a survey conducted by the institute, 36 percent of businesses in the industry saw cancelations due to the virus by March 11. Two weeks later that number jumped to 81 percent.

She said 37 percent of these businesses had no bookings for March, though she did say this number drops as the months go on.

“There’s hope out there that summer will come around for everybody,” she said.

Nickerson said the accommodations industry has been devastated by COVID-19 and cited statements that were sent to her by business owners.

“These businesspeople who are actually saying things,” she said, “Made comments like, ‘Currently all of my May bookings are canceled, if we don’t have a 2020 season, I’m not sure our business and ranch will survive. I don’t know how we will pay our bank payments, I’m concerned for my family which has worked so hard to keep this ranch in our family for so long’ another one, ‘Had to close and let my employees go, put our property up for sale on MLS to try to find a buyer as soon as possible.’”

She said outfitters and guides, particularly fishing guides, are in similarly grim situations.

“You’ve heard it from Tino, you hear it every day; this is unprecedented. But the other word that stands out is uncertainty,” she said.

Ag industry in the air

Kate Fuller, an assistant professor of the economics of farm management decisions and a specialist at MSU Extension, said the past 12 months have not been good for the agriculture industry before the pandemic hit.

“2019 was not a great year for the us ag scene overall. There were a lot of natural disasters pretty bad weather,” Fuller said, “… Add to that just a sort of general uncertainty and you end up with a scenario that had a lot of farmers pretty stressed out.”

She said prior to the pandemic, projections showed that 2020 would be similar to 2019 for the ag industry.

“All of that has flown out the window,” she said.

Fuller said despite the turmoil of the previous years, sentiment was at a record high. She said that number took a sharp turn downward in mid-March, but that it was still above average.

Fuller said the CARES Act might be a bright spot for the industry, but the rules on how funds will be handled are not set in stone yet.

“The rules are still very much being sorted out,” she said.

Fuller said direct assistance is slated to go to, as are specialty crops, direct-to-market and livestock, but a lot of lobbying is going on to figure out how that money gets allocated.

Fuller also said ag banks look strong and could help farmers and ranchers get through these times.

She also said low interest rates will help those ag producers looking to refinance their properties.

Fuller said she hopes some of the direct assistance money from the CARES Act will go toward improving internet access for ag producers in rural areas.

“I don’t live in a particularly rural area, but I do know people that are struggling to be able to do things like work from home and communicate from their homes,” she said.

She also said a lot of Montana crops are in a pretty good position for now, with high demand and more flexible supply chains due to the crops’ high storability.

However, Fuller said, despite these bright spots the ag industry is facing serious challenges amid the pandemic, particularly the cattle market.

Fuller said cattle markets have taken a dive since mid-March, with feeder futures having dropped 20 percent, live cattle futures by 30.

She also said beef markets are facing problems due to the closure of restaurants in the state.

Fuller said recent news stories show fresh produce, particularly milk, being thrown away due to quick expirations, and said this is indicative of a larger problem in the industry.

“This really highlights the problem with our current delivery system, which is ‘just-in-time delivery,’ in times of crisis,” she said.

Fuller said during the pandemic ag producers are especially important.

“Farmers and farm workers are considered essential workers, and it’s very important that we keep them safe,” she said.

She added that this was important because of the high average age of ag producers in the state with the median age being 58 and 40 percent of them older than 65.

Fuller said grain and cow calve markets will be talked about in more detail during next week’s webinar, along with supply chains.


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