The Importance of Agriculture in the Economy: Impacts from COVID-19.

Abstract

Much of the attention from COVID‐19 has been on the impacts on tourism and other service sectors; but there has been a growing interest in some agricultural and food topics, such as the decline in food away from home (FAFH) expenditures. Our work considers the importance of FAFH in the overall economy, and we also consider changes in agricultural production and trade that have occurred because of COVID‐19. We gather data on actual changes to these components, as well as similar shocks to non‐agricultural sectors, and employ a simulation model to estimate the impacts on gross domestic product (GDP). Results indicate that changes from agriculture due to COVID‐19 have had a larger effect on the overall U.S. economy than the share of agriculture in the economy at the beginning of COVID‐19. But the non‐agricultural shocks still outweigh the impacts from agriculture by a magnitude of 3. Breaking the results down along the components, we find that the loss in FAFH expenditures is the largest contributor to the change in GDP resulting from shocks to agricultural markets and conclude that agricultural production/trade markets have been very resilient during the pandemic. Our results also indicate that our model (computable general equilibrium) does reasonably well in estimating GDP compared to actual changes due to the inclusion of data on actual demand, supply, and fiscal responses to COVID‐19.