ISE COVID-19 Impact Updates #8

Recent updates include notices from SoSafe Cyber Security Awareness, CTL, Parks Associates, and an article by S. Robertson. Visit COVID-19 Network Response at https://isemag.com/category/safety/telecom-covid-19-network-impact-wireless-wireline/ to find these and more COVID-19 Impact Updates.

U.S. Economy Gathers Momentum, Policy Decisions Will Reshape the Future 

The U.S. economy continues to outperform expectations as stimulus funds are fueling robust consumer spending. Consensus forecasts point to 7% GDP growth for 2021, the fastest rate of expansion since 1984. Inflation is inevitable, however, as the 2020 price declines will widen year-over-year inflation over the next two quarters, and new upward price pressure should push headline inflation above 3%.

The transition to a less COVID-restricted world has begun. But for the economy and rural industries, there will be no going back to pre-COVID conditions. A transformed policy environment and awakened commodity markets are making way for a whole new operating environment, according to the new Quarterly report from CoBank’s Knowledge Exchange.

"The policy focus in Washington is shifting from crisis management to building for the future," said Dan Kowalski, vice president of CoBank’s Knowledge Exchange division. "And the outcome of the president’s infrastructure plan will have substantial implications for rural water, power and broadband providers. Hundreds of billions of dollars in funding would reshape these industries and intensify the current focus on climate resilience and social equity." 

GRAIN PRICING

The cyclical turn in grain pricing, driven by strong demand and tight stocks, continued during the first quarter of 2021 and has picked up further gains ahead of spring planting. Accumulated grain exports to China have been very strong. While the backdrop for the grain and oilseed complex is positive, there are issues worth monitoring that could result in price volatility in the coming months. A recent surge of African Swine Fever (ASF) in Asian countries could temporarily slow soybean demand. 

FARMING

Farm supply retailers are positioned to benefit from an exceptionally strong spring agronomy season, outpacing fall and spring 2020. Financially strong U.S. crop farmers should increase spending given a 3.1% increase in planted corn, soybean and wheat acres. Fertilizer prices rose 42% during Q1 and are now 96% above the trough level in May 2020. While much of the Midwest Corn Belt is free of drought, some areas of concern surfaced in late March. 

FUEL ETHANOL

The U.S. fuel ethanol sector has recovered, with production running near 90% of pre-COVID levels. The industry is adapting to new short-term and long-term realities, including changes in driving and work habits, policy directives on ethanol and fossil fuels and increased adoption of electric vehicles. Operating margins averaged near $0.10/gallon but rose sharply in March to above $0.25/gallon as fuel ethanol prices rose and natural gas prices fell. 

CHICKEN PRICES

U.S. chicken prices started 2021 on a high note, climbing over 20% in the first quarter. These prices offset the double-digit rate of feed cost inflation and brought spot margins well into positive territory. The counts of eggs set and chick placements are a leading indication that chicken production will remain at current levels, so chicken prices continue to look strong through the summer. Expected increases in vacation and business travel this summer will boost food service sales, benefiting the chicken sector.

BEEF

U.S. beef demand has been incredibly strong in the first quarter despite the challenges in food service and the away-from-home dining sector. Strong demand and expectations for limited supply growth in the back half of 2021 have driven up cattle futures. The USDA expects beef production to decline by 3.5% in the second half of 2021, which has helped lift cattle prices nearly 15% above year-ago levels. Packer margins remain elevated, but producers are expected to realize better margins in the second half of 2021.

PORK

Strong first quarter demand for pork, coupled with indications of limited supply growth, has lifted hog sector profitability to levels not seen in many years. Concerns over feed and other cost inflation has taken a back seat to optimism for another year of strong pork exports and robust domestic demand as U.S. consumer behavior slowly returns to normal. China has slowed its hog herd rebuilding due to increased ASF cases this winter, helping drive the positive outlook for the remainder of the year.

DAIRY

The pace of U.S. dairy exports started 2021 on a weaker note as exporters continue to struggle with trade logistics, specifically with the scarcity of containers, port congestion and rising transportation costs. Cheese and butter stocks continued their rapid ascent, climbing 5.4% and 16.8% year-over-year respectively, for February. U.S. milk production rose in January and again in February, giving dairy processors ample milk supplies for processing. Cow numbers in February reached the highest level in 30 years following months of ongoing expansion.

COTTON AND RICE

Combined cotton and rice planted acreage is expected to fall for the third consecutive year in the U.S. according to USDA’s latest projections, as acres shift out of pima cotton and all classes of rice. The surge in upland cotton prices has blunted losses in its acreage. Last year’s rally in refined sugarbeet prices also forestalled losses in sugarbeet acreage. The recovery in U.S. foodservice demand remains an unknown for both rice and sugar, while China remains critical for U.S. cotton demand. 

TREE NUTS

Tree nut exports reached an all-time high with the peak shipping now drawing to a close. However, container shortages and port constraints are estimated to have delayed U.S. tree nut export shipments 10%-20% in the opening months of the year. The lack of movement could potentially translate into higher-than-expected tree nut inventories at the end of the marketing season. Drought conditions in California are raising concerns of limited water allocations in the forthcoming growing season.

POWER, ENERGY, WATER INFRASTRUCTURE

February’s polar vortex refocused attention on deficiencies in U.S. power, energy and water infrastructure, and how it is affected by climate change. Widespread failures in energy systems tend to negatively impact water systems. Consequently, any climate mitigation program in the U.S. must account for water and energy system dependencies. President Biden, delivering on his "Build Back Better" platform promise, has announced the American Jobs Plan — a $2 trillion infrastructure and economic modernization bill, which includes a major focus on climate change.

AMERICAN RESCUE PLAN

The recently enacted American Rescue Plan Act included $20 billion for broadband availability and affordability and the American Jobs Plan includes $100 billion to bridge the Digital Divide. Details are not finalized, but President Biden wants to prioritize funding for nonprofits, cooperatives and local governments. The ultimate outcome of the infrastructure plan will have substantial implications for rural water, power and broadband providers.

Read The Quarterly. Each CoBank Quarterly provides updates and an outlook for the Macro Economy and U.S. Agricultural Markets; Grains, Biofuels and Farm Supply; Animal Protein; Dairy; Specialty Crops; Other Crops and Rural Infrastructure Industries.

About CoBank
CoBank is a $159 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 75,000 farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and maintains an international representative office in Singapore.

For more information, contact, Julie Davis, Director, Corporate Communications, 202.215.1354, [email protected].

How to Sustain Flexible Thinking and Nimble Action

Hardwire Flexibility Into Your Organization

To survive the pandemic, companies were forced to adapt very quickly to radically new circumstances. Even large organizations — where it’s typically difficult to shift directions quickly — managed to accomplish it. Leaders discovered that, when required, their organization could act much more quickly and nimbly than they normally do.

So, the obvious questions are:
• What was different?
• How can you "hardwire" this flexibility into your organization so it continues to be stronger in the future?

WHAT WAS DIFFERENT?

All humans have a set of cognitive biases, which are mental shortcuts that are used for problem-solving and decision-making. 

To be clear, cognitive biases are NOT individual or personal biases. They are a neuroscience phenomenon that all humans share. It’s also important to understand that they operate subconsciously; They affect your thinking in ways that you don’t realize.

You have2 different thinking systems, commonly known as System 1 and System 2, sometimes referred to as thinking fast (1) and thinking slow (2.). 

SYSTEM 1
System 1 is the "intuitive", quick, and easy thinking that we do most of the time. In fact, it accounts for about 98% of our thinking. It doesn’t require a lot of mental effort; we do it easily, quickly, and without having to think about that fact that we’re thinking. 

SYSTEM 2
System 2 thinking is deeper thinking; the kind that’s required for complex problem-solving and decision-making. This deeper thinking requires more effort and energy; it literally uses more calories. Since it’s less energy efficient, our brain automatically and subconsciously defaults to the easier System 1 thinking whenever it can, to save effort.

COGNITIVE BIASES 

Cognitive biases result when our brain tries to stay in System 1 thinking, when perhaps it should be in System 2. The outcome is often sub-optimal solutions and/or poor decision-making. But we don’t realize that we have sub-optimized because all of this has happened subconsciously.

In typical circumstances, several of these cognitive biases conspire to make us perceive that continuing as we are – with only slower, incremental changes – seems like the best decision. It feels familiar, it feels lower risk, in sum: it feels smarter. Choosing to do nothing different is — very often — simply the default. It frequently doesn’t even feel like we made a decision; instead, it feels like we were really smart for NOT making a potentially risky decision.

BUT DURING THE PANDEMIC, changing nothing, or changing very slowly, were simply not options. This particular situation was so unique that our brains didn’t have the choice to stay in short-cut System 1 thinking. System 2 thinking was required. Since we consciously realized we MUST change — quickly, our brains started literally working harder — in System 2 — and the normal cognitive biases weren’t a factor. 

HOW TO CONTINUE TO BE MORE NIMBLE IN THE FUTURE

The key to maintaining flexible thinking and nimble behavior is to not allow our brains to fall into the trap of cognitive biases. Obviously, since these are intuitive and subconscious responses, this is not easy task. 

But there are proven ways that we can better manage our brains. Here are a few ways to start.

1. Knock out the Negativity Bias. Negativity Bias is the phenomenon that negative experiences have a greater impact on your thoughts, feelings, and behaviors than positive experiences. So, you are much more highly motivated to avoid negative than we are to seek out positive. The way this manifest in your daily work is that we are much more prone to reject new ideas than to accept them, because rejecting ideas feels like we’re avoiding potential negative.

Respond to "yes but…" with "what if…?" This requires a dedicated and conscious mental effort, by everyone on the team, to monitor their own and the team’s response to new ideas. Every time "yes, but…" is uttered, the response needs to be "What if we could solve for that?" This reframing of the problem into a question will trigger our brains to look for solutions, instead of instantly rejecting the idea.

2. Short Circuit the Status Quo Bias. The Status Quo bias is a subconscious preference for the current state of affairs. We use "current" as a mental reference point, and any change from that is perceived as a loss. As a result, we frequently overestimate the risk of a change, and dramatically underestimate the risk of "business as usual." 

When weighing a choice of possible actions, be sure to overly list "do nothing" as one of the choices, so you are forced to acknowledge it is a choice. Also include "risk" as one of the evaluation criteria and force the team to list all the possible risks. Then comes the difficult part – remind the team that their subconscious brain is making them perceive the risks of doing nothing to be lower than the reality, so they should multiply the possibility of each of those risks.

3. Curtail the Curse of Knowledge. In any subject where we have some expertise, we also have many subconscious assumptions about that subject. Under normal circumstance, this Curse of Knowledge (these latent assumptions) limits our thinking and suppresses our ability to come up with radically new ideas. 

Rely on advisors who don’t have the same Curse of Knowledge. In other words, seek out advice from people outside of your industry. When evaluating ideas or actions, these outsiders won’t have the same blinders that you have, so they will likely have a more clear-eyed view of the benefits and risks.

The bad news is that cognitive biases are always going to be a factor in our problem-solving and decision making; they’re hard-wired into us. The good news is that, with some dedicated and continuous mental effort, we can mitigate them and become nimbler in the face of change.