Southern Ag Today

Blog

  • U.S. Pecan Trade and Tariff Outlook

    U.S. Pecan Trade and Tariff Outlook

    United States (U.S.) pecan production totaled 120 thousand metric tons (TMT) in 2024. Exports of pecans from the United States in 2024 totaled 53.7 TMT, worth a total of $381 million. In-shell pecans accounted for 32.2 TMT and $169.2 million; the remaining 21.5 TMT and $211.8 million of exports were shelled. In-shell exports to Mexico and China accounted for $94.5 million in 2024, representing 75.8 percent of the total volume of in-shell exports. The export market for shelled pecan exports is less consolidated.

    Due to the ease of access to low-cost labor in Mexico, a significant portion of the in-shell pecans exported to Mexico will be shelled and then imported back to the United States, where they will be sold domestically or packaged for export elsewhere. This makes Mexico far and away the largest market for U.S. pecan imports. Mexico accounted for 99.7 and 99.5 percent of in-shell and shelled imports, respectively.

    The North American Free Trade Agreement (NAFTA) worked to lower trade barriers and was renewed recently in 2020 as the United States-Mexico-Canada Agreement (USMCA). One such barrier addressed was tariffs on pecan trade between the United States and Mexico, which were set at zero percent. This does not account for non-tariff barriers to trade. Non-tariff measures (NTM) have a major impact on trade that is difficult to quantify. Since 2004, the NTMs for all WTO countries have nearly quadrupled from 5.3 thousand measures to 19 thousand. The largest NTM category is sanitary and phytosanitary (SPS) restrictions.

    The pecan weevil quarantine is one such SPS issue that has arisen. Arizona, California, New Mexico (except for Otero County), and six counties near El Paso, Texas, are all that fall outside of the pecan weevil quarantine zone. While the Texas Department of Agriculture also has a quarantine on pecan weevils for many eastern states, once one of the four approved treatment options has been completed, the product is free to travel from a non-quarantine zone. That is not the case with exports to Mexico, which requires non-quarantined pecans to be treated and will not allow any pecans from quarantine areas. 

    In February, it was announced that a 25 percent tariff would be placed on both USMCA partner countries; this applies to all products, including agricultural imports. Thus, the tariff rate on imported pecans from Mexico, which is primarily shelled, would increase from zero percent to 25 percent. U.S. pecan imports coming from Mexico account for over 99.5 percent of the total for both shelled and in-shell; thus, other new import tariffs have little impact comparatively. It is very difficult to predict the actual impact of the 25 percent tariff, but somewhere along the supply chain, the extra cost will have to be paid, and oftentimes the lion’s share falls onto the consumer.

    References

    Foreign Agricultural Service (FAS). Global Agricultural Trade System (GATS). Online database. https://apps.fas.usda.gov/gats/default.aspx. Online public database accessed August 2025. 

    USDA Animal and Plant Health Inspection Service (APHIS). Phytosanitary Export Database (PExD) with Requirements by Country. https://pcit.aphis.usda.gov/PExD/faces/ViewPExD.jsf  Online public database accessed May 2025.

    USDA National Agricultural Statistics Service (NASS). Quick Stats. https://www.nass.usda.gov accessed May 2025.

    World Trade Organization. WTO Stats. https://stats.wto.org/. Online public database. Accessed April 2025.

    Young, Landyn, and Luis Ribera. “U.S. Pecan Trade and Tariff Outlook.” Southern Ag Today 5(24.4). June 12, 2025. Permalink

  • How can crop marketing and crop insurance go together?

    How can crop marketing and crop insurance go together?

    Agriculture is inherently risky, with producers facing a complex array of production, market, and financial risks. These risks can significantly impact farm profitability, necessitating robust risk management strategies. Risk management in agriculture has become a complex system of financial instruments and strategies, with crop insurance and forward contracting serving as two key components.

    Forward contracting allows producers to mitigate price risk by securing a predetermined price and buyer for their grain. This approach can be especially attractive due to the potential weather risk premium embedded in forward contract grain prices. Buyers are often willing to pay higher prices to hedge against weather-related uncertainties affecting crop production, which allows farmers to lock in favorable prices and potentially increase their revenue. However, it’s crucial to note that while forward contracting addresses market risk, it does not directly mitigate production risk. Aggressive use of forward contracting can expose farmers to unexpected yield risk as farmers may be unable to meet contracted quantities, leading to non-delivery penalties imposed by elevators and potentially substantial financial losses.

    Farmers can also purchase crop insurance as a complementary risk management tool to address the production risk associated with forward contracting. The federal crop insurance program offers various products, with yield (YP) and revenue protection (RP) accounting for 71% of the $158.6 billion of liability in 2024 (USDA-RMA, 2024). YP provides production risk management using a farm-specific Actual Production History (APH), while RP additionally provides price risk management using futures prices. Pairing forward contracting with either insurance product could potentially help offset non-delivery penalties and reduce the financial burden on farmers who experience yield shortfalls. The combination of forward contracting and insurance protection allows farmers to confidently engage in more aggressive marketing strategies. By protecting against both price and yield risks with RP and yield risk with YP, this integrated approach could potentially lead to a more stable farm income and improved overall risk management.

    We provide a visual example of how these two risk management tools can work together in Figure 1 below. The red bar is the potential revenue generated from corn production by locking in a price of $4.50/bushel via a forward contract at a farm yield expectation of 200 bushels/acre. If a farmer booked 80% of expected production, the expected revenue from forward contracting would be $720.00/acre. The blue bar behind the red bar shows an RP crop insurance policy at 80% coverage that is layered underneath the expected revenue from forward contracting which guarantees $744.00/acre.

    Figure 1. Layers of Protection Provided by Simultaneously Using Revenue Protection (RP) Crop Insurance and Forward Contracting in the Local Cash Market 

    NOTE: The purpose of this figure is to show two different “layers” of revenue coming from two different revenue risk management tools: forward contracting and RP crop insurance. The forward contracted revenue is in red while the crop insurance revenue guarantee is in blue behind the forward contracted revenue.

    To illustrate the importance of this “layering” strategy, consider when a yield shortfall occurs leaving only 150 bushels/acre to sell at the forward price of $4.50/bushel rather than the 160 bushels/acre promised for delivery. This leaves a 10 bushel/acre shortfall. The local grain elevator is offering a cash delivery price of $4.00/bushel with a $0.05/bushel non-delivery penalty resulting in a non-delivery price of $4.05/bushel, and therefore, a total penalty of $40.50/acre. The resulting harvest revenue is about $635.00/acre (see table 1). Despite the penalty, the RP policy – which is in blue underneath the forward priced grain – provides an indemnity of $121.00/acre at a producer-paid premium of $56.00/acre. This results in a final cash revenue of about $700.00/acre rather than $635.00/acre, showing how the RP policy was able to pull crop revenue almost completely back to the expected amount of $720.00/acre despite the inability to fully deliver the promised amount (see table 2). This finding highlights the benefit of locking in prices during spring time as part of a pre-harvest marketing plan.

    Table 1. Calculating Crop Revenue Using a Forward Price and Non-Delivery Penalty

    Expected Yield (a) 200 bpa
    Booked Yield (b = 80% x  a)160 bpa
    Realized Yield (c)150 bpa
    Yield Shortfall (d = b – c)10 bpa
      
    Forward Price (e)$4.50/bushel
    Harvest Price (f)$4.00/bushel
    Non-Delivery Fee (g)$0.05/bushel
    Non-Delivery Price (h = f + g)$4.05/bushel
      
    Forward -Priced Revenue (i= c x e)$675.00/acre
    Non-Delivery Penalty (w = d x h)$40.50/acre
    Revenue with Penalty (i– w)$634.50/acre
    Note: bpa = bushels per acre

    Table 2. Including Crop Insurance in the Crop Revenue Using a Forward Price and Non-Delivery Penalty

    Revenue with Penalty (a)$634.50/acre
    Crop Insurance Indemnity (b)$121.00/acre
    Revenue + Indemnity (c = a + b)$755.50/acre
      
    Producer Premium (w/subsidy) (d)$56.00/acre
      
    Revenue + Indemnity – Premium (c – d)$699.50/acre

    Biram, Hunter, Andrew M. McKenzie, and Chanda Bhattrai. “How can crop marketing and crop insurance go together?” Southern Ag Today 5(24.3). June 11, 2025. Permalink

  • A Little More Insight on Meat Trade 

    A Little More Insight on Meat Trade 

    Over the last 2 months, the rapidly changing tariff environment has had livestock market analysts anxiously awaiting USDA trade data releases.  The latest monthly trade data from the USDA was published on June 6th.  It included meat and livestock exports and imports for April 2025.
     
    Trade is interesting because of all the moving parts.  Tariffs are only a part of the story.  Domestic production impacts prices, creating incentives to import or export.  For example, record high beef prices creates an incentive to import more beef and export less.  Relative prices between countries, exchange rates, shipping costs and availability, and other countries’ actions may impact trade, overwhelming the effect of a new tariff.  
     
    U.S. companies exported 237 million pounds of beef in April, an 18.5 million pound decline from March and 22.3 million pounds less than April 2024.  Exports to China declined the most, down 27.7 million pounds, or 34 percent, compared to March.  The impact of China on total U.S. beef exports was partially offset by larger exports to Japan, South Korea, and Hong Kong.  It’s not unusual for beef exports to decline from March to April.  On the pork side, exports declined 58 million pounds, or 9 percent, from March, and 73 million pounds less than April 2024.  Shipments to most markets declined, led by Canada, Mexico, and China.  The decline in pork exports to Canada accounted for 41 percent of the total export reduction from March.
     
    Beef imports declined in April compared to March, down 27 million pounds.  As with exports, it’s normal for imports to decline from March to April.  Fewer imports came from Canada, Mexico, New Zealand, and Uruguay.  Imports jumped 17.8 million pounds, 17 percent, from Brazil.  The increase in imports from Brazil bucked the usual trend of declining imports after January.  
     
    Lamb imports have been a very contentious issue for the industry for many years.  The imposition of tariffs on Australian and New Zealand imports, which make up 99 percent of U.S. lamb imports, has had industry backers and detractors.  Imports in April were 5 percent larger than those in March and 10 percent larger than those in April 2024.  Some other factors are clearly at work in the lamb market, and it may take more time to see any impacts of tariffs that were imposed in early April.
     
    The April trade data gives us an early glimpse at the impacts of tariffs on meat trade.  The May data may give us a better look at impacts because that will better account for shipping time lags for some markets.  Clearly, the very large tariffs between the U.S. and China did impact that transaction.  Other markets with smaller tariff levels may not reveal large changes yet.

    Anderson, David. “A Little More Insight on Meat Trade.” Southern Ag Today 5(24.2). June 10, 2025. Permalink

  • Broiler Litter as a Nutrient Source for Crop Production

    Broiler Litter as a Nutrient Source for Crop Production

    The US poultry industry generates roughly 13.9 million tons of broiler litter (BL) annually. Broiler litter is a mixture of chicken feces, urine, bedding material (such as pine shavings, peanut hulls, or sawdust), spilled feed, and feathers. Most BL is applied on agricultural lands such as pastures and row crops as a soil amendment to improve the soil organic matter. 

    Broiler litter typically contains 11 essential plant nutrients – nitrogen (N), phosphate (P2O5), potash (K2O), calcium (Ca), magnesium (Mg), sulfur (S), copper (Cu), zinc (Zn), iron (Fe), manganese (Mn), and boron (B).  It is a valuable organic fertilizer for sustaining soil fertility and supporting plant growth. However, nutrient concentrations in BL are highly variable and depend on several factors such as bird age, type of ration fed, number of flocks between cleanouts, age of litter, amount and type of bedding materials, compositing method, litter pH, and moisture content. The nutrient content of litter may also vary from one poultry operation to another. A survey analyzing the nutrient content of BL samples collected from poultry houses across Alabama revealed significant variability in nutrient composition. This is consistent with the BL analysis from Kentucky in a previous Southern Ag Today article (here). Table 1 provides the range of nutrient concentrations in BL collected from seven different poultry farms supported by three different integrators (Pilgrim’s Pride, Tyson, and Ingram). The analysis revealed that N content in litter can be as high as 66 lb/ton and as low as 34 lb/ton, with a median value of 58 lb/ton. Similarly, the P2O5 content was found to vary between lows of 38 to highs of 59, with a median value of 42 lb/ton. K2O was found to vary between 46 to 73 lb/ton with a median value of 52 lb/ton. Interestingly, the total carbon content of BL ranged from 260 to 609 lb/ton. Each ton of BL applied contributes a median of 528 lb of carbon to the soil. While the median values suggest a typical nutrient composition of broiler litter as 60-40-50, relying solely on these estimates can be costly for row crop growers purchasing litter as a substitute for commercial fertilizer—especially during periods of high fertilizer prices. To ensure accurate nutrient value and cost-effectiveness, it is strongly recommended that growers collect a representative sample of the litter and have it analyzed by a certified laboratory specializing in manure testing. This ensures they are getting the nutrient value they are paying for.

    Growers using BL as fertilizer should be aware of the potential environmental risks associated with its application. For instance, applying litter annually for more than five consecutive years can lead to phosphorus accumulation in the soil, which may negatively impact water quality. Growers should watch for extreme phosphorus buildup by routinely testing their soils. Additionally, applying litter to fallow fields during the winter months should be avoided, as rainfall can cause nutrients to dissolve and either wash away or leach into the soil, reducing effectiveness, increasing environmental risk, and lowering the economic value of BL. The ideal time to apply litter is 10 days before spring green-up in the case of pasture and 10 days before planting a row crop. The nutrients in litter are available as both fast-release and slow-release. The fast-release components provide nutrients within a matter of 10 days, whereas the slow-release nutrients become available over months or even years. Most farmers should take advantage of the fast-release nutrients by synchronizing the litter application timing close to the timing of spring green-up.

    Determining the value of BL compared to commercial fertilizer isn’t always easy. If you have values of N, P2O5, and K2O, the calculation is straightforward. However, the availability of fertilizer materials may include products such as DAP (18-46-0).  In this case, use the value of N from a material that is N only (Urea) and subtract that value from the price of DAP. The remaining value is the price of P2O5 in DAP. Recent fertilizer prices in Alabama averaged $655/ton for Urea, $884/ton for DAP, and $509 for Potash (0-0-60). These prices give us a per unit value of N $0.71, P2O5 $0.68 and K2O $0.42.  Using the median value of nutrient values in Table 1, the value of a ton of BL is $91.58. (N $41.18, P $28.56, K $21.84). If BL can be purchased, delivered, and spread for less than $91.58 per ton, it should be considered as a possible substitute for commercial fertilizer. Consider the micronutrients and carbon as a bonus towards soil fertility.

    Table 1. Range of nutrient concentrations in broiler litter 

      As sampled or wet basis (lb/ton)
    Sample #moisture content (%)N P2O5K2OC CaMgAlBCuFeMnSZn
    12934394626042105.00.11.16.40.752.30.7
    21853597352746120.30.11.40.30.912.20.9
    3206640526092380.20.30.30.20.89.30.6
    41858426054040100.30.10.30.21.023.40.8
    52065385452846100.40.10.30.20.924.40.8
    6275447485213490.41.40.50.41.012.90.7
    7256043505702780.20.30.40.10.89.30.6
    Mean2356445550837910.3111211
    Minimum1834384626023800.10.30.1191
    Maximum29665973609461251161521
    Median2058425252840100.330.100.380.250.8912.920.74

    Prasad, Rishi, Kent Standford, and Max Runge. “Broiler Litter as a Nutrient Source for Crop Production.” Southern Ag Today 5(24.1). June 9, 2025. Permalink

  • Understanding the Section 199A Tax Deduction

    Understanding the Section 199A Tax Deduction

    Recent tax discussions have focused on extending some of the provisions of the 2017 Tax Cuts and Jobs Act (TCJA), which were set to expire in 2025.  One of the lesser-known provisions that impact agricultural producers is the Section 199A deduction.  As in all tax provisions, the details are quite complex, but a layman’s explanation can give a flavor of the key provisions.  The history of the provision dates to 2004 when Congress passed the domestic production activities deduction (DPAD) which provided a deduction to companies that manufactured inside the U.S. Farming was included in the definition of manufacturing, so agricultural producers qualified, but there was also a W-2 wage requirement that limited the value to many commodity producers. Agricultural cooperatives were also included, and they could elect to reflect the farmer’s production and associated tax deduction at the cooperative level.

    The DPAD was eliminated by the 2017 tax bill in exchange for the reduction of the corporate tax rates.  Because over 98% of producers are operating pass-through taxation entities, few farmers benefited from the decrease in the corporate tax rates.  Agricultural cooperatives also did not benefit from the tax rate decrease since they typically pass on profits and the taxation of those profits on to their members through patronage.  In order to create parity for those groups the TCJA created the Section 199A qualified business income deduction.

    As a simplification, Section 199A provides a deduction equal to 20% of qualified income, which is roughly equivalent to taxable income.  That deduction lowers the effective rate on pass-through taxation entities such as sole proprietorships, partnerships and limited liability companies to be more on par with the corporate tax rate.  The deduction is limited to 50% of W-2 wages paid since the original intent of the DPAD legislation was to encourage manufacturing and employment in the U.S. 

    The cooperative provisions of Section 199A are somewhat complex.  The cooperative calculates the deduction based on their qualified income and it is limited to 50% of the cooperative’s W-2 wages.  In the case of cooperatives, qualified business income is calculated before patronage distribution, which is analogous to before tax income in a corporate firm. The cooperative can either retain the deduction at the cooperative level or pass a portion or all of it on to the producer. Because of that pass-through possibility, producers who market commodities through a cooperative have their farm-level Section 199A deduction reduced.  Unfortunately (in terms of complication) the cooperative member’s offset is based on formulas relating to the farm qualified income and W-2 wages and is not related to the amount of deduction (if any) passed on by the cooperative.  

    Because of that structure, cooperative boards of directors face complicated decisions on the amount of the cooperative level Section 199A deduction that is retained or passed on.  Those boards must consider both the loss of deduction that the member received from marketing through the cooperative and the value of the deduction to both the cooperative firm and cooperative member.The Section 199A deduction has been an important tool in creating tax parity between corporations, farm businesses and agricultural cooperatives.  As with many tax provisions it is perhaps unnecessarily complex. It has positively benefited both producers and agricultural cooperatives which typically did not benefit from the corporate tax rate reduction.  It has also created a new, and somewhat complex, role for agricultural cooperatives in pooling and distributing tax deductions. If Section 199A becomes and remains a permanent feature of the tax code, that tax deduction management may come to be viewed as just another aspect of the traditional roles of agricultural cooperatives.  I wonder if the Rochdale Pioneers envisioned that role when they developed the original cooperative principles in 1844?

    Kenkel, Phil. “Understanding the Section 199A Tax Deduction.” Southern Ag Today 5(23.5). June 6, 2025. Permalink