Category: Farm Management

The southern region in the United States has been well known for several unique crops, including cotton, rice, peanuts, and tobacco.  However, the latest Census data reveal that farms growing tobacco are disappearing from the landscape of southern agriculture. 

Tobacco has had a storied history in the formation of this nation as it quickly became the most important cash crop in Colonial America, serving as the leading export commodity and a form of currency for the emerging nation.  Over the years, tobacco remained a valuable crop for several Southern states, which enabled many small family farms to survive. 

A federal tobacco program emerged as part of the New Deal in the 1930s to further protect small tobacco farms consisting of supply controls and eventually price supports.  Increased global competition from lower-cost producers in South America and Africa ultimately led to the demise of the program over time and eventually the 2004 passage of The Fair and Equitable Tobacco Reform Act, or more commonly known as the “tobacco buyout.”

This act provided nearly $10 billion to purchase tobacco quotas and provide compensation to growers to transition to a market-based economy.  The landmark legislation was expected to result in a significant concentration of tobacco farms, a geographic shift in production to the lowest cost regions, and larger farms to benefit from economies of scale.

This historic policy action, followed by two decades of increasing cost of labor, heightened government regulation, and declining consumer demand for tobacco products has led to depressed exports, growing imports, and arguably the most significant structural change in the history of U.S. agriculture.

According to the Ag Census, the number of U.S. farms growing tobacco has declined from 56,977 farms in 2002 to 2,987 farms in 2022 – a loss of more than 95% since the passage of the tobacco buyout twenty years ago.

While there was speculation that the elimination of tobacco quotas would lead to U.S. tobacco production moving out of the southern region to other areas, nearly 80% of U.S. farms growing tobacco today remain in southern states.

Kentucky has historically been the state with the largest number of tobacco farms, with nearly 60,000 (of its 90,000) farms growing tobacco in the early 1990s compared to roughly half that number in 2002 and only 984 recorded in the 2022 Ag Census. However, Kentucky’s share has declined from 42% of U.S. tobacco farms in 2017 to 33% in 2022. North Carolina remains number two in tobacco farms, with 822 farms, followed by Pennsylvania (377), Tennessee (241), and Virginia (173). 

As anticipated, acres of tobacco production per farm following the tobacco buyout has increased significantly – increasing from an average of 7.5 acres in 2002 to 69.5 acres in 2022, with the largest tobacco farms remaining in the flue-cured tobacco regions of North Carolina, Georgia, Virginia and South Carolina where production averages more than 100 tobacco acres per farm.

The relative importance of tobacco in southern agriculture has declined considerably.  Today, tobacco accounts for less than 3% of Kentucky’s annual ag cash receipts compared to averaging 25% during the 1990s.  For North Carolina, the nation’s second largest tobacco producing state, tobacco has fallen from 15% of ag cash receipts in the 1990s to only 3% today.  

Table 1. Changes in the Number of Tobacco Farms and Average Size (2022 vs 2002)

	Tobacco Farms		% Change		Average Size (acres)
	2002	2022			2002	2022
Alabama	8	0	-100%		24.9	–
Florida	115	14	-88%		33.5	114.6
Georgia	822	44	-95%		30.5	138.0
Kentucky	29,237	984	-97%		3.8	44.9
Louisiana	6	1	-83%		50.2	–
Mississippi	7	0	-100%		22.6	–
North Carolina	7,850	822	-90%		21.4	141.4
South Carolina	873	48	-95%		34.6	119.4
Tennessee	8,206	241	-97%		4.4	51.4
Virginia	4,184	173	-96%		7.2	73.0
Total Southern States	51,308	2,327	-95%		7.9	85.6
Other U.S. States	5,669	660	-88%		4.2	13.0
U.S. Total	56,977	2,987	-95%		7.5	69.5

Snell, Will . “Census Reveals Tobacco Farms Disappearing from Southern Agriculture.” Southern Ag Today 4(13.3). March 27, 2024. Permalink

Planting date is one of the most crucial aspects of crop production. The ability to get a crop in the ground in a timely manner can be the difference between making a profit or a loss. As shown in Figure 1, the optimal planting date for soybeans grown in Mississippi would be around April 20^th (Julian Day 110). Every day before April 20^th reduces yield by 0.51bu/ac, and for every day after, yield decreases by 0.39bu/ac. The goal should be to plant as many acres around this date as possible. One way to do that is by increasing planting speed. To illustrate the impact that planting speed can have on yield, costs, and net returns we can compare a traditional mechanical planter planting at 5 mph to a precision planter planting at 9 mph. 

First, for simplicity’s sake, we will assume a 2,000-acre soybean farm. Using the standard machine cost calculation formulas, a 12-row 38-in row-spacing mechanical planter is going to plant 15 acres per hour (planting at 5 mph), and the same size precision planter is going to plant 26.9 acres per hour (planting at 9 mph). This means a mechanical planter would take 133.6 hours to plant 2,000 acres and a precision planter would only take 74.2 hours. We could just use those numbers to determine when to start planting but that doesn’t consider the fact that weather can prevent farmers from actually getting in the field. The USDA NASS collects data on how many days in a given week are suitable for fieldwork. For this example, we use the average days suitable for fieldwork from 2019-2023 in Mississippi. Table 1 shows the yield, planter speed, and days suitable for fieldwork by week. 

One drawback to the precision planter is that it is going to cost more to purchase. A mechanical planter costs around $106,000, and the same size precision planter will be about $150,000. However, because of increased planting speed which results in fuel efficiency and labor savings, the operating cost per acre is actually less for the precision planter at $15.81/acre compared to $19.20/ac for the mechanical planter. For more information on machine cost calculations, see: http://extension.msstate.edu/publications/farm-machinery-cost-calculations

Putting all this together and some back-of-the-napkin math, the optimal start date for the mechanical planter would be April 9^th (Julian 99) and April 14^th (Julian 104) for the precision planter (Table 2). A precision planter would reduce the days of planting from start to finish from 23 days to 13 days and thus increase yield by 1.2 bu/ac. Assuming a soybean price of $12.00/bu, this would increase revenue by $14.07/ac. Costs would be decreased by $3.38/ac leading to an increase in net returns of $17.45/ac. Effectively, the additional cost of the precision planter would pay for itself in 2 years for a 2,000-acre farm.

Now, this analysis is pretty basic and makes some broad assumptions. It is important to look at your state’s planting date yield data to determine when is optimal for you to plant. Larger farms are going to benefit from higher planting speeds more than smaller farms. It also assumes that there is no yield loss when planting faster. Preliminary data at Mississippi State shows there isn’t a yield hit, but this could vary depending on your situation. Nevertheless, the basic idea is that by planting faster a producer could capture higher yields. So be a maverick and bump that cruise speed up.

Figure 1. Effect of Planting Date on Soybean Yield in Mississippi from Batemen et al. (2020)

Table 1. Weekly comparison between mechanical and precision planter for Mississippi
Period	Average of Soybean Yield bu/ac	Days Suitable for Fieldwork 2019-2023	Hours per Day Suitable for Farminga	Mechanical Planter Acres Per Day	Precision Planter Acres Per Day
Week 12	59.1	2.9	4.9	74.1	132.8
Week 13	62.6	3.4	5.8	86.9	155.9
Week 14	66.2	3.1	5.4	80.7	144.8
Week 15	69.8	2.8	4.8	71.5	128.2
Week 16	71.5	3.5	6.1	91.0	163.2
Week 17	68.7	3.9	6.7	100.8	180.8
Week 18	65.9	4.6	7.8	117.3	210.3
Week 19	63.2	4.0	6.8	101.8	182.6
Week 20	60.5	5.4	9.2	137.8	247.2
Week 21	57.7	5.7	9.7	145.5	261.0
Week 22	55.0	5.6	9.5	143.0	256.4

References

Bateman, N.R., Catchot, A.L., Gore, J., Cook, D.R., Musser, F.R., & Irby, J.T. (2020). Effects of Planting Date for Soybean Growth, Development, and Yield in the Southern USA. Agronomy. https://doi.org/10.3390/agronomy10040596

Johnson, J., & Mills, B.E. (2023). Farm Machinery Cost Calculations. Mississippi State University Extension P3543. Available at: http://extension.msstate.edu/publications/farm-machinery-cost-calculations

USDA NASS. (2024). Days Suitable for Fieldwork. Available at: https://quickstats.nass.usda.gov/

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Mills, Brian, Mike Mulvaney, Wes Lowe, and Oluwaseyi Olomitutu. “Planting Date: The Need for Speed.“ Southern Ag Today 4(12.3). March 20, 2024. Permalink

With tax season in full swing, knowing how to properly report crop insurance premiums and indemnities is important to ensure accurate tax reporting. Many producers have CPAs or accounting firms that manage their finances and taxes. However, understanding how to report crop insurance proceeds is a great on-farm skill when maintaining accurate financial records.

The Schedule F, “Profit and Loss from Farming,” is an Internal Revenue Service (IRS) form that allows producers to report net profit (or losses) from their agricultural production (IRS, 2022). The Schedule F shows income and expenses pertaining to principal farming activities, such as grain and livestock sold, any income from cooperatives, program payments, and federal crop insurance distributions. Crop insurance proceeds (or indemnities) must be included on a Schedule F as farm income regardless of how much proceeds a producer receives to cover the producer premium. Importantly, crop insurance proceeds can be reported in several ways depending on when you sell your grain. 

1. Reporting crop insurance indemnities – not deferred

Assume a producer received $50,000 in crop insurance indemnities this year and would receive a 1099-MISC form from the crop insurance company confirming that indemnity amount. The producer’s normal business practice is to sell their crop in the same year as production (i.e., crops produced in 2023 are sold in 2023). Therefore, the producer must report the indemnity on the tax return for the year the crop was sold and produced. The $50,000 indemnity would be reported on lines 6a and 6b.  

Figure 1. Reporting a $50,000 Crop Insurance Indemnity

2. Reporting crop insurance indemnities – deferred

Again, assume a producer received $50,000 in crop insurance indemnities this year. However, the producer normally reports income from crops in a following tax year under their normal business practices. Therefore, the producer can defer the crop insurance indemnities to next year. The $50,000 would again be reported on line 6a. But now, the producer checks the box on line 6c to defer the indemnity until next year (Figure 2). To defer, a producer must submit a statement containing 1) producer’s name and address, 2) declaration that the producer is making the deferral, 3) identifying crop and damage information, 4) declaration that crop income is normally included in the following year, and 5) name of the insurance carrier. For more information on how to compile this statement, please consult a tax professional.

Now, let’s assume the producer deferred a $30,000 indemnity in 2022 and must report it on their 2023 taxes (Figure 3). The producer would follow Figure 2 and then report the $30,000 on line 6d. 

Figure 2. Deferring a $50,000 Crop Insurance Indemnity

Figure 3. Reporting a Deferred Crop Insurance Indemnity from 2022

3. Reporting crop insurance premiums

Lastly, the premium paid is reported as expense on the Schedule F. The full amount of premium paid must be reported regardless of how much indemnities cover the premium cost. In this case, premiums reduce Schedule F profit and lessens the tax burden on their farming enterprise. Assume a producer paid a total of $40,000 in premiums for 2023, they would report this amount on Schedule F, Part II, line 20, effectively reducing taxable Schedule F profit by $40,000. 

Figure 4. Reporting a $40,000 Crop Insurance Premium

It’s worth noting that we are not tax accountants, and every farm’s situation is unique. Therefore, you should always consult with a tax professional when preparing your farm’s taxes. 

References

Internal Revenue Service. (2023, July 13). About Schedule F (Form 1040), Profit or Loss From Farming. Retrieved September 25, 2023, from https://www.irs.gov/forms-pubs/about-schedule-f-form-1040.

Loy, R. and Biram, H.D. (2023). Cultivating Financial Security: A Guide on Farm Finances, Taxes, and Crop Insurance. University of Arkansas System Division of Agriculture, Cooperative Extension Service Fact Sheet No. FSA80.

Tidgen, K.A. (2019). Special Rule for Taxing Crop Insurance and Disaster Payments. Iowa State University Center for Agricultural Law and Taxation. Retrieved September 25, 2023, from https://www.calt.iastate.edu/blogpost/special-rule-taxing-crop-insurance-and-disaster-payments.

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Loy, Ryan, and Hunter Biram. “Tax Reporting for Crop Insurance.” Southern Ag Today 4(11.3). March 13, 2024. Permalink

The number of H-2A workers in the country increased by more than four times since 2005 (Figure 1).  In the last two years, over 370,000 H-2A positions were certified each year.  Each worker was employed for an average of six months. Despite such growth, the program supplies only 10 percent of the farm sector’s labor needs.  This is a conservative lower bound compared to earlier estimates since this calculation accounts for H-2A’s restricted employment duration and the farms’ actual year-round labor requirements (Costa, 2023).  

The current H-2A model is clearly a mechanism for hiring seasonal and temporary workers only. Seasonal labor demand arises during a short time segment(s) of the production cycle. Therefore, farm operations with longer production cycles and requiring help on more complex farm tasks usually face the challenge of recruiting and training, which comes at a significant cost compared to retaining a workforce from year to year. This lack of farm work continuity causes uncertainty and inefficiencies in farm management.

Based on the distribution of H-2A workers according to job classifications (Figure 2), workers on ranch and livestock (animal-based) operations accounted for only 4 to 5 percent of all H-2A labor in the last four years.  This confirms USDA-ERS estimates of the livestock farms’ share in H-2A employment at around 4-8 percent (Castillo et al., 2021). This low H-2A patronage can be partially attributed to the livestock production cycle.  Although many ranch operations are labor intensive, the industry’s need for year-round labor cannot be filled by seasonal, temporary H-2A work contracts.

The U.S. House of Representatives has introduced H-2A program reforms under its Farm Workforce Modernization Act (FWMA) bill.  The bill was introduced in both the 116^th and 117^th Congresses in 2019 and 2021, respectively, but was subsequently rejected by the Senate in both attempts.^[1]  Last year, several legislators revived and developed a more recent version of the bill (FWMA 2023), which is currently under review by the House’s Committees of Jurisdiction, to be potentially taken up at the 118^th Congress this year.   

FWMA 2023 contains specific provisions designed to accommodate the needs of year-round farm operations.  The bill proposes to allot a maximum of 20,000 H-2A visas per year (over a 3-year period) for year-round employers like dairy and other livestock farms.  As an incentive for foreign workers to be continually employed, the bill offers them a path to permanent residency after 10 years of accumulated farm working experience.  

The farm sector will likely benefit from FWMA’s intention to lay out a definite path for workers to acquire permanent residence status.  Foreign workers’ commitment to meet the 10-year employment tenure requirement will assure the farm sector of a more stable supply of reliable workers.  However, such economic benefits may be realized only in the short-term.  Past studies conclude that while the farm sector subsists on foreign labor, gross disparities in the compensation structures of farm and non-farm employers usually lead to substantial migration of workers away from farms into non-farm employers offering higher wages and fringe benefits (Luo and Escalante, 2017).  Meanwhile, after exhausting all available family and local sources of labor, farms are usually left to rely on foreign workers, who are either bound to work under a labor contract (the H-2A case) or are desperate to survive, hence would cling on to and endure farm work (the undocumented workers’ case).  When qualified H-2A workers eventually obtain green card status, the question remains whether their newly acquired employment flexibility will not lure them away from farm employment.

Figure 1.  H-2A Job Petitions Approved, Certified, and Issued with Visas, 2005-2022

Figure 2.  Certified H-2A Positions by Job Titles, H-2A Selected Statistics, 2020-2023

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^[1] Among the reasons why the FWMA failed to pass in the previous two attempts include a provision that would have allowed farmworkers to file lawsuits against employers. The current version of the FWMA seems to have taken such past issues into consideration in the hopes that it will be passed successfully this time.

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References:

Castillo, M., P. Martin, and Z. Rutledge. (2022).  The H-2A Temporary Agricultural Worker Program in 2020.  Economic Information Bulletin #238, Economic Research Service, U.S. Department of Agriculture.  Washington, DC.

Costa, D. (2023). “How many farmworkers are employed in the United States?” Economic Policy Institute Working Economics Blog.  Available online at https://www.epi.org/blog/how-many-farmworkers-are-employed-in-the-united-states/#:~:text=If%20we%20use%20a%20low,crop%20employment%20on%20U.S. %20farms.  Accessed on January 30, 2024.

Luo, T., and C.L. Escalante. (2017a). “US farm workers: What drives their job retention and work time allocation decisions?” Economic and Labor Relations Review. 28,2: 270-293.

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Escalante, Cesar L., Shree Ram Acharya, and Alejandro Gutierrez-Li. “Reforming the H-2A Guest Farmworker Visa Program: Sectoral Coverage Expansion and Workers’ Path to Permanent Residency.” Southern Ag Today 4(10.3). March 6, 2024. Permalink

Every year, the Farm Service Agency (FSA) national office reviews the Soil Rental Rates used for the Conservation Reserve Program (CRP). The FSA has recently announced that county-average rental rates will be updated based on the 2023 National Agricultural Statistics Service (NASS) Cash Rent Survey results for dryland rent estimates. When considering the prevalent farm lease arrangements and production practices, NASS survey results may not provide accurate estimates. This results in a county-average rental rate that does not reflect typical rent paid in a county. For example, Figure 1 highlights the percentage change in proposed CRP rental rates in Arkansas between 2023 and 2024, where negative values represent counties facing lower CRP rental rates than in 2023. 

Figure 1. Percentage Change in Stated CRP Rental Rates This figure provides the year-over-year percentage change in stated CRP rental rates in Arkansas between 2024 and 2023. (Source: USDA-FSA, 2023)

Several acceptable models can be used to address rental discrepancies or determine an alternative rate. One such method approved by the FSA is the “Share Rent Equivalent Model.” The model intends to infer cash rents in situations (e.g., counties) where share leases predominate available data or where share leasing is the rule rather than the exception. Acceptable supporting data sources for the model include an average of the most recent three years of yield data, including NASS county yields. When NASS yields are unavailable, RMA T-yields can be substituted. 

Arkansas counties are an example, though this model applies to any county in the southeast region of the United States. Given the prevalence of 20% and 25% share leases found in the southeast region and the limited amount of non-irrigated crop production, the model incorporates county-specific production practices and lease structures that more accurately reflect the soil value and environmental benefits of the CRP program. Table 1 utilizes the “Share Rent Equivalent Model” to determine an alternative cash rent for 20% and 25% share leases under a wheat/soybean double cropping system for Arkansas County, Arkansas.  

Table 1. Share Rent Equivalent Model for Wheat/Soybean Production, Arkansas County

Crop	Winter Wheat	Non-Irrigated Soybeans	Winter Wheat	Non-Irrigated Soybeans
Share Rent (%)	25%	25%	20%	20%
RMA T-Yield (bu/ac) (2020-2022 avg.)	63	41	63	41
RMA 2023 Harvest Price	$6.60	$12.84	$6.60	$12.84
Cash Rent Equivalent ($/acre)	$103.95	$131.61	$83.16	$105.29
Total Cash Rent Equivalent ($/acre)	$235.56		$188.45

The results in Table 1 more closely resemble non-irrigated cash rents in the representative county, particularly in the current commodity market environment for grains. Figure 2 is a map of alternative CRP rental rates derived from the “Share Rent Equivalent Model” for 20% crop-share arrangements in predominate agricultural counties in Arkansas. Furthermore, the model’s accuracy is determined by calculating the percentage change between the 2023 effective CRP rental rate and the alternative 2024 CRP rates from the model. Figure 3 maps this percentage change for each county in Arkansas. According to Figure 3, our estimates are only marginally higher than what was stated in 2023. Therefore, we can conclude that the “Share Rent Equivalent Model” reflects existing CRP rental rates more accurately than the survey-based approach. Work with your local FSA office to determine if the Share Rent Equivalent model more accurately reflects cash rent in your county.  

Figure 2. Share Rent Equivalent CRP Rental Rates at 20% Crop Share (2024) This figure provides the per acre share rent equivalent CRP rental rates under a 20% crop share. (Source: USDA-FSA, 2023)

Figure 3. Percentage Difference in the Share Rent Equivalent at 20% and Stated CRP Rental Rate This figure shows the percentage difference in the 2024 share rent equivalent and the 2023 stated CRP rental rate. (Source: USDA-FSA, 2023)

References

USDA-FSA. (2024, January). 2023 ARC-County Benchmark Yields and Revenues as of January 5, 2024. Retrieved January 31, 2024, from https://www.fsa.usda.gov/programs-and-services/arcplc_program/arcplc-program-data/index.

USDA-FSA. (2022, October). 2022 ARC-County Benchmark Yields and Revenues as of October 31, 2023. Retrieved December 20, 2023, from https://www.fsa.usda.gov/programs-and-services/arcplc_program/arcplc-program-data/index.

USDA-FSA. (2023, December). Provisional County-Average Rental Rates to Determine CRP SRR’s for FY 2024. Retrieved January 30, 2024, from https://www.fsa.usda.gov/Internet/FSA_Notice/crp_1012.pdf.

USDA-NASS. (2022, August). Arkansas Cash Rents County Estimates. Retrieved December 20, 2023, from https://www.nass.usda.gov/Statistics_by_State/Arkansas/Publications/County_Estimates/2021-2022/22_AR_cash.pdf.

USDA-RMA. (2023). USDA-RMA Actuarial Data Master.

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Loy, Ryan, and Hunter Biram. “Using the Share Rent Equivalent Model to Determine Farmland Value.” Southern Ag Today 4(9.3). February 28, 2024. Permalink