Category: Farm Management

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

Dairy Revenue Protection (Dairy-RP) is an insurance policy available to dairy producers to guarantee revenue every quarter. Dairy-RP was designed to help producers combat the high volatility in the fluid milk market. There are five terms producers must agree to when purchasing a policy, however, the most important decision is the pricing option of either class or component pricing. Since the introduction of Dairy-RP, over 82,000 policies have been purchased. From these policies, 253 billion pounds of milk have been insured, generating $1.72 billion in premiums, which resulted in $1.26 billion in indemnities. The number of Class Pricing policies has increased from 5,000 in 2019 to 11,300 in 2023. Alternatively, Component Pricing policies have decreased from 2,800 policies in 2019 down to 2,300 in 2023. For the producer selection terms and added information, see the previous article, Dairy Revenue Protection Historical Performance for Class Price, as this publication covers producer options.

The loss ratio is one method of measuring the performance of Dairy-RP. The loss ratio is calculated as total indemnity payments divided by the total premiums, thus representing a ratio of the total money paid back to the producers relative to the premiums paid (in total) for the policies. We often focus on a loss ratio of one, which means all money paid for the policy (insurance premiums) was distributed back to the producers in protection (indemnities).

We analyzed the performance of Dairy-RP by state under the component pricing option. Figure 1 shows the weighted average loss ratio for Dairy-RP (component pricing option) by state. Compared to the class pricing option, policies purchased under component pricing as a collective have had historically lower loss ratios. There are 40 states that are currently enrolled in Dairy-RP, and none of the states have loss ratios greater than or equal to one. California accounts for 22.8% of the milk declared under the component pricing option, but even though being the most declared, it ranks twelfth with the highest loss ratio of 0.75. Wisconsin is the second most declared, accounting for 15.1% of the milk declared under the component pricing option, and ranks fifth for the highest loss ratio at 0.82. Idaho has the largest loss ratio of 0.91 and accounts for 14.4% of the component priced milk declared. Three states, New Hampshire, Delaware, and Massachusetts are not listed as producers in these states have not purchased any component pricing policies. The southeast is expected to see lower participation in component price due to the federal milk marketing order. However, Texas ranks second with a loss ratio of 0.84 and accounts for 9.1% of the milk declared under the component pricing option. 

Labor shortages have affected the agricultural sector for many decades. In regions of the country like the South, the reduction in the farm labor supply is a major problem as many labor-intensive commodities are produced across several states. The decline in the availability of workers is in part due to the lack of interest by American-born laborers to engage in field work that is very physically demanding. For this and other reasons, foreign workers have historically been overrepresented in the agricultural sector. In recent years, the H-2A program, which allows U.S. farmers to hire foreign farmworkers legally, has experienced rapid growth (Gutierrez-Li, 2021). The undocumented and H-2A agricultural workers fill the need for manual labor. These employees perform a variety of tasks like planting, weeding, sorting, packing, applying pesticides, and, most importantly, harvesting. While most of the hired labor on farms engages in manual work, highly specialized workers are also needed to perform tasks that demand more training and often college education. In recent years, agricultural employers have also started facing difficulties recruiting highly educated workers, in the context of tight labor markets and new opportunities for college graduates in sectors like data science and engineering.

When American farmers cannot hire the number of workers they need from the domestic workforce, they turn to foreign workers. In the case of manual labor, they rely on the H-2A program. The option to hire highly skilled foreign workers in agriculture is the TN visa program.  The TN visa system was created in 1994 as chapter 16 of the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico. In 2020, the program was grandfathered into the USMCA, the replacement of NAFTA. This visa avenue allows citizens of Mexico and Canada to work temporarily in the United States. The program focuses on highly skilled professionals whose area of expertise covers around 60 occupations. 

The benefits of the TN visa system are many. Like the H-2A visa program, there is no cap on the number of TN visas that can be issued every year. Visas can be renewed indefinitely, but holders cannot apply for permanent residency. Canadian citizens only need to show a job offer at a port of entry to obtain a TN visa, while Mexican citizens must apply first at a U.S. consulate. Unlike other visas, the TN visa does not require a labor certification (LC). LC is a lengthy process in which employers must show that they were unable to find qualified U.S. workers to fill the position they are requesting. Moreover, the TN visa allows farmers to file for premium processing, an option that guarantees their petition will be resolved by USCIS (an immigration authority) in 15 days or less for an additional fee. Lastly, TN visas are less likely to be denied than other visas like H-2B or H-2A and allow holders to bring their dependents (spouse and children under the age of 21) through TD visas (TN dependent). On the other hand, some limitations of the TN visa program are that it does not cover all occupations that farmers may want to hire and that it is limited to Canada and Mexico, leaving out specialized talent from other countries.

The TN visa program was not designed specifically for the agricultural sector. However, among the list of occupations that qualify for workers, there are several professions that directly relate to agriculture (Table 1). Some include veterinarians, animal scientists, animal breeders, agriculturists (including agronomists and food scientists), apiculturists, dairy scientists, entomologists, biologists, soil scientists, zoologists, plant breeders, horticulturists, and poultry scientists. In addition, some bigger farm operators hire economists, engineers, silviculturists, lawyers, and other technicians who can also be brought under TN visas. The main requirement is for individuals to have at least a bachelor’s degree in their field. For example, dairy farmers in the U.S. hire veterinarians with TN visas that help support American veterinarians on tasks like preparing animal health reports, examining herds, vaccinations, artificial inseminations, and birthing. Moreover, TN visa holders from Mexico can interact with H-2A workers (in Spanish), facilitating communication between all workers. 

In summary, while most of the news on labor shortages in agriculture relate to field workers and the expansion of the H-2A visa program, the reality is that finding workers across the spectrum of skills is proving more difficult for American farmers. Highly specialized workers are becoming harder to recruit as lucrative careers in other sectors are luring college graduates away from agriculture. In this context, the TN visa appears as a viable (albeit less-known) option for U.S. agricultural employers to obtain dependable workers and continue to expand their operations.

Table 1. Occupations Allowed Under the TN Visa System

General Professionals	Medical/Allied Professionals	Scientist Professionals
Accountant	Nutritionist	Animal breeder
Architect	Occupational therapist	Animal scientist
Computer Systems Analyst	Medical laboratory technologist	Astronomer
Lawyer	Pharmacist	Agriculturist
Librarian	Recreational therapist	Apiculturist
Mathematician	Physician	Biochemist
Industrial designer	Dietitian	Biologist
Landscape Architect	Dentist	Chemist
Hotel manager	Physiotherapist/ physical therapist	Dairy scientist
Forester	Registered nurse	Entomologist
Disaster relief insurance claims adjuster	Psychologist	Epidemiologist
Economist	Veterinarian	Geologist
Engineer		Geochemist
Graphic designer		Geneticist
Research assistant		Geophysicist
Interior designer		Horticulturist
Land surveyor		Meteorologist
Range manager/ Range conservationist		Physicist
Social worker		Pharmacologist
Teacher / College or University		Poultry scientist
Silviculturist		Plant Breeder
Technical publications writer		Soil scientist
Scientific technician/ technologist		Zoologist
Teacher / Seminary
Urban planner
Vocational counselor

References

Gutierrez-Li, A. (2021). The H-2A visa program: addressing farm labor scarcity in North

Carolina. NC State Economist. North Carolina State University.

Payan, T. & Rodriguez-Sanchez, J. (2023). Revamping the TN Visa to get workers where the US needs them. Center for the U.S. and Mexico. Research paper.

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Gutierrez-Li, Alejandro. “What is the TN Visa Program?” Southern Ag Today 4(7.3). February 14, 2024. Permalink

With an entire month of the new year behind us, meeting season is in full swing. This season is a time when many agricultural economists get the opportunity to provide market outlooks for the upcoming year for the commodities producers grow and the inputs used to grow them. Last week, a producer approached me at the end of one meeting and commented that it appears like they may be “farming to breakeven in 2024.”That comment gave me an idea for a teachable moment on planting decisions and variable costs. 

Producers’ decisions on what they plant are based on a variety of factors including crop rotation, yield history, expected market prices, estimated input costs, weather expectations, and availability of credit. Planting decisions are a short-run decision (i.e. decisions that impact the current crop year). On the other hand, long-run decisions impact multiple years (i.e. investing in irrigation equipment). When making decisions in the short-run, it is important to cover total variable costs. Total variable costs for a crop are what it costs to plant, grow, harvest, and market the crop. Producers should calculate their cost of production to help them calculate the market prices and/or yields they need to achieve to cover their variable costs.

Given a producer is able to estimate their cost of production, there are two ways to calculate breakeven. The first is through calculating the price needed to breakeven. Breakeven price can be calculated through the following formula:

Breakeven Price per Unit of Yield = Total Variable Cost per Acre/Expected Yield per Acre

Imagine a producer in Georgia who plans to rent irrigated cropland and grow cotton on that rented land. The producer downloaded the 2024 Irrigated Cotton enterprise budget from the University of Georgia Extension web page to help them estimate the total variable cost at $679 per acre. They are also aware that the Georgia state average cash land rent for irrigated cropland was $234 per acre last year, according to the USDA National Agricultural Statistics Service. With the land rent added, total variable costs are estimated to be $913 per acre. Based on historical production on this land, the producer expects an irrigated cotton yield of 1,200 pounds per acre. The calculation for the breakeven price follows:

$913 per acre / 1,200 pounds per acre = $0.76 per pound

The producer will need to average of $0.76 per pound to breakeven on a projected yield of 1,200 pounds per acre on the rented irrigated land.

The second way to calculate breakeven is through yield. Breakeven yield can be calculated through the following formula:

Breakeven Yield per Acre = Total Variable Cost per Acre/Expected Price per Unit of Yield

The same producer decides to plug in the harvest time futures price for cotton, adjusted for basis, for the expected price. As of the writing of this article, Dec24 cotton was trading around $0.805 per pound.  The producer decides to use $0.775 per pound (Dec24 adjusted lower for local basis). The calculation for the breakeven yield follows:

$913 per acre / $0.775 per pound = 1,178 pounds per acre

The producer will need an average yield of 1,178 pounds per acre to breakeven at a price of $0.775 per pound on the cotton grown on that rented land.

Individual producers should keep in mind that their variable costs and cash land rents may differ. Producers are encouraged to utilitze tools like enterprise budgets to help them estimate their cost of production, breakeven prices, and breakeven yields. Understanding breakeven prices and yields can aid producers in management and marketing for the upcoming production season.

Sources/Resources:

Liu, Y., A.R. Smith, & G.A. Hancock. 2024 Irrigated Cotton Row Crop Enterprise Budget. https://agecon.uga.edu/extension/budgets.html

USDA National Agricultural Statistics Service, US and States Cash Land Rents Survey Results. https://quickstats.nass.usda.gov/results/58B27A06-F574-315B-A854-9BF568F17652#7878272B-A9F3-3BC2-960D-5F03B7DF4826

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Smith, Amanda R. “Farming to Breakeven in 2024.” Southern Ag Today 4(6.3). February 7, 2024. Permalink