Category: Farm Management

The internet is an essential part of daily life for many Americans. For farmers, it allows them to get up-to-date prices, discover available farm programs, or get information from places like Southern Ag Today. Agriculture is seeing many technological advances with tools such as precision agriculture and autonomy. Reliable access to the internet is increasingly necessary to take full advantage of these newer technologies. To that end, there have been several government programs initiated to provide more access to the internet across the U.S. The Rural Digital Opportunity Fund (RDOF) was announced in 2019 and is focused on improving internet access for rural Americans with $20.4 billion in funding in a ten-year period. The Broadband Equity, Access, and Deployment (BEAD) Program has provided $42.45 billion to increase high-speed internet access across all 50 states in the upcoming years. Every state now has a state broadband office that deals solely with improving internet access in their state. For example, Mississippi has the Office of Broadband Expansion and Accessibility of Mississippi (BEAM). 

Internet access for producers has seen modest improvements from 2017 to 2022 based on U.S. Census data (Table 1; Figure 1). Across the U.S., the percentage of farm operations or operator residences with internet access increased from 75.4% in 2017 to 78.7% in 2022. While many of the southeastern states still lag behind the U.S. average, most of the states had significant increases in producers’ internet access over this time period. Of the 14 southeastern states examined, 10 had a higher percentage increase than the U.S. average. Arkansas had the highest increase of 8.3%, followed by Louisiana with an increase of 7.5%, and then Mississippi with an increase of 7.3%. Even so, there is still a surprisingly large number of producers, 21.3%, who do not have access to the internet. This is important for government agencies and universities to understand and make sure that the information they provide is available to all producers.

It should be noted that simply having access to the internet does not necessarily mean that the internet is reliable or has the speed to be effective for producers. For the measure described here, internet access can be obtained through 1) a Cellular data plan, 2) Satellite Internet, 3) Broadband (high-speed) Internet service such as cable, fiber optic, or DSL service, or 4) Dial-up Internet. Some of these options are not adequate to use for precision agriculture. The FCC’s Task Force for Reviewing the Connectivity and Technology Needs of Precision Agriculture in the United States recommends a minimum performance of 100 Mbps download and 20 Mbps upload to support precision agriculture. The percentage of farmers who have internet that can actually support precision ag technologies would be considerably less than that described above. However, programs, such as BEAD, are prioritizing the buildout of fiber optic internet to ensure reliable and fast connections. Fiber optic internet would meet the FCC performance recommendations and allow producers to more easily adopt new technologies and gain the efficiencies that come with them. Currently, many producers in the Southeast are still at a disadvantage, in terms of their internet access compared to other regions. This disadvantage could affect producers’ ability to easily access information and adopt new technologies to improve their operations. 

Figure 1. Percentage Change in Farm Operations or Operator Residences Internet Access from 2017 to 2022. 

References

FCC. (2021). Task Force for Reviewing the Connectivity and Technology Needs of Precision Agriculture in the United States. Available at: https://www.fcc.gov/sites/default/files/precision-ag-report-11102021.pdfUSDA NASS Census Data. (2024). Percentage of Farm Operations or Operator Residences with Internet Access. Available at: https://quickstats.nass.usda.gov/

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Mills, Devon, and Brian E. Mills. “Farmers’ Internet Access Improving but Still Lacking.” Southern Ag Today 4(33.3). August 14, 2024. Permalink

Payment limitations are not a novel policy tool.  Modern day limits have been imposed since the 1970 Farm Bill, with multiple changes to the payment limit in subsequent farm bills (Congressional Research Service, 2020; Ferrell, Fischer, Lashmet, 2024). We provide an example of what incentivizes a producer to create a new entity to receive potentially forgone commodity program payments and how it could be completed in practice when appropriate.  It should be note that there are rules in place that prohibit farmers from restructuring just to avoid payment limits.

Suppose a producer is one of three members (with equal ownership shares) of Dead and Company, LLC, located in Lawrence County, Arkansas. The entity has 2,800 acres of long grain rice base; the county average Price Loss Coverage (PLC) payment yield is 63 cwt/ac^[1], and the payment rate is $2.10/cwt. This would result in a total PLC payment for Dead and Company, LLC of $370,440^[2]. However, under current rules, Dead and Company, LLC is subject to a $125,000 payment, and each member is also subject to a personal payment limit of $125,000, however, based on their one-third share they are limited to $41,667. In this example, Dead and Company, LLC receives the full $125,000 payment limit, effectively forgoing $245,440 ($81,813 per member) of the total payment. A visual example is provided in Figure 1 below.

Figure 1. Example of Payment Limit Distribution and Forgone Payment under an LLC

If it makes sense within the operation of the business, the three members of Dead and Company, LLC could choose to reallocate the 2,800 base acres to different entities to increase their individual payment received and stay within the $125,000 individual payment limit. This could be done by creating two new entities, HRE, LLC and Lucky 13, LLC, which have the same three members as Dead and Company, LLC. The three individuals are now members of three different LLCs, each containing 933 acres, or an even share of the 2,800 base acres, resulting in a total payment per entity of $123,436, below the $125,000 payment limit per LLC. While there are three entities that have separate payment limits, one should note that the three entities have to maintain separate sets of books.  In other words, while setting up additional entities is relatively easy with the help of a lawyer, the additional time associated with the requirement to maintain separate records for each farm also needs to be taken into consideration.  In addition, while the math on this exercise is fairly easy, there are significant rules and procedures that have to be followed when reorganizing to avoid the appearance of reorganizing to take advantage of payment limit rules.  Figure 2 shows how the forgone payment due to current payment limit rules increases per individual as each person receives an additional payment from a different entity. In short, each individual receives $41,145 in three PLC payments under Dead and Company, LLC, HRE, LLC, and Lucky 13, LLC.

Figure 2. Payments to each member under base reallocation from Dead and Company, LLC to Lucky 13, LLC and HRE, LLC

The 2014 farm bill provides a unique setting for studying the impact of payment limits on entity creation. First, producers had to make a one-time decision in 2014 for the commodity program to place their base acres in (i.e., ARC or PLC), which would not change for the life of the 2014 farm bill. Second, for a given crop year, all entities would receive a PLC payment if a payment was triggered for a crop in which base acres were enrolled. Third, historical plantings directly tied to the land determine the number of base acres, and enrolled entities are free to dissolve and be created. Therefore, while these conditions do not allow for reallocation to a new program election (i.e., switching from PLC to ARC), they can allow for base acreage reallocation to different entities.

While considering the individual payment limit itself is important in discussions that include higher statutory reference prices, it is also important to consider the number of entities allowed to receive payments. This is because of rules such as the “3-entity-rule” which existed prior to the 2008 farm bill, which repealed this rule. Understanding why a producer would create a new farm entity and how this can be done in practice is important as increasing farm size could limit the whole farm protection provided by commodity program payments and threaten farm income stability.

References

Congressional Research Service, 2020, U.S. Farm Programs: Eligibility and Payment Limits, https://crsreports.congress.gov/product/pdf/R/R46248. Accessed 22 May 2024. 

Ferrell, Shannon L., Tiffany Dowell Lashmet, and Bart L. Fischer. “Paved with Good Intentions: Unintended Impacts of Farm Bill Payment Limitations.” Southern Ag Today 4(19.4). May 9, 2024. Permalink

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^[1] This value was taken from USDA-FSA data files and could be converted to bu/ac using a conversion factor of 2.22. In this case, this same yield in bu/ac is 140 bu/ac.

^[2] This value is found by multiplying the total base acreage, the payment yield, and the payment rate.

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Biram, Hunter, Ryan Loy, and Eunchun Park . “Commodity Program Payment Limits, Farm Entity Creation, and Implications for the Next Farm Bill.” Southern Ag Today 4(32.3). August 7, 2024. Permalink

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Based on the USDA’s most recent Census of Agriculture 2022 data for tillage practices, no-till, and conservation/reduced tillage acres comprise 65.4% of the tillage practices for selected southern states (Table 1). For the US, the no-till and conservation/reduced tillage rate is 73.4%. No-till is defined as leaving 50% or more of the soil surface undisturbed from harvest to planting. Whereas conservation and reduced tillage is defined as leaving 30% or more surface undisturbed and may involve chisel plows or light disking (Rust and Williams, 2010). As of 2022, three southern states have the highest rate of no-till and conservation/reduced tillage in the U.S.: Tennessee (93%), Maryland (92.1%), and Virginia (91.7%). The three southern states with the smallest adoption of no-till and conservation/ reduced tillage practices compared to all tillage practices were Florida (39%), Texas (52.1%), and Mississippi (56.8%).

Of interest would be the comparison of southern state’s adoption of these tillage practices over time, which are indicated in Figure 1. The figure displays the percentage change in no-till and conservation/reduced tillage acres at the county level from 2017 to 2022. Green shades indicate percentage decreases in these tillage practices whereas blue shades indicate an increase percentage wise.

Figure 1. 2017 to 2022 Percentage Change in No-Till and Reduced/Conservation Tillage Acres

The five southern states with the highest increase in acreage of cropland using no-till plus conservation/reduced tillage practices from 2017 to 2022 are Arkansas (17.6%), followed by Florida (15.3%), Texas (15.1%), Georgia (10.8%), and Alabama (10.7%). The states with the largest average increase in these tillage practices for the three census periods (2012, 2017, and 2022) were Florida (29.3%), Mississippi (20.6%), Arkansas (20.2%), Texas (17.1%), and Louisiana (16.4%).

This information helps us understand which regions within the South are adopting reduced and no-till practices and is also relevant as carbon markets expand.  These practices can improve soil health by preserving soil structure, increasing water retention and organic matter. Additionally, they reduce soil erosion and lower greenhouse gas emissions by minimizing soil disturbance. However, given the cropping system, adopting no-till or reduced till may not make sense (e.g., peanut and rice production). Most importantly, the impact and profitability of no-till and reduced-till practices varies depending on the regions and crops involved, influencing adoption rates.

Reference

Rust, B. & J. Williams. 2010. USDA/ARS. “How Tillage Affects Soil Erosion and Runoff.” USDA/ARS Available at https://www.ars.usda.gov/ARSUserFiles/20740000/PublicResources/How%20Tillage% 20Affects%20Soil%20Erosion%20and%20Runoff.pdf.

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Menard, R. Jamey, and Hence Duncan. “Digging into Dirt: Southern States Adoption of No-Till and Reduced Tillage Practices.” Southern Ag Today 4(31.3). July 31, 2024. Permalink

The H-2A Program allows direct farm employers to hire H-2A workers through Farm Labor Contractors (FLCs) (CFR § 655.132).  Current regulations allow an FLC to file a single foreign labor certification application where they declare the need for a batch of workers intended to service multiple farms at several farm work locations.  These work assignments can even extend beyond the FLC’s home state boundaries (Castillo, Martin, and Rutledge, 2022).  

In 2021 and 2022, FLCs have hired more than 40 percent of all DOL-certified H-2A workers, with California, Florida, and Georgia as the most popular work destinations in recent years (Table 1).  More than 60 percent of FLCs’ H-2A hires are accounted for by companies based in Florida and California. In recent years, Georgia, Texas, and North Carolina are the other Southern States included in the Top 6 home states of FLCs.

In 2023, most H-2A workers hired by California FLCs were detailed within the state (88 percent), with about 10 percent outsourced to Arizona farms, while the rest worked in four other states (Colorado, Nevada, Texas, and South Carolina).  In contrast, H-2A hires of Florida-based FLCs are more dispersed, with 52 percent ending up employed within the state, while the rest are deployed in 28 states with North Carolina and Michigan (11 percent each), Indiana (6 percent), Georgia (4 percent), and Illinois (3 percent) as the five most popular work destinations. 

The value of FLCs in the H-2A hiring scheme lies in their greater familiarity with the farm labor supply conditions in countries where most potential H-2A workers come from.  FLCs maintain extensive social and business networks in those countries that allow them to solicit workers even from remote local communities.  In contrast, individual U.S. farm businesses’ worker solicitation outreach networks are usually not as broad and far-reaching.  Thus, the FLCs capitalize on their good connections and extensive outreach, making them viable suppliers of prospective H-2A workers for U.S. farms.  

However, a cursory review of wage-related violations in agriculture indicates high incidences of infractions associated with the FLC-H-2A hiring scheme. Based on more recent wage violations data compiled by the Department of Labor’s Wage and Hour Division (DOL-WHD), FLCs’ H-2A hires account for 27 percent (2022) to 31 percent (2023) of all H-2A-related cases.  Back wages owed to FLC’s H-2A workers account for 15 percent (2022) to 26 percent (2021) of all H-2A back wages.  These proportions may be less than the FLCs’ H-2A supply proportions of about 33 to 44 percent during these years, but the nature of these violations provides an interesting discussion of the crucial impact of FLCs on the viability of the H-2A program.  In a later issue, a follow-up article will discuss the nature of these FLC-associated labor violations and back wages, as well as shed light on how federal budgetary decisions could influence the varying efficiency, scope, and depth of the DOL-WHD’s policy compliance auditing process over the years.

Table 1. H-2A Workers Hired by Farm Labor Contracts, Geographical Dispersion, and Wage

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.

Code of Federal Regulations (CFR). Labor Certification Process for Temporary Agricultural Employment in the United States, Subpart B. National Archives, Government Policy and OFR Procedures, Washington, DC.

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Escalante, Cesar L. “Hiring H-2A Workers through Farm Labor Contracts.” Southern Ag Today 4(30.3). July 24, 2024. Permalink

Crop Insurance decisions are closely tied to farmer’s risk preferences. Each producer faces different circumstances and has a different risk tolerance. Some producers prioritize revenue stability and opt for higher coverage levels and choose optional units for more targeted coverage. Conversely, others may be able to tolerate more risk and choose lower coverage levels or utilize basic or enterprise units in exchange for lower premiums. Crop insurance decisions can be overwhelming as the full suite of protection also involves choices on the FSA programs (ARC or PLC), crop insurance product, unit structure, and coverage level. Each of these choices need to made taking into account producer risk preference. 

In discussing the effects of risk on crop insurance decisions, we use an online application, “Crop Insurance Decision Maker, ” which can be found here. A set of example results for Christian County, Kentucky, can be seen in Figure 1. In our case example, we look at insurance on non-irrigated corn acreage using enterprise units. The case example illustrates that as the coverage level increases, average net revenues increase. Among the three main crop insurance products (YP, RP, RP-HPE), Revenue Protection (RP) consistently yields the highest net revenues, followed by Yield Protection (YP) and then Revenue Protection with a Harvest Price Exclusion (RP-HPE). This suggests that on the example farm, higher levels of coverage generally lead to better average net revenues ($/acre), with RP providing the most significant benefit. 

The fact that average net revenue increases with coverage level may seem counterintuitive but is evidence of the effect of a reduction in the actuarially fair insurance premium. To discuss this point, we use Figure 2, which compares the net revenue distributions for Christian County, Kentucky, utilizing no crop insurance and a 75% RP plan utilizing Enterprise Units. Figure 2 indicates that with no crop insurance, a producer faces a 20% chance of net revenues less than zero which is the downside risk a producer wants to minimize or eliminate. Conversely, the 75% coverage level in this example eliminates the downside risk of negative net revenues while slightly reducing the likelihood of larger returns. Due to the protection offered, net income increases on average. That is, the downside risk reduction outweighs the reduction in the upside potential driven by the producer paid premium.

Our comparisons in Figure 1 and Figure 2 should be considered for each insurance decision. Net revenue probabilities change each time a crop insurance product, unit structure, or FSA program is changed. Each producer needs to determine their risk preference as under-insuring could leave the producer vulnerable to losses. Still, over-insuring could limit net income in years when indemnities are not triggered. The “Crop Insurance Decision Maker” aims to make these choices easier. It is important to note that the effects of each crop insurance decision change by county depending upon premiums, and the results for Christian County, Kentucky, may not hold for your operation.

Figure 1: Crop Insurance Decision Maker Web Application Output

Figure 2: Net Revenue Distribution for No Insurance VS a 75% Revenue Protection Plan using Enterprise Units

References

Biram, Hunter D., et al. “Mitigating price and yield risk using revenue protection and agriculture risk coverage.” Journal of Agricultural and Applied Economics 54.2 (2022): 319-333.

Maples, William E., et al. “Impact of government programs on producer demand for hedging.” Applied Economic Perspectives and Policy 44.3 (2022): 1126-1138.

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Serrano, Enil, Grant Gardner, and Hunter Biram. “Using Risk Preference to Inform Crop Insurance Decision-Making.” Southern Ag Today 4(29.3). July 17, 2024. Permalink