Category: Specialty Topics

On October 18, 2022, USDA announced the implementation of Section 22006 of the Inflation Reduction Act of 2022. The Act provides up to $3.1 Billion in funding to the Secretary of Agriculture to provide payments for the cost of loans or loan modifications for distressed borrowers of USDA Farm Service Agency (FSA) administered direct or guaranteed loans. The distressed borrowers include borrowers eligible for loan modifications defined in the House passed Build Back Better Act and borrowers whose operations are at financial risk. Financial risk is further defined to include borrowers as of August 16, 2022, who are 60 days or more delinquent, undergoing bankruptcy, foreclosure, loan restructuring, and owe USDA more interest than principal. There are different groups of distressed borrowers; the grouping will determine if, when, and how much of a program payment will be applied to their outstanding debt. For many distressed borrowers, the program payment will be applied to the debt to make the loans current (no longer delinquent). 

The announcement indicated that almost $800 million has either already been used or is earmarked to identified distressed borrowers. These program payment(s) will provide immediate relief to America’s farmers and ranchers with USDA FSA direct and guaranteed loans which are financially distressed. USDA officials say over 13,100 borrowers have received immediate relief through automated payments.  Additionally, about 1,600 borrowers with more complex cases have the potential to benefit from some form of relief. To learn more about the announcement, view FSA’s factsheet on the announcement, https://www.farmers.gov/sites/default/files/2022-10/farmersgov-fsa-ira-distressed-borrower-assistance-factsheet.pdf.

The farmer and rancher relief is viewed as a program payment, and USDA FSA program payments, even applied directly to debt servicing, create a taxable event.  The program payment is considered ordinary earned income subject to Self-Employement tax. Impacted borrowers should expect to receive a 1099-G (1099s are required to be sent out for all costs of $600 or more in a year) and a 1098 (if interest was paid as part of the program payment) in early 2023. To enhance support of America’s farmers and ranchers, USDA partnered with tax experts from the National Farm Income Tax Extension Committee to provide resources detailing the important relationship between federal income taxes and USDA farm programs:  https://www.farmers.gov/working-with-us/taxes

To offer added support and trainings, FSA entered into a cooperative agreement with the University of Arkansas Division of Agriculture to develop a tax education and asset protection program.  The agreement resulted in a newly created technical assistance program called Agricultural Finance, Tax, and Asset Protection (AgFTAP).  AgFTAP seeks to enhance farmers’ and ranchers’ ability to understand and navigate the farm business tax and asset protection strategies for their operations. To learn more about the program and its collaborators, visit the AgFTAP portal, https://agftap.org/. The project features a collaboration between educators and the National Farm Income Tax Extension Committee, which offers a collection of tax guidance on its RuralTax.org website. Selected resources, publications, webinars, decision aids, etc., developed by the tax committee will be featured on the AgFTAP portal. For example, individuals interested in understanding 1099s and their tax treatment can view a resource posted on the portal, 1099s.pdf (ruraltax.org). Future AgFTAP resources and training will help farmers and ranchers understand their risk environment and identify resources/expertise to inform their decisions. 

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Kantrovich, Adam, and Ron Rainey. “Immediate Relief for Financially Distressed FSA Farm Loan Borrowers.” Southern Ag Today 2(43.5). October 21, 2022. Permalink

Rural communities frequently lack access to veterinary care, for both companion animals and livestock. This unmet need poses a threat to animal health and wellness, as well as ranch and rural community viability. The demand for veterinarians in rural communities is strong; however, fewer veterinarians opt to start a career in rural areas. Concerns about reduced economic opportunities and social experiences in less populated areas contribute to veterinarians’ and their families’ hesitation to locate in rural communities. Distance, lack of accessibility, and concerns about both economic viability of rural practices and hours on-call also have an impact. 

The use of telehealth in both animal and human health has been on the rise since the start of the COVID-19 pandemic, allowing many practices to expand and providing access to more clientele. Keeping up with the advancements of digital information is crucial for telehealth in rural areas and requires viable broadband internet services. Rural areas continue to lag urban areas in both broadband availability and adoption, but ongoing public and private efforts continue to build rural broadband capabilities.

The need for veterinarians located in rural areas will remain. However, telemedicine may provide opportunities both for rural vets and for the ranchers and rural residents who need their services. For example, telemedicine may provide access to specialists in more populated areas. Ranchers may also be able to communicate with their vet virtually (after they have an established relationship), saving travel time.

In recent work, stronger ranch-veterinary relationships supported higher net revenues of $128.25 per cow plus an additional $24/cow increase in profit from reduced death loss of yearlings. Across 5,000 head, higher ranch incomes created an estimated $338,700 in output, including $79,500 in additional labor income, and 2.4 jobs in the county economy.

Gains net revenue were estimated after accounting for higher veterinary, feed, supplement, and other costs. In one rural Texas county (population under 15,000), an estimated $60,000 in additional veterinary expenditures resulted in $72,600 output and an additional job in the county. The largest dollar (output) impacts accrued to a wide range of businesses beyond veterinary services, including real estate, banking, restaurants, electric utilities, and general merchandise retail. Equally important, the presence of a veterinarian may help recruit and retain other economic activities.

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King, Kallie, and Rebekka Duddensing. “The Importance of Veterinarians in Rural Communities“. Southern Ag Today 2(40.5). September 30, 2022. Permalink

On occasion, I am approached by a group of producers who have a business idea that is too big for any one producer to achieve. Their first thought is “we need a cooperative.” Their second thought is often “what is a cooperative, and how does it work?” Simply put, a cooperative is a business that is jointly owned by its customers. It operates much like any other business; however, its ownership and distribution of profits is based on an individual’s use of the business. Cooperatives are an integral part of our agricultural system and help to guarantee market access and manage risk for agricultural producers. They benefit their communities by helping profits to remain in the local economy. 

Cooperatives generally form out of an economic need to correct shortcomings in the market. In general, agricultural producers form cooperatives for various reasons:

• Reduce costs through volume purchasing
• Obtain market access to more buyers
• Improve bargaining power when marketing commodities
• Obtain products and services that might not otherwise be available
• Improve quality of offered products and services
• Improve income through activities that add value to commodities

Cooperation, then, is a strategy that agricultural producers jointly employ to achieve their business goals. However, this strategy comes with added complexity to manage. Further, it isn’t a solution for a poor business plan. A cooperative is a business with a joint ownership structure. Its success is subject to the economics of the business and its approach to the competitive environment. For those who are interested in forming a cooperative, you might ask yourselves a few pertinent questions.

• Do we have a business plan?
• What volume is required for profitability?
• Will we have enough members to provide the needed volume of business?
• Is this product or service already provided in the market?
• Who are our competitors, and how might they react?
• Is the cooperative necessary to combat the market power of our buyers or sellers?

Your Extension professional can help you think through these issues. 

Further Reading

John Park. “The Question of Cooperation” Field & Fiber, Spring/Summer 2021, Plains Cotton Cooperative Association. https://pcca.com/article/the-question-of-cooperation/

John Park, Jonathan Baros, Rebekka Dudensing. 2009. “Communicating the Value of Texas Cooperatives.” Roy B. Davis Cooperative Management Program, Texas A&M AgriLife Extension. https://agecoext.tamu.edu/wp-content/uploads/2013/08/Communicating_Cooperative_Value.pdf

Park, John. “Should We Form a Cooperative?“. Southern Ag Today 2(39.5). September 23, 2022. Permalink

Using social media content to grow an agribusiness should not be a mystery, but for most, it is. Often, the problem is that the content produced does not grab followers’ attention. When that happens, followers ignore the content. 

But recent research shows how to create social media content to get attention and engagement. The solution is to avoid critical mistakes when creating content (Barnes, 2020). 

One common mistake is agribusiness companies don’t explain that they solve a specific problem for customers. How do you write this type of content? Here’s an example post from a Mississippi agribusiness company called HogEye Trap Cameras. This Facebook post reached more than 10 million followers: 

            Are you frustrated because you can’t stop feral hogs from destroying          

            your land, property, and habitat? 

Now let’s see why the post attracted attention and engagement. [Frustrated] is the negative feeling landowners have. {Can’t stop feral hogs} is the problem. [Destroying your land, property, and habitat] are the economic losses. In a few words, this post asks landowners if they have this problem. If they do, they will keep reading. The rest of the post highlighted the solution this company sells and the savings that will accrue if customers buy, namely the economic value of stopping feral hog damages. 

Talk about the problem you solve for your customers. It’s the easiest way to hook followers’ attention.

Want to learn how to avoid more mistakes and create social media content to grab your followers’ attention? Access the marketing resources provided by the Bricks-To-Clicks^® Marketing Extension Program at Mississippi State University, including Dr. James Barnes’ new book and courses, or listen to the podcast. Get more customized help here. 

References

Barnes, J. 2020. 5 Social Media Mistakes Your Business Should Avoid: A Step-By-Step Guide to Help You Grow Your Business [Amazon Kindle & Audible]. Mississippi State University Extension.

Barnes, James. “How to Create Attention-Grabbing Content to Grow Your Agribusiness with Social Media“. Southern Ag Today 2(34.5). August 19, 2022. Permalink

Labor markets remain strong despite predictions by some economists that the country may be heading into a recession. After a substantial increase in unemployment due to the lockdowns imposed at the onset of the pandemic, there has been a strong recovery in the demand for workers. At the same time, the availability of labor has been reduced as a result of increased government benefits, ongoing fear of contracting COVID, substantial reductions in immigration, an increase in people’s savings, career moves (and transitions to self-employment), and early retirement of older workers (Mitchell et al., 2021). The combination of strong demand for labor and a reduction in the supply of workers has led to shortages across the board, including in agricultural industries that are heavily reliant on labor like specialty crops.

The number of unemployed persons per vacancy since 2007 is shown in Figure 1. In the last fifteen years, the peak of unemployment was experienced in 2008 (during the Great Recession). Back then, there were almost seven people competing for every available job. In May of 2020, about two months after the start of the pandemic closures, the ratio was five people for every job. The latest data point (May of 2022) evinces that, two years after the onset of the pandemic, the ratio went down to 0.5. In other words, there is currently half a person available for every job posted or, equivalently, there are two open jobs for each unemployed worker!

Economic theory predicts that all else equal, whenever there is a shortage of a good or service, its price goes up. The cost of worker hours offered to the market is captured by total compensation, which includes salaries and wages, health and retirement benefits, and other monetary and nonmonetary incentives. Total compensation for civilian workers went up by 1.4% for the three-month period ending in March 2022 (first quarter), and by 4.5% for the twelve-month period spanning March of 2021 to March of 2022. Increases in wage rates, coupled with supply chain and other disruptions, have impacted all sectors of the economy, giving rise to inflationary conditions. In response, the central bank has started to increase interest rates (and thus borrowing costs) to cool down the economy. The effect of these changes on the labor markets will be seen in the following months.

Figure 1. Number of Unemployed Individuals Per Job Opening, U.S., May 2007 – May 2022

Figure 2. Three-month Total Compensation Percentage Change, U.S., 2017-2022

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References

Mitchell, Josh; Weber, Lauren; and Chaney, Sarah. (2021). Wall Street Journal, Eastern edition; New York, N.Y. Article published the 15 of October of 2021.

Gutierrez-Li, Alejandro. “Job Market Behavior During Pandemic Times“. Southern Ag Today 2(33.5). August 12, 2022. Permalink