Southern Ag Today

Category: Uncategorized

  • Will a New Trade War Impact the Two Leading Distilled Spirits States? What’s at Stake for Tennessee and Kentucky Exports?

    Will a New Trade War Impact the Two Leading Distilled Spirits States? What’s at Stake for Tennessee and Kentucky Exports?

    Distilled spirits fall into six main categories: whiskey (which includes bourbon), vodka, rum, gin, tequila, and brandy. Each is defined by its key ingredient, for example, rum is produced from sugarcane, brandy from grapes, and whiskey from corn and other grains. Production methods, geography, and legal requirements also help in defining these categories. Tennessee Whiskey and Kentucky Bourbon are iconic American spirits, elevating these states to leading exporter status.

    American distilled spirits enjoy global popularity and are among the nation’s top agricultural exports. Despite disruptions from the 2018 trade war and the COVID-19 pandemic, exports have shown a steady upward trend reaching almost $3.0 billion in 2024 (Figure 1). Tennessee and Kentucky lead the nation in distilled spirits exports, consistently ranking first and second among exporting states, respectively. While distilled spirits make up approximately 2% of total agricultural exports nationwide, they dominate sales in both states, accounting for 36% of Tennessee’s and 48% of Kentucky’s agricultural exports in 2024. That year, Tennessee exported over $900 million worth of distilled spirits, while Kentucky shipped around $750 million, together comprising more than half of the country’s total distilled spirits export revenue. For comparison, Texas, the third-largest exporting state, had around $350 million in distilled spirits exports in 2024.

    Both Canada and the EU have been embroiled in the recent trade actions by the Trump Administration. In response, both countries have either implemented or proposed retaliatory tariffs on U.S. good including distilled spirits. What is at stake if Canada and the EU impose retaliatory tariffs on American distilled spirits?

    Because retaliatory tariffs could seriously impact distilled spirits, disrupting export sales, economic activity, and job stability, it is essential to evaluate what is at risk. Our research shows that although export sales to the EU and Canada for the two states combined average around $760 million annually from 2022-2024, the totaled economic impact was over $1.2 billion and nearly 3,000 jobs. These findings highlight how distilled spirits exports create a ripple effect, influencing employment, tax revenue, and business activity across multiple sectors in Tennessee and Kentucky. If Canada or the EU were to impose tariffs on U.S. distilled spirits, it could lead to reduced exports, affecting the economic stability of distilleries and related industries. This could result in job losses, decreased income for workers, and lower tax revenues, ultimately harming the regional economy. 

    Figure 1. U.S. Distilled Spirits Exports (Tennessee, Kentucky, and Other States): 2010 – 2024    

    Source: Reprinted from forthcoming article in Choices. See the reference list.

    For More Information

    Muhammad, A., R.J. Menard, S.A. Smith (2025) “Tennessee and Kentucky distilled spirits: What’s at stake from a new trade war?” Choices (In Press).

  • Uptick in Livestock Risk Protection for Feeder Cattle

    Uptick in Livestock Risk Protection for Feeder Cattle

    Livestock Risk Protection (LRP) is an insurance policy that cattle producers can purchase to insure a minimum price level when they market their cattle. LRP policies are available daily and can be customized by the number of head (between one and 25,000 head per crop year), the insurance periods (13, 17, 21, 26, 30, 34, 39, 43, 47 or 52 weeks), and coverage levels (70-100%) of an expected price at the end of the insurance period. Additionally, a policy can be adjusted for sex, breed, and weight. Policyholders are paid an indemnity payment at the end of an insurance period if the actual price is lower than the insured coverage price. LRP has been available to producers since 2003, but the purchase of LRP policies by feeder and fed cattle producers has been low. In 2019 and 2020, the premium subsidy rate for LRP was increased. The adjustment reduced the insurance premium cost to producers. The premium subsidy increased to 20% from 13% of the total premium cost in 2019. Then, in 2020, a tiered subsidy rate was set. Subsidy rates became 35% for coverage between 95–100%, 40% for coverage between 90–94.99%, 45% for coverage between 85–89.99%, 50% for coverage between 80–84.99%, and 55% for coverage between 70–79.99%. 

    We recently published research analyzing the impact of the premium subsidy rate increase on feeder and fed cattle LRP costs and, as expected, found these changes reduced the cost of LRP to producers (Boyer and Griffith 2023a, 2023b), but we were still not sure how producers responded to these lower premiums until recently. The figure below shows the number of policies sold and head of cattle insured by year in the US under LRP. Starting in 2021, there has been an increased interest in LRP feeder cattle policies, with purchases and the number of head insured nearly tripling. While the increase in LRP sales is higher than before, purchases of LRP relative to the cattle eligible for LRP coverage is still low. It should also be noted that other factors than the subsidy rate could be driving the increased use of LRP (i.e. risk experienced due to COVID-19, recent feeder calf price increases). 

    References

    Boyer, C.N., and A.P. Griffith. 2023a. “Subsidy Rate Changes on Livestock Risk Protection for Feeder Cattle” Journal of Agricultural and Resource Economics 48(1):31-45. (Link)

    Boyer, C.N., and A.P. Griffith. 2023b. “Increasing Livestock Risk Protection Subsidies Impact on Producer Premiums” Agricultural Finance Review 83(2):201-210. (Link)

    Boyer, Chris, Charley Martinez, Enchun Park, Andrew Griffith, and Karen L. DeLong. “Uptick in Livestock Risk Protection for Feeder Cattle.” Southern Ag Today 3(24.2). June 13, 2023. Permalink