Southern Ag Today

Blog

  • A Cattle On Feed Preview

    A Cattle On Feed Preview

    USDA’s next cattle on feed report is to be released on Friday, June 21st.  This one is coming out against a backdrop of rising fed cattle prices, higher Choice beef cutout values, and beef production that is slightly larger than last year.  It’s going to be an interesting report because it should continue to show declining numbers of cattle in feedlots and indicate falling beef supplies in coming months.

    Market analysts who publish pre-report estimates generally expect May feedlot placements to be smaller than those last May.  The range of estimates runs from placements down 5 percent to up 1 percent (I’m the analyst who is down 5 percent on placements).  USDA reports that the number of feeder cattle going through auctions, video and internet sales, and direct sales were down 4.8 percent compared to those last May.  The number of feeder cattle in May reported as part of the CME feeder cattle index was down 19.5 percent compared to a year ago.  Contrasting those data points, feeder cattle imports from Mexico were about 30,000 head larger than last year.  

    Feedlot marketings should be about even with a year ago.  Daily steer and heifer slaughter during May was 100.4 percent of last May, with the same number of work days in the month.  Continued near record dressed weights of those cattle marketed, largely due to longer feeding periods, is adding to beef production.  

    Combining placements and marketings should leave the number of cattle in feedlots on June 1 about 1.7 percent smaller than last year.  June 1 should mark the second straight month of smaller cattle inventories.  The number of cattle on feed for longer than 120 days should continue to decline, as well.  Shrinking cattle inventories will begin to cut into beef production in coming months limiting the impact of heavier weights on supplies.  On balance, fewer cattle on feed will keep pressure on for higher cattle and calf prices.

    Anderson, David. “A Cattle On Feed Preview.” Southern Ag Today 4(25.2). June 18, 2024. Permalink

  • June WASDE Report Projects Increases to Wheat Prices, Decreases to Cotton Prices

    June WASDE Report Projects Increases to Wheat Prices, Decreases to Cotton Prices

    USDA released its latest World Agricultural Supply and Demand Estimates (WASDE) on June 12th. This report follows the first set of estimates for the 2024/2025 crop marketing year that were released in May. This month’s report continues to use the March Prospective Plantings report as the basis for estimated acreage. As a result, there were no changes to the production or price projections for most crops, with wheat and cotton the exceptions as shown in table 1.

    Table 1: WASDE Estimated and Projected Prices 5 by Crop and Marketing Year

    Cotton’s 2024/2025 marketing year average price is a projected $0.70/lb., which represents a $0.04/lb. decrease from last month’s projection. This change was driven by a 0.45 milllion bale increase in the estimated cotton stocks at the start of the marketing year, bringing estimated stocks up to 2.85 million bales. The revision to beginning stocks was due to a halfmillion bale reduction in expected U.S. cotton exports during the 2023/2024 marketing year. While global demand for cotton remains strong, U.S. cotton export sales have been slower than expected amid tight supplies, and Brazil is expected to overtake the U.S. as the top cotton exporter for 2023/2024. If realized, this would mark the first time since the 1992/1993 marketing year that the U.S. would not be the world’s top cotton exporter. As a result of reduced exports, U.S. cotton stocks are projected to increase to 4.1 million bales at the end of the 2024/2025 marketing year. 

    On the other hand, the projected 2024/2025 marketing year U.S. wheat price increased by $0.50 to $6.50/bu. This price increase is due to a 25 million bushel increase in projected exports this coming marketing year, in spite of a slight increase in projected U.S. wheat yields and soft harvest-time prices in the United States. The increase in U.S. exports follows a 1% decrease in projected global wheat production because of yield reductions for major wheat exporters Russia, Ukraine, and the European Union. The decreased global yield projections were driven by dry weather in Russia and Ukraine, late-season frosts in Russia, and excessive precipitation in France.

    Looking ahead, we should expect to see more significant changes in next month’s WASDE report. On June 28th, USDA is scheduled to release the Acreage report, which will likely result in adjustments to acreage planted and harvested estimates for most row crops. These updated acreage estimates will affect projected production and be taken into account in the July WASDE report.

    References

    Biram, Hunter, and Ryan Loy. “May WASDE Projects Higher Supplies and Lower Prices Again in 2024.” Southern Ag Today 4(20.1). May 13, 2024. Available at: http://southernagtoday.org/may-wasde-projects-higher-supplies-and-lower-prices-again-in-2024/

    USDA-NASS. World Agricultural Supply and Demand Estimates. June 12, 2024. Available at:  https://www.usda.gov/oce/commodity/wasde/wasde0624.pdf

    USDA-FAS. Cotton: World Markets and Trade. June 12, 2024. Available at:  https://downloads.usda.library.cornell.edu/usda-esmis/files/kp78gg36g/xk81m8188/xs55p371r/Cotton.pdf

    Sawadgo, Wendiam. “June WASDE Report Projects Increases to Wheat Prices, Decreases to Cotton Prices.” Southern Ag Today 4(25.1). June 17, 2024. Permalink

  • Product of the U.S.A. Rule and Trade Implications

    Product of the U.S.A. Rule and Trade Implications

    On May 17, 2024, the USDA’s new “Product of the USA” rule took effect nationwide. At your local meat counter, “Product of the USA” now has a new meaning. Previously, labels using “Product of the USA,” “Made in the USA” and use of the American flag imagery could be used whenever any single part of the processing of meat, poultry and eggs occurred within the U.S. This meant that even where the only processing involved was repackaging on U.S. soil, labels could claim that the product was “Made in the USA.” In a 2022 USDA conducted study, 63% of consumers mostly incorrectly believed that “Product of the USA” meant that all production steps occurred in the U.S., an additional 21% reported not knowing what “Product of the USA” meant, while only 16% of consumers could correctly define this marketing claims.[i]

    On March 11, 2024, USDA Secretary Tom Vilsak announced USDA’s new rule for labeling meat, poultry, and eggs as “Product of the USA” or “Made in the USA,”, as well as the use of the American flag on labels. Under the new rule, these claims may only be used if the product is derived from animals born, raised, slaughtered, and processed in the United States. Meaning, every step from birth to processing must be done in the U.S. in order to use these marketing claims. The same is true whether it is a single-ingredient product, such as ground beef, or a multi-ingredient product such as pork sausage. With the exception for spices and flavorings, which may be of foreign origin, each individual ingredient must be of U.S. origin and entirely processed within the United States. Compliance for those choosing to use these marketing claims is mandated by January 1, 2026. The new rule is intended to better align with consumer understanding of the label claims. In the announcement of the new rule, Vilsak stated that consumers should be able to rely on the packaging claims of meat, poultry and egg products which they are purchasing, without hidden nuances and misleading claims. 

    As we saw with country-of-origin labeling (COOL), Mexico and Canada have openly expressed objection to the new Product of the USA rule in terms of compliance with existing trade agreements, suggesting that the rule violates the United States-Mexico-Canada Agreement (USMCA) and U.S. obligations to the World Trade Organization by discriminating against Mexico and Canada exports and ignoring economic integration principles. Further, Mexico alleges that the rule hinders binational production chains, ignores North America’s extensive integration of meat and livestock industries, and may result in food chain disruptions.[ii] It is anticipated that the countries will consult and work towards a mutually agreeable resolution, as is first required by USMA’s dispute resolution process.

    This conflict follows on the heals of a U.S.-Mexico USMCA dispute regarding Mexico’s ban on biotech and genetically modified (GM) corn, initially in tortillas and dough, with the intent to gradually ban the use of biotech and GM corn in all products intended for human and animal consumption. The U.S. alleges that Mexico’s ban is not based in science and undermines market access guaranteed by the USMCA. In August of 2023, the U.S. established a dispute panel under provisions of the USMCA in an effort to ensure that U.S. producers continue to have “full and fair access to the Mexican market.”[iii] A hearing on this dispute is scheduled for June 2024 with an expected report and decision by the dispute panel in November 2024.

    [i]https://www.fsis.usda.gov/sites/default/files/media_file/documents/Product_of_USA_Consumer_Survey_Final_Report.pdf

    [ii] Gobierno De Mexico, Press Release form the Ministry of Agriculture. March 11, 2024. https://www.gob.mx/agricultura/prensa/press-release-from-the-ministry-of-agriculture

    [iii] Office of the U.S. Trade Representative, Press Release. August 17, 2023. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/august/united-states-establishes-usmca-dispute-panel-mexicos-agricultural-biotechnology-measures

    Friedel, Jennifer. “Product of the U.S.A. Rule and Trade Implications.” Southern Ag Today 4(24.5). June 14, 2024. Permalink

  • China lifts ban on Australian beef: Is there cause for concern in the U.S.?

    China lifts ban on Australian beef: Is there cause for concern in the U.S.?

    In 2019, China became the largest beef importing country in the world ($8.2 billion). By 2022, China imported a record $18.0 billion in beef and beef products. To provide some background, China’s imports were negligible over a decade ago, less than $150 million in 2010 and 2011. The remarkable growth in China’s beef imports since that time has benefited major exporting countries, most notably Brazil. However, U.S. exporters have also benefited, particularly since China lifted its ban on U.S. beef due to BSE concerns in 2016. China is now the third leading market for U.S. beef exports (See previous SAT article in 2023).

    Figure 1 shows China’s beef imports since 2010 in terms of quantity and value and by exporting country. Since 2010, China’s beef imports have increased from 33 million metric tons to 2.8 billion metric tons by 2023, which is an increase of 8,000%. As the figure shows, Brazil accounts for the largest share of total imports (1.2 billion metric tons). Since 2019, U.S. beef exports to China increased from 10 million metric tons ($85 million) to 192 million metric tons ($1.8 billion) by 2022.In late May, China lifted bans on Australian beef companies raising questions about the competitiveness of U.S. beef in China moving forward. Recall that these bans were imposed during a period of rising tensions when Australia’s former Prime Minister called for an investigation into the first outbreak of COVID-19 in central China. Tensions between Australia and China began to ease in 2022 with the election of the new Prime Minister (Hoyle, 2024). The ease in tensions and the lifting of ban on Australian companies have resulted in increased imports from Australia in recent years. But what does the data show for U.S. beef? In 2023, U.S. beef exports to China decline from 192 to 166 million metric tons, while imports from Australia increased from 185 to 228 million metric tons. That said, Uruguay (decrease of 84 million metric tons) and New Zealand (decrease of 10 million metric tons) also experienced declines in the Chinese beef market in 2023, even as beef imports from Argentina, Brazil, and the Rest of World increased. Year-to-date (January-April) imports in 2024 suggests a different story. As of April 2024, China’s beef imports are down 18% when compared to imports during the same period in 2023. Beef imports from Australia were down 26% as of April 2024. However, imports of U.S. beef were up 7% as of April of this year. Only time will tell if these trends continue throughout the year.

    Figure 1. China’s Beef Imports by Major Exporting Country: 2010-2023

    References

    Hoyle, R. (2024). “China Lifts Ban on Most Australian Beef Exporters, Australian Officials Say” Wall Street Journal(May 29, 2024).

    Trade Data Monitor®. (2023). https://tradedatamonitor.com/

    Muhammad, Andrew. “China lifts ban on Australian beef: Is there cause for concern in the U.S.?” Southern Ag Today 4(24.4). June 13, 2024. Permalink

  • Farmland Value Trends in South

    Farmland Value Trends in South

    Farmland value represents the most important component of an agricultural producer’s net worth and asset value, accounting for more than 80% of the average farm balance sheet, according to a USDA survey. Therefore, monitoring farmland value per acre is crucial, as it affects farmers’ and ranchers’ ability to secure additional funding from lending institutions, given that these lands are used as collateral.

    Farmland Value Increase in the Short-Term

    In the last couple of years, despite interest rate hikes that have increased the cost of funding for farmland purchases, the demand for agricultural land and farm profitability have remained strong. Strong demand, coupled with a limited supply of agricultural land, average agricultural land prices soared by 7.7% in 2023, according to the USDA.

    Recent record-high farmland value increases in the Corn Belt region have sparked discussions about the seemingly slower increase in the southern region. While it is true that some Corn Belt states experienced 30% to 40% increases in farmland values over the past couple of years, examinations of broader regional changes and long-term trends present a different picture.

    Source: USDA NASS

    According to the USDA, since 2021, cropland values in the Southeast (Alabama, Florida, Georgia, South Carolina) and the Southern Plains (Texas and Oklahoma) have increased by 20% and 22%, respectively, making these increases comparable to those in the Corn Belt states (22%). Delta states (Arkansas, Louisiana, and Mississippi) experienced a 12% increase, falling short of other regions. Increases in pastureland values were more consistent across regions. Delta and Southeast states saw increases of 12% and 13% in pastureland values, similar to the 14% increase in the Corn Belt states. In the Southern Plains, pastureland values soared in 2023, reaching a 20% increase.

    Source: USDA NASS

    Farmland Value Increase in the Long-Term

    While some southern states may seem to lag behind in growth rates in the short term, long-term trends show robust growth for these states. Between 2014 and 2023, the Southern Plains states experienced the highest increase in cropland value (50%), while the Southeast and Delta states each saw a 40% increase. Cropland values in the Corn Belt states increased by 18% during the same period. Looking at pastureland, the dollar value per acre in the Delta states increased by 39%, followed by the Southern Plains (34%) and the Southeast (30%). Pastureland value in Corn Belt increased by 22% for the same period.

    Moving Forward

    While it is true that farmland value increases have been sluggish for some states in the South, production specialties and long-term trends should not be overlooked.

    For 2024, it is generally expected that farm profitability will decrease, especially for crop producers, adding downward pressure on cropland values along with high farmland loan interest rates. However, due to the limited supply of farmland and strong demand for agricultural land, it is expected that farmland values will remain steady or experience a slight increase.

    Kim, Kevin. “Farmland Value Trends in South.” Southern Ag Today 4(24.3). June 12, 2024. Permalink