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  • Calf Prices Jump

    Calf Prices Jump

    Calf prices bounced around in the first month of the year, but they rebounded significantly higher in the last couple of weeks.  Higher fed cattle prices, hitting $160 per cwt last week, and tighter supplies of calves and feeders are fueling this price run.  

    In the Southern Plains, 5-600 pound steers have increased from $203 per cwt to $214 in the last two weeks.  During the same period, the same weight calves in Georgia bounced from $181 to $188 per cwt.  Heavier feeders, (7-800 pounds) saw more modest gains in the Southern Plains, up about $4 per cwt to $182.  In Georgia, those heavier calves actually dropped about $2 per cwt to $163.  Calf prices tend to be lower the further South and East from feedlots in the Plains and Corn Belt.  Prices in both the Plains and Georgia were about $26 per cwt higher than last year.

    Fed cattle prices hit $160 in several markets last week.  Higher prices for fed cattle certainly boosted calf prices.  Fewer available feeder cattle are also working to boost prices.  Calculating feeder cattle supplies from information in USDA’s cattle inventory report indicated that 25.3 million head were outside of feedlots, about 270,000 head fewer than the prior year.  That is the fewest since the 24.6 million available in 2015.  

    Tight supplies of calves will keep prices higher than a year ago.  But, there is likely to be some volatility as feed prices and demand for cattle move throughout the year.  Prices for lighter weight calves and feeders tend to increase seasonally into March and April.  Heavier feeders are often pressured by winter pasture cattle coming to market in the Spring.

    Author: David Anderson

    Professor and Extension Economist Livestock and Food Products Marketing, Dairy, Policy

    Anderson, David. “Calf Prices Jump.” Southern Ag Today 3(7.2). February 14, 2023. Permalink

  • Possible Extreme Outcomes for 2023 Cotton

    Possible Extreme Outcomes for 2023 Cotton

    U.S. cotton production is typically uncertain in any given year, in part because roughly half the acreage is in Texas.  Still, the 2023 season is starting off with a more than usual degree of uncertainty.

    First, the early season forecasts of U.S. cotton plantings vary by as much as two million acres, i.e., from 9.5 to 11.5 million acres.  Such a discrepancy puts a premium on the milestone planting intentions reports from the National Cotton Council (released February 12) and USDA (March 31 Prospective Plantings report and June 30 Acreage report).

    The weather is a second major source of variability.  The National Oceanic and Atmospheric Administration’s Climate Prediction Center (CPC) is forecasting a transition from the hotter/drier La Niña condition to a neutral influence by late Spring.  CPC further predicts the onset of the cooler/wetter El Niño condition by early Fall.  That’s all well and good, but there is uncertainty around all weather forecasts.  Will the beginning dryness lead to above average early season abandonment?  Or will neutral El Niño-Southern Oscillation (ENSO) conditions by planting time surprise us with timely planting rains and good growing conditions?

    The third consideration is whether the recent signs of improving cotton demand will continue.  There is plenty of uncertainty about whether the broader economy is recovering or entering a double dip recession.  

    These three variable situations outline some possible extremes.  If, for example, U.S. cotton growers plant a low level of acreage, and it continues dry, and abandonment is above average, and demand continues to recover, the result could be ending stocks below 3 million bales.  Historically, it suggests that Dec’23 futures might follow the seasonal path of the green line in Figure 1, strengthening as the growing season goes on.  In the context of this year’s price levels, it suggests a march back up through the 90s towards a dollar.

    On the other hand, what if 11+ million acres are planted and receive timely rains?  That could lead to three million more bales of production than the first scenario.  If demand doesn’t recover enough to absorb these bales, the carryover outcome could be five or six million bales.  In years of building excess stocks, the historical seasonal average of December ICE futures reflects weakening prices.  The pattern of the blue line in Figure 1 could push prices under 80 cents.

    Figure 1’s red line reflecting “Stable Carryover” years is simply the in between scenario, with middling implications for ending stocks and prices. The level of these seasonal averages isn’t as important as the pattern itself.  Time will tell how all these variables play out.  

    Figure 1. December Futures Seasonal Average Price in Stable, Larger and Smaller Carryover Years

    Author: John Robinson

    Professor and Extension Economist

    Cotton Photo by Mark Stebnicki: https://www.pexels.com/photo/plantation-of-cotton-in-a-cropland-10287687/

    Robinson, John. “Possible Extreme Outcomes for 2023 Cotton.” Southern Ag Today 3(7.1). February 13, 2023. Permalink

  • The Need for Equity Preparing for the 2023 Farm Bill

    The Need for Equity Preparing for the 2023 Farm Bill

    A central focus throughout the Biden-Harris Administration has been addressing the issue of racial equity. In January of 2021, the administration issued an executive order on advancing racial equity and support for underserved communities through the federal government citing disparities in laws, public policies, public, and private institutions. In response to the Racial Equity Executive Order, The United States Department of Agriculture has admitted that its programs have a flawed design, and because of that and the discriminatory behaviors of individuals over many decades, it recognizes that there are existing barriers for underserved producers. As organizations begin to navigate the 2023 Farm Bill, research has shown there is a need for equity to continue making changes for Socially Disadvantaged Farmers and Ranchers. 

    The Socially Disadvantaged Farmers and Ranchers Policy Research Center at Alcorn State University (The Policy Center) has developed several policy recommendations for the 2023 Farm Bill that aim to address the many years of systemic and historic discrimination. These recommendations range from the need to eliminate the use of the term “historically underserved producer” to the elimination of the FSA State and County Committee System, all supported by external research conducted on behalf of the policy center and listening sessions with the farmers and ranchers seeking equitable experiences in agriculture. 

    Also, at the center of Farm Bill discussions are the 1890 land-grant institutions (the 1890s), historically black universities established under the Second Morrill Act of 1890, that have been historically underfunded. The 1890s were not provided with research and extension funds until 1977, with inequities continuing between 1862 land-grant institutions (1862s) and 1890s since then. In “The Equity in Agricultural Production and Governance” drafted by The Farm Bill Enterprise, it states that NIFA’s 2016 Annual Review Report displayed a stark disparity of AFRI funding, with the 1862s receiving over 82% of the funding, and the 1890s receiving 1.2%. They further discuss that while all states provide 1862s with adequate funds 1890 Institutions, in 10 of the 18 states where they are present, have been continuously underfunded or receive no funding. While the direction of the 2023 Farm Bill is uncertain, there is still hope for equitable spaces to be carved out in agriculture. 

    Author: April Love

    Policy Analyst and Attorney

    Alcorn State University

  • U.S. Agricultural Exports Set Another Record in 2022, but Higher Prices Appear to be the Cause

    U.S. Agricultural Exports Set Another Record in 2022, but Higher Prices Appear to be the Cause

    The 2022 data on U.S. agricultural exports are now available and it looks like another record year. U.S. agricultural exports were $196 billion in 2022, up $20 billion (up 11%) when compared to the previous year. Note that 2021 was also a record year for U.S. agricultural exports ($177 billion). It appears that record sales were more so due to higher commodity prices and global inflation than an increase in real export sales. That is, the U.S. did not necessarily sell more soybeans, grains, meats, or other products to the world, we simply sold the same or even lower volumes at higher prices.

    Figure 1 shows both the agricultural export value ($ billion) and volume (million metric tons [MT]), as well as the average export price or unit value ($/MT) for the U.S. Given the broad range of exported products, a total volume measure is clearly a representative equivalent. However, as long as the U.S. Department of Agriculture is consistent every year with how volumes are measured, comparisons over time can reveal what is driving recent export growth. In 2021, U.S. agricultural exports increased from $150 to $177 billion, which was an 18% increase. However, the export volume during this period increased by only 2%: 226 million MT in 2020 to 230 million MT in 2021. Given the larger increase in value, clearly, the record in 2021 was more so due to prices. However, albeit relatively smaller, the volume did increase. In 2022, however, the volume of U.S. agricultural exports (216 million MT) was down by 6%, despite the value being up by 11% to a record level. Note that the average export price or per-unit export value in 2022 ($906/MT) was up 18% when compared to the previous year ($768/MT). Thus, the most recent record is all due to higher prices.

    In closing, record export sales in the last two years being more inflationary than representative of real export growth is not necessarily a bad thing and is in fact, quite laudable. Most important, higher values do suggest higher revenues for U.S. producers regardless of the quantities being sold. When taking a longer view, there is another positive takeaway. Note that export volumes significantly decreased with rising prices in past years (e.g., 2010 – 2013), resulting in negligible increases in export values. Whereas in the last two years, export volumes have remained relatively stable despite significantly higher prices.

    Figure 1. U.S. Agricultural Exports (Volume, Value, and Unit Value): 2010-2022

    Source: USDA, Foreign Agricultural Service, Global Agricultural Trade System (GATS) (2022)

    References

    US. Department of Agriculture. 2023. Global Agricultural Trade System (GATS). Foreign Agricultural Service, Washington, DC.

    Muhammad, Andrew. “U.S. Agricultural Exports Set Another Record in 2022, but Higher Prices Appear to be the Cause.” Southern Ag Today 3(6.4). February 9, 2023. Permalink

  • Chapter 12 Bankruptcy as an Option to Relieve Financial Distress

    Chapter 12 Bankruptcy as an Option to Relieve Financial Distress

    During the farm financial crisis in the 1980s, Congress created a temporary title to the bankruptcy code designed to assist family farmers, which has since been expanded to help family fishermen.  This Chapter was set to expire in 1993 but was extended by Congress and made permanent in 2005.  Chapter 12 allows agricultural operations to reorganize, which the other Chapters do not allow.  The idea of this Chapter is to prevent debtors from needing to sell off assets and enable the operation to continue operating through the process.

    Agricultural operations and fishermen must qualify for Chapter 12.  Current qualifications include:

    • Engaged in farming or commercial fishing operations.
    • Having total debt of less than $11,097,350 for a family farm or $2,268,550 for a family fishing operation.
    • Total farm-related debts of at least 50% or fishing-related debts of at least 80% of all filer debt.
    • More than 50% of the filer’s gross income originates from the farm or fishing operation.

    One unique feature of Chapter 12 is the “cram down” provision.  The cram down allows the debtor to reduce the obligation on secured debt to the value of the collateral.  For example, suppose an agricultural operation has a secured debt of $200,000 secured by collateral valuing $100,000.  In a Chapter 12 case, the value of the debt would be reduced to $100,000, and the remaining $100,000 would become an unsecured debt.  This unsecured debt, like other unsecured debt, could be discharged in bankruptcy proceedings.[1]

    Data were obtained on Chapter 12 filings from the Federal Judicial Center for October 1, 2013 to September 30, 2022, representing Fiscal Years 2014-2022.  During this ten-year period, 4,284 Chapter 12 bankruptcy cases were filed in the U.S. courts.  Southern states, on average, make up 32% of the national Chapter 12 filings each year.  That proportion ranges between a low of 26% in 2020 and 2021 to a high of 37% from 2015-2017.  Figure 1 shows the percentage of cases filed during this period across the region in each southern state.  Georgia leads the region with 19.5%, followed by Florida with 12.9% and Texas with 12.8%.  The states with the least number of filings in the region are West Virginia at 0.9%, South Carolina at 2.1%, and Maryland at 2.2%.

    Bankruptcy is not something that should be taken lightly.  It can have potential impacts on your credit down the road.  Before considering bankruptcy, you should always work with creditors to determine if more favorable repayment arrangements can be made.  Most creditors would prefer communication from debtors rather than silence.  Options other than bankruptcy may exist and working with creditors is always preferred before looking to the court for help.

    Figure 1.

    This work is supported by the Agriculture and Food Research Initiative (AFRI) program, grant no. 2022-67023-36112/project accession no. 1028056, from the U.S. Department of Agriculture, National Institute of Food and Agriculture.

    Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and should not be construed to represent any official USDA or U.S. Government determination or policy.

    [1] Like in some other Chapters, secured debt may be restructured. This restructuring may change the interest rate, maturity, or other terms of the debt agreement.

    Goeringer, Paul, William Secor, and Adam Rabinowitz. “Chapter 12 Bankruptcy as an Option to Relieve Financial Distress.” Southern Ag Today 3(6.3). February 8, 2023. Permalink

    Photo by Melinda Gimpel on Unsplash