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  • Fewer COF and Hogs, But More Milk

    Fewer COF and Hogs, But More Milk

    USDA released a flurry of livestock related reports last week leading up to Christmas including Cattle on Feed, Hogs, and Pigs, Milk Production, and Cold Storage.  Each of them has something of interest for livestock markets in the new year.

    Pork bellies hit 54 million pounds in cold storage facilities around the country.  That is not a record large amount but, it is more than double the stock supplies in November last year.  About 28 percent fewer hams were in storage.  Bellies have been the poster child for market volatility in recent years.  The combination of abundant stocks and reduced hog production should continue that volatility.  Beef storage was up 6 percent compared to a year ago.  That’s not much considering the large amount of beef produced this year.

    The combination of more cows and more milk per cow produced 1.3 percent more milk than in November last year.  In the Southern states that are reported monthly, Georgia and Texas increased milk production by 13 and 6 percent, respectively.  Florida and Virginia reported less milk production than a year ago, 11 and 3 percent, respectively.

    The Hogs and Pigs and Cattle on Feed reports were released Friday afternoon.  The Hogs and Pigs report indicated slightly more breeding hogs (28,800) than a year ago on December 1.  Growth in other states offset the 50,000 head decline in Utah due to previously announced production cutbacks attributed to California’s proposition 12.  After small increases, the number of sows in states across the South more than offset a 10,000 sow decline in North Carolina.  Some growth in sow numbers should translate to small growth in pork production by later in 2023.  

    The Cattle on Feed report indicated 2.6 percent fewer cattle in feedlots than last December 1st.  November placements were down 2 percent compared to last year, for the 3rd month in a row of smaller placements. August 2022 will turn out to be the largest month for placements this year.  The number in feedlots will continue to decline in 2023 reflecting the smaller cow herd.  The tightening in supplies will bring some higher calf and cattle prices in the new year, of course depending on feed costs and beef demand.

    The year-end brought a number of interesting livestock reports with some implications for 2023.  All of us livestock economists at Southern Ag Today wish you a happy and prosperous new year!

    Author: David Anderson

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

    danderson@tamu.edu

    Anderson, David. “Fewer COF and Hogs, But More Milk.” Southern Ag Today 2(53.2). December 27, 2022. Permalink

  • Quantifying U.S. Corn Exports to Mexico

    Quantifying U.S. Corn Exports to Mexico

    There has been a lot of recent concern regarding Mexico potentially banning genetically modified (GM) corn. The crux of the issue started in December 2020 when Mexico’s president, Andrés Manuel López Obrador, issued a presidential decree calling for GM corn for human consumption to be phased out by the end of January 2024. Details of this decree and how it would be implemented are scarce. The United States has also engaged in negotiations with Mexico on this issue.  The purpose of this article is not to debate the merit, or lack of merit, in Mexico’s decree to ban GM corn, it is to quantify the potential amount of corn trade that could be affected.

    Mexico’s position revolves around the protection of native heirloom varieties and banning GM corn for human consumption.  The Mexican President’s position on GM corn used for animal feed and industrial use has softened recently however, the phrase “destined for human consumption” is opaque and subject to interpretation. Any potential ban is destined to have a two-pronged result. First, Mexico would pay more to secure the displaced U.S. corn (whether the replacement is U.S. non-GM or procured from another country), and second, U.S. corn would have to find an alternative market. 

    From 2009-2022, Mexico consumed an average of 12.5 million metric tons (MMT) of corn more than it produced (Figure 1). During this time interval, 94% of the corn imported to make up the deficit came from the U.S. (Figure 2). For the 2022-2023 marketing year, Mexico is projected to import 17.2 MMT of corn. Trade data can be examined by Harmonized System (HS) code. HS code is a standardized numerical method of classifying traded products. Table 1shows the value of U.S. corn exports to Mexico by HS code. Over 90% of corn exports to Mexico are Number 2 Yellow Corn. Available data did not provide an indication of intended use (food, feed, industrial etc.) for U.S. origin corn.

    Annually, the U.S. exports approximately 15% of total corn production. The top five export markets for U.S. corn over the past five years have been Mexico, Japan, China, Columbia, and South Korea. U.S. corn exports to Mexico represented 25% of all corn exports from 2009-2022. If access to Mexico’s market is restricted, then corn exporters would have to rely on alternative export markets or absorb the production domestically. Holding other factors constant, restriction of U.S. corn exports to Mexico would adversely affect domestic corn prices in the U.S.  Producers, Corn Growers Associations, and other stakeholders are rightfully concerned over attempts to restrict market access for U.S. corn exported to Mexico. The impact of any potential loss of access to Mexico’s corn market will be contingent on the details of the proposed restrictions. 

    Figure 1. Mexico Corn Production, Imports, and Consumption, 2009-2022

    Data Source: USDA-PSD

    Figure 2. Corn Exports to Mexico, 2009-2022

    Data Source: USDA-PSD and USDA-GATS 

    Table 1. Value of U.S. Corn Exports to Mexico by HS code, 2021 and 2022 (Jan-Oct) 

     HS CodeDescription2021% of Total2022% of Total
    1005902030Yellow Dent Corn (maize), U. S. No. 2, Except Seed4,350,527,44691.3%3,840,293,29992.4%
    1005902035Yellow Dent Corn (maize), U. S. No. 3, Except Seed25,919,3950.5%58,556,4961.4%
    1005902020Yellow Dent Corn (maize), U. S. No. 1, Except Seed37,924,0900.8%26,834,6230.6%
    1005904049Popcorn, Unpopped, Except Seed, Others32,252,0310.7%31,747,5990.8%
    1005904065Corn (maize), Except Seed, Yellow Dent Corn, Popcorn, Or White Corn, Others42,646,3640.9%24,584,5050.6%
    1005100010Yellow Corn (maize), Seed27,033,2250.6%18,781,4620.5%
    1005904055Corn (maize), White, Others229,351,3854.8%146,595,2033.5%
    1005100090Corn Other5,089,8310.1%3,375,8910.1%
    1005902070Yellow Dent Corn (maize), Except Seed, Others3,411,8390.1%2,732,2170.1%
    1005902045Corn (maize), Other Than Seed Corn9,543,7610.2%2,450,5650.1%
      $4,763,699,367 $4,155,951,860 
    Data Source: USDA GATS

    References and Resources

    International Trade Administration. Understanding Harmonized System Codes. https://www.trade.gov/harmonized-system-hs-codes#:~:text=The%20Harmonized%20System%20is%20a,International%20Trade%20Administration

    U.S. Department of Agriculture – Foreign Agricultural Service (USDA-FAS). Global Agricultural Trade System. Available on-line at: https://apps.fas.usda.gov/GATS/default.aspx

    U.S. Department of Agriculture – Foreign Agricultural Service (USDA-FAS). Production, Supply, and Distribution. Available on-line at: https://apps.fas.usda.gov/psdonline/app/index.html#/app/home

    Author: Aaron SmithAssociate

    Professor, Crop Marketing Specialist

    aaron.smith@utk.edu

    Smith, Aaron. “Quantifying U.S. Corn Exports to Mexico.” Southern Ag Today 2(53.1). December 26, 2022. Permalink

  • Strong 2022 Holiday Spending Reflects Experiences and Expectations

    Strong 2022 Holiday Spending Reflects Experiences and Expectations

    Americans don’t seem concerned about holiday spending. An October Gallup poll reported that we intend to spend 6-8% more on holiday gifts in 2022. The average of $932 was just $10 off the 2019 high of $942. Just over half plan to spend about the same amount as last year, while 17% plan to spend more and 26% plan to spend less. 

    This is somewhat surprising given that consumer confidence inched up at the end of 2022 but still rivaled 1980 levels. Inflation slowed and unemployment dropped in the third quarter of 2022, but inflation remains well above average. The Federal Reserve has increased its interest rates six times this year with another hike expected before the end of 2022. Companies, including retailers usually adding holiday employees, announced layoffs throughout the fall, and the National Retail Federation expected seasonal hiring to decrease by 10-33% relative to 2021. 

    A Deloitte study produced results similar to the Gallup poll, noting that after inflation, that money is expected to buy nine gifts rather than last year’s 16. Holiday spending plans are rosier than expectations for household financial expectations for 2023 in the Deloitte data. Holiday spending tends to trend with November unemployment and consumer sentiment (see chart). Holiday spending is a reflection of 2022 experiences as much as 2023 expectations. But, really, no one wants to give up holiday memories, many of which include gifting.

    In other news, don’t forget to turn in your Ag Census form. Might be a fun way to spend time waiting for the kids to go to sleep on Christmas Eve or between bowl games. Filling it out while contemplating year-end business spending may economize on your holiday time.

    Author: Rebekka Dudensing

    Professor and Extension Specialist, Associate Vice President for Economic Development and Community Impact

    rmdudensing@tamu.edu

    Photo by Ron Dauphin on Unsplash

    Duddensing, Rebekka. “Strong 2022 Holiday Spending Reflects Experiences and Expectations.” Southern Ag Today 2(52.5). December 23, 2022. Permalink

  • Where are Commodity Prices Headed in the Next CBO Baseline?

    Where are Commodity Prices Headed in the Next CBO Baseline?

    A recent article in Southern Ag Today highlighted that increasing marketing year average prices over the past few years likely will lead to increasing “Effective Reference Prices” for many crops.  The article further noted that if those increased Effective Reference Prices were realized, “then the cost of increasing reference prices for all commodities should be significantly lower when cost estimates are developed during farm bill discussions.”

    The analysis in the earlier article was based on the Congressional Budget Office’s (CBO) May 2022 baseline projections.[1]  The biggest question at this point: where are commodity prices headed in the next CBO baseline?  To help answer this question, we look to the U.S. Department of Agriculture’s (USDA) most recent long-term outlook released on November 7, 2022.[2]

    As noted in Table 1, commodity prices in USDA’s latest long-term price outlook have increased significantly relative to CBO’s May 2022 projections.  Significant increases in the near term will bolster Effective Reference Prices, and generally speaking, those increases persist throughout the entire baseline period.  For example, USDA is projecting corn prices to average $4.30/bu in 2032, a $0.50/bu increase over CBO’s $3.80/bu estimate for 2032 in May 2022.  Figure 1 explores the same data as percentage increases.  For example, the marketing year average prices for corn, cotton, and wheat are all expected to be at least 10 percent higher in 2032 than projected by CBO in May 2022.

    Bottom line: the upcoming baseline projections will likely reinforce the point made in the earlier Southern Ag Today article, with higher prices continuing to reduce the cost estimates for raising reference prices in the next farm bill.

    Table 1.  Dollar Change in Marketing Year Average Price Projections, USDA November 2022 versus CBO May 2022.

    Units2023202420252026202720282029203020312032
    Corn$/bu1.250.800.550.450.450.350.300.350.400.50
    Cotton$/lb0.060.050.040.050.060.070.090.100.120.11
    Soybeans$/bu2.501.200.750.450.250.300.300.300.300.30
    Wheat$/bu1.651.600.750.450.500.500.500.550.550.60

    Figure 1.  Percent Change in Marketing Year Average Price Projections, USDA November 2022 versus CBO May 2022.

    [1] https://www.cbo.gov/data/baseline-projections-selected-programs

    [2] https://www.usda.gov/oce/commodity-markets/baseline

    Author: Bart Fischer

    Research Assistant Professor

    Co-Director Agricultural & Food Policy Center at Texas A&M University

    Bart.Fischer@ag.tamu.edu

    Fischer, Bart. “Where are Commodity Prices Headed in the next CBO Baseline?” Southern Ag Today 2(52.4). December 22, 2022. Permalink

  • Will Hemp Production Fare Any Better in 2023?

    Will Hemp Production Fare Any Better in 2023?

    The acres of hemp production in the United States have been on the decline since its most recent peak production of over 200,000 acres in 2019. By 2021 the acreage had shrunk to 54,000 acres, and in 2022 the production is under 37,000 acres. However, there is some light at the end of the tunnel for this crop. Over the last two years, acreage has shifted from floral production to grain and fiber production. This trend is expected to continue into 2023 as processing capacity and markets begin to emerge. There is also some good news for the hemp floral production segment, with existing stocks of hemp crude oil and floral biomass having degraded to a point of minimal economic value. For hemp to maintain current acreages and potentially increase acres in 2023, there will need to be a continued investment in genetic improvement, infrastructure development, and market research. 

    Awards through the most recent rounds of Climate Smart Agricultural funding will help to propel research and production of this crop. In addition to research investment, there continue to be significant announcements of additional fiber and grain processing facilities across the United States. In 2023, Farm Bill hearings will continue, providing the next major opportunity to further develop the regulatory framework for the hemp industry. This will be a pivotal point in the development of the hemp industry and will set the course for its continued growth. Lastly, we are watching 2023 for increasing demand and access to international markets which will be key for the industry’s development and long-term growth potential.

    There are also some bright spots from a profitability standpoint for the grain and fiber sectors. With additional increases in grain and fiber demands and rising prices, these products are becoming more competitive with traditional commodities. However, producers considering the production of hemp in 2023 need to proceed with caution and carefully evaluate the profit potential for their individual operations. Enterprise budgets that can be used to assist in evaluating the profit potential can be found on the University of Kentucky Industrial Hemp Agronomic Research webpage. Additionally, make sure to involve a lawyer in the evaluation of the hemp production contract to ensure it provides the relevant risk management protections for your operations. A contract checklist can be found at the University of Maryland.

    University of Kentucky Ag Logo

    Author: Tyler Mark

    Associate Professor

    tyler.mark@uky.edu

    Mark, Tyler. “Will Hemp Production Fair Any Better in 2023?” Southern Ag Today 2(52.3). December 21, 2022. Permalink