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Feeding Efficiency Gains Over Time

The cattle feeding industry has experienced large increases in feeding efficiency over time.  In this case, efficiency means fewer pounds of feed to produce the same or more amount of beef, pounds of feed per pound of gain.  Not only has efficiency increased, long term, but fed cattle finished weights have increased also.  Greater efficiency in feed use is one way to offset higher feed costs.

The Kansas State University Focus on Feedlots is a long running survey (since 1990) of a few feedlots that includes data on in-weights and out-weights, days on feed, average daily gains, and pounds of feed per pound of gain.  The data is also divided by steers and heifers.

In 1990, 6.51 pounds of feed were fed to get 1 pound of gain.  So far in 2022, 6.16 pounds of feed fed have produced a pound of gain.  That represents a 5.3 percent decline in feed needed to get a pound of live weight.  Examining 5-year averages, feed per pound of gain average 5.99 over the 2011-2016 period.  Feed per pound of gain has increased in recent years but, finished weights have continued to increase.  It does take more feed to get those last few pounds on each animal.  In this dataset, steer finished weights have increased from 1187 pounds to 1429 pounds, a 20.4 percent increase.  Similar to steers, feed per pound of gain for heifers has declined 3.7 percent since 1990, from 6.75 pounds of feed to 6.49 pounds.

Feed per pound of gain exhibits significant seasonality, with the most feed needed in the February-March period.  That may make some sense given winter feeding conditions and the animal using more feed to keep warm rather than gain weight.  The least amount of feed to get a pound of gain tends to occur in September.

Increasing feed efficiency is another area of improvement in beef production over the last few decades. Efficiency increases are allowing feeder cattle and calf prices to not decline in response to high feed costs as much as they might have in the past.

Author: David Anderson

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

danderson@tamu.edu

Anderson, David. “Feeding Efficiency Gains Over Time.” Southern Ag Today 2(51.2). December 13, 2022. Permalink

December 13, 2022

Corn Exports: Quality, Value, and Prices

U.S. corn exports are important in determining farm level prices. For the 2022/2023 marketing year, the November USDA World Agricultural Supply and Demand Estimates (WASDE) report estimates 15.4% (2.15 billion bushels) of U.S. corn production will be exported to foreign markets. This does not include the export of corn products, such as ethanol and DDGS.

Figure 1. U.S. corn exports (quantity, value, and price) and USDA – National Agricultural Statistics Service (NASS) average monthly price, 5-year average, 2021, and 2022.

Exports fluctuate month-to-month, with the majority of U.S. corn exports occurring January through July (Figure 1). In calendar year 2022, the quantity of U.S. corn exports has lagged behind last year’s pace – 2.038 billion bushels compared to 2.363 billion bushels in 2021 as of the end of October (Figure 1; Export Quantity). However, in terms of value, the U.S. has exported $400 million more in 2022 ($16.53 billion), than 2021 ($16.11 billion) (Figure 1; Export Value).

Price is the reason for the difference between lower quantity and greater value. USDA export sales do not report prices, but a monthly export price can be calculated by dividing value by quantity (Figure 1; Calculated Export Price). The calculated export price needs to be interpreted cautiously as this price does not represent prices established only in the month reported (prices can be established months in advance of exports). That being said, the calculated export price does provide a point of reference for comparison to other prices.

Table 1 shows the calculated export price (Figure 1; Calculated Export Price) minus the USDA NASS national estimated cash farm price (Figure 1; NASS Price). From 2017 to 2020, the difference between the calculated export price and the NASS price ranged from a low of $0.80 to a high of $1.21 per bushel. In 2021 and 2022, the range of the price difference was $1.02 to $1.81 per bushel, $0.41 per bushel greater than the four prior year’s average. The price difference can be interpreted as a rough approximation of the costs associated with moving corn from the farm gate to the export terminal.

What is the reason for this increase in the price difference? The most likely factor is increased transportation costs. This is due to supply chain disruptions coming out of the pandemic, elevated fuel costs, and higher wage rates. While the price difference has increased the past two years, the NASS estimated price has accounted for a greater portion of the calculated export price: 80.5% in 2021 and 2022 compared to 77.5% from 2017-2020. So, even with a wider differential between cash farm prices and export prices, the farmer is receiving a greater proportion of the export value. Whether the increased price difference between calculated export price and NASS price, or the proportion allocation holds into the future is highly uncertain.

Table 1. Calculated monthly corn export price minus USDA NASS price ($/bu), 2017-2022

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2017	1.02	1.00	0.95	1.03	0.94	1.00	0.92	1.09	0.99	1.06	1.09	1.12
2018	1.05	0.94	0.94	0.93	0.96	1.11	1.15	1.20	1.10	1.10	1.14	1.07
2019	1.05	1.03	1.01	1.10	0.96	0.86	0.83	0.90	0.96	0.80	0.99	0.96
2020	0.89	0.92	1.06	1.12	1.11	1.12	1.00	1.08	0.96	0.99	1.12	1.21
2021	1.66	1.61	1.55	1.40	1.15	1.42	1.49	1.03	1.64	1.81	1.59	1.62
2022	1.44	1.33	1.19	1.24	1.56	1.34	1.32	1.28	1.02	1.70
5-Year Average	1.23	1.24	1.26	1.25	1.20	1.20	1.13	0.94	0.95	1.20	1.29	1.31

References and Resources:

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

U.S. Department of Agriculture – National Agricultural Statistics Service (USDA-NASS). November. Available on-line at: https://quickstats.nass.usda.gov/

U.S. Department of Agriculture – World Agricultural Supply and Demand Estimates (USDA-WASDE). November. Available on-line at: https://www.usda.gov/oce/commodity/wasde

Author: Aaron Smith

Associate Professor and Crop Marketing Specialist

aaron.smith@utk.edu

Smith, Aaron. “Corn Exports: Quality, Value, and Prices.” Southern Ag Today 2(51.1). December 12, 2022. Permalink

December 12, 2022

Urban Development and Farm Labor Scarcity: Are Workers Leaving Agriculture for Construction?

The United States has faced a shortage of farmworkers for several decades. In areas of the country that grow labor intensive crops, the lack of a reliable supply of agricultural workers is one of the main concerns among farmers. The reduction in the availability of workers in the fields is attributed to multiple factors, including a reduction in the number of undocumented immigrants engaging in agricultural work, increased border enforcement, and the reticence of native-born individuals to take physically demanding jobs even in periods of high unemployment (Gutierrez-Li, 2022).

While the decline in the number of farmworkers may be explained in part by fewer people interested in taking agricultural jobs, the exodus to other sectors is also increasing over time. One of the main industries to which agricultural workers are moving is the field of construction. This sector requires a similar skillset to agricultural work, which facilitates workers’ mobility out of the farm sector (Barham et al., 2020). One incentive that motivates farmworkers to leave farm work to find jobs in construction is relatively higher wages. According to the U.S. Bureau of Labor Statistics, the mean hourly wage of a construction worker in 2021 was $21.22, compared to $14.27 in the agricultural sector.

In addition to offering better wages, the construction sector has been luring farmworkers as metropolitan areas in the nation are experiencing rapid growth, thereby requiring additional labor to complete real estate developments. As seen in Figure 1, some of the fastest growing cities are in the Southeast. These include areas–Charlotte/Raleigh-Durham in North Carolina, Nashville in Tennessee, Atlanta in Georgia, Jacksonville/ Miami in Florida, and multiple cities (Austin, Dallas, Houston, San Antonio, Fort Worth) in Texas—have also experienced a sizable increase in population. The rise in urbanization in southern states has been driven by their relatively larger percentages of gross domestic product (GDP) growth as shown in Figure 2. If urban development continues to accelerate in states where the agricultural industry is heavily dependent on a human workforce, it is expected that farm labor shortages there may continue to worsen, and the demand for H-2A foreign agricultural workers will continue to rise.

Figure 1. Population size and growth rates in the 50 largest U.S. cities

Source: Brookings Institution using information from the 2010 and 2020 decennial censuses.

Figure 2. Growth in Gross Domestic Product in 2022

Source: Kenan Institute of Private Enterprise. The University of North Carolina.

References

Barham, B. L., Melo, A. P., & Hertz, T. (2020). Earnings, wages, and poverty outcomes of US farm and low‐skill workers. Applied Economic Perspectives and Policy, 42(2), 307-334.

Frey, W. (2021). 2020 Census: big cities grew and became more diverse, especially among their youth. Report. Brookings Institution. Washington D.C.

Gutierrez-Li, A. (2021). The H-2A visa program: addressing farm labor scarcity in North Carolina. NC State Economist. North Carolina State University.

The American Growth Project. (2022). 2022’s Fastest-growing U.S. cities, ranked. October report. Kenan Institute of Private Enterprise. University of North Carolina, Chapel Hill.

Author: Alejandro Gutierrez-Li

Assistant Professor and Extension Economist

alejandro-gil@ncsu.edu

Gutierrez-Li, Alejandro. “Urban Development and Farm Labor Scarcity: Are Workers Leaving Agriculture for Construction?” Southern Ag Today 2(50.5). December 9, 2022. Permalink

December 9, 2022
What is the Expected Impact of High Commodity Prices on Effective Reference Prices for Covered Commodities

Commodity reference prices are used in both the price loss coverage (PLC) and agriculture risk coverage (ARC) programs to calculate program benefits.  For most commodities, reference prices have not increased since their establishment in the 2014 Farm Bill.  One of the major farm bill changes farm groups would like to see in the next farm bill is an increase in reference prices to catch up with input price inflation.  However, a feature added to the 2018 Farm Bill allows for reference prices to increase along with commodity prices.  Since most commodity prices have increased over the past few years it is interesting to see whether reference prices are likely to increase.

Section 1101 of the 2018 Farm Bill (P.L. 115-334) allows for the “effective reference price” for a commodity to replace the statutory reference price if 85% of the previous five-year Olympic average of the national marketing year average price is greater than the statutory reference price (Schnepf).  The “effective reference price” may increase to as much as 115% of the statutory reference price.

Table 1 contains the statutory reference prices and calculated commodity “effective reference prices” for 2023 through 2028 determined using historical prices and CBO May 2022 commodity price estimates.  The statutory reference prices are blue.  If the projected “effective reference prices” are green or red that means the commodity prices have risen enough to generate a higher “effective reference price”.  If the calculated reference price is green it means the “effective reference price” is less than 115% of the statutory reference price.  If the calculated reference price is red it means the “effective reference price” is greater than 115% of the statutory reference price and would be set at 115% of the statutory reference price.

Corn, soybeans, oats, grain sorghum, mustard seed, sunflower, safflower and large and small chickpeas could see an increase in “effective reference prices” over the next six years depending upon whether CBO’s price estimates are realized.  While many commodities such as wheat have experienced significant price increases, prices have not increased enough to overcome only being able to use 85% of the Olympic average of the previous 5 years commodity prices.  If the “effective reference prices” in Table 1 are realized then the cost of increasing reference prices for all commodities should be significantly lower when cost estimates are developed during farm bill discussions.

Table 1.  Statutory Reference Prices and Calculated “Effective Reference Prices” Based Off of Historical and CBO Estimated Prices for Covered Commodities.

References

Schnepf, R.  “Farm Commodity Provisions in the 2018 Farm Bill (P.L. 115-334), Congressional Research Service Report R45730, May 21, 2019.  The report can be found at: https://www.everycrsreport.com/files/20190521_R45730_24831706457d3ed90c82fa471d93b778b7d33676.pdf

Congressional Budget Office (CBO).  USDA Mandatory Farm Program Baseline, May 2022.  The report can be found at: https://www.cbo.gov/system/files?file=2022-05/51317-2022-05-usda.pdf

Author: Joe Outlaw
Professor and Extension EconomistCo-Director Agricultural & Food Policy Center at Texas A&M University
joutlaw@tamu.edu

Outlaw, Joe. “What is the Expected Impact of High Commodity Prices on Effective Reference Prices for Covered Commodities.” Southern Ag Today 2(50.4). December 8, 2022. Permalink

December 8, 2022
Enterprise Budgeting

Enterprise budgets are a helpful tool for organizing and understanding what production costs are for the coming year. Producers can use enterprise budgets to examine their farm by crop, variety, irrigation, tillage, or any other production practice. The more specific the enterprise budget, the more a producer can determine where their farm is profitable and where it can be improved. Enterprise budgets are typically developed in the late fall or winter as producers plan their next year’s crop decisions.

Table 1 is an example of a corn enterprise budget developed at Mississippi State. The budget title should describe what is being examined in as much detail as possible. The income section should be a projection of the prices and yield expected for that enterprise. The costs can be broken down into direct and fixed expenses. Direct expenses are any costs needed in the production of the given crop, such as costs of fertilizers, herbicides, insecticides, seed, labor, etc. Fixed expenses are any costs that would be paid regardless of the production. In the example budget, this would be fixed expenses related to equipment, such as depreciation and interest. Returns above total expenses or break-even prices can then be calculated based on the expenses.

Mississippi State creates yearly enterprise budgets across various crops, like the one presented in Table 1. Costs are obtained from companies across Mississippi, and a multidisciplinary team puts together example enterprise budgets based on the latest trends/recommendations. Since every producer will have different costs and revenues, it is important for each producer to determine their own enterprise budgets that match their farm’s situation. Over 80 example budgets are available to help with this process at: https://www.agecon.msstate.edu/whatwedo/budgets.php. In addition, each state in the Southern Region will have their own version of enterprise budgets, so contact your local Agricultural Economics department for more information (links below). In times where input costs are especially high, developing an enterprise budget can help in managing those costs and in determining which crop is going to be the most profitable.

Alabama: https://www.aces.edu/blog/tag/profiles-and-budgets/?c=farm-management&orderby=title

Arkansas: https://www.uaex.uada.edu/farm-ranch/economics-marketing/farm-planning/budgets/crop-budgets.aspx

Florida: https://fred.ifas.ufl.edu/extension/commodityenterprise-budgets/

Georgia: https://agecon.uga.edu/extension/budgets.html

Kentucky: https://agecon.ca.uky.edu/budgets

Louisiana: https://www.lsuagcenter.com/portals/our_offices/departments/ag-economics-agribusiness/extension_outreach/budgets

North Carolina: https://cals.ncsu.edu/are-extension/business-planning-and-operations/enterprise-budgets/

Oklahoma: http://www.agecon.okstate.edu/budgets/

South Carolina: https://www.clemson.edu/extension/agribusiness/enterprise-budget/index.html

Texas: https://agecoext.tamu.edu/resources/crop-livestock-budgets/

Tennessee: https://arec.tennessee.edu/extension/budgets/

Table 1. Example Corn Enterprise Budget

Author: Brian E. Mills

Assistant Professor and Extension Economist

Delta Research and Extension Center

Mississippi State University

Email: b.mills@msstate.edu

Mills, Brian. “Enterprise Budgeting.” Southern Ag Today 2(50.3). December 7, 2022. Permalink

December 7, 2022