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  • Reforming the H-2A Guest Farmworker Visa Program: Sectoral Coverage Expansion and Workers’ Path to Permanent Residency

    Reforming the H-2A Guest Farmworker Visa Program: Sectoral Coverage Expansion and Workers’ Path to Permanent Residency

    The number of H-2A workers in the country increased by more than four times since 2005 (Figure 1).  In the last two years, over 370,000 H-2A positions were certified each year.  Each worker was employed for an average of six months. Despite such growth, the program supplies only 10 percent of the farm sector’s labor needs.  This is a conservative lower bound compared to earlier estimates since this calculation accounts for H-2A’s restricted employment duration and the farms’ actual year-round labor requirements (Costa, 2023).  

    The current H-2A model is clearly a mechanism for hiring seasonal and temporary workers only. Seasonal labor demand arises during a short time segment(s) of the production cycle. Therefore, farm operations with longer production cycles and requiring help on more complex farm tasks usually face the challenge of recruiting and training, which comes at a significant cost compared to retaining a workforce from year to year. This lack of farm work continuity causes uncertainty and inefficiencies in farm management.

    Based on the distribution of H-2A workers according to job classifications (Figure 2), workers on ranch and livestock (animal-based) operations accounted for only 4 to 5 percent of all H-2A labor in the last four years.  This confirms USDA-ERS estimates of the livestock farms’ share in H-2A employment at around 4-8 percent (Castillo et al., 2021). This low H-2A patronage can be partially attributed to the livestock production cycle.  Although many ranch operations are labor intensive, the industry’s need for year-round labor cannot be filled by seasonal, temporary H-2A work contracts.

    The U.S. House of Representatives has introduced H-2A program reforms under its Farm Workforce Modernization Act (FWMA) bill.  The bill was introduced in both the 116th and 117th Congresses in 2019 and 2021, respectively, but was subsequently rejected by the Senate in both attempts.[1]  Last year, several legislators revived and developed a more recent version of the bill (FWMA 2023), which is currently under review by the House’s Committees of Jurisdiction, to be potentially taken up at the 118th Congress this year.   

    FWMA 2023 contains specific provisions designed to accommodate the needs of year-round farm operations.  The bill proposes to allot a maximum of 20,000 H-2A visas per year (over a 3-year period) for year-round employers like dairy and other livestock farms.  As an incentive for foreign workers to be continually employed, the bill offers them a path to permanent residency after 10 years of accumulated farm working experience.  

    The farm sector will likely benefit from FWMA’s intention to lay out a definite path for workers to acquire permanent residence status.  Foreign workers’ commitment to meet the 10-year employment tenure requirement will assure the farm sector of a more stable supply of reliable workers.  However, such economic benefits may be realized only in the short-term.  Past studies conclude that while the farm sector subsists on foreign labor, gross disparities in the compensation structures of farm and non-farm employers usually lead to substantial migration of workers away from farms into non-farm employers offering higher wages and fringe benefits (Luo and Escalante, 2017).  Meanwhile, after exhausting all available family and local sources of labor, farms are usually left to rely on foreign workers, who are either bound to work under a labor contract (the H-2A case) or are desperate to survive, hence would cling on to and endure farm work (the undocumented workers’ case).  When qualified H-2A workers eventually obtain green card status, the question remains whether their newly acquired employment flexibility will not lure them away from farm employment.

    Figure 1.  H-2A Job Petitions Approved, Certified, and Issued with Visas, 2005-2022

    (Reproduced from Costa, 2023)

    Figure 2.  Certified H-2A Positions by Job Titles, H-2A Selected Statistics, 2020-2023

    Source:  Annual Statistical Summary Reports, Office of Labor Certification, Employment and Training Administration, Department of Labor

    [1] Among the reasons why the FWMA failed to pass in the previous two attempts include a provision that would have allowed farmworkers to file lawsuits against employers. The current version of the FWMA seems to have taken such past issues into consideration in the hopes that it will be passed successfully this time.

    References:

    Castillo, M., P. Martin, and Z. Rutledge. (2022).  The H-2A Temporary Agricultural Worker Program in 2020.  Economic Information Bulletin #238, Economic Research Service, U.S. Department of Agriculture.  Washington, DC.

    Costa, D. (2023). “How many farmworkers are employed in the United States?” Economic Policy Institute Working Economics Blog.  Available online at https://www.epi.org/blog/how-many-farmworkers-are-employed-in-the-united-states/#:~:text=If%20we%20use%20a%20low,crop%20employment%20on%20U.S. %20farms.  Accessed on January 30, 2024.

    Luo, T., and C.L. Escalante. (2017a). “US farm workers: What drives their job retention and work time allocation decisions?” Economic and Labor Relations Review. 28,2: 270-293.

    Escalante, Cesar L., Shree Ram Acharya, and Alejandro Gutierrez-Li. “Reforming the H-2A Guest Farmworker Visa Program: Sectoral Coverage Expansion and Workers’ Path to Permanent Residency.” Southern Ag Today 4(10.3). March 6, 2024. Permalink

  • 2022 Census of Agriculture: Review of Southern Hay Prices

    2022 Census of Agriculture: Review of Southern Hay Prices

    On February 13th, USDA-NASS released the 2022 Census of Agriculture report.  This report provides a comprehensive agricultural overview for each state and county. The report provides information on farm operations, livestock inventory, milk production, commodity production and value of commodity production.  Hay (including alfalfa) production ranked in the top three for value of crop commodity production in six of the thirteen Southern region states.  Those states were Virginia, Kentucky, Tennessee, Texas, Alabama, and Oklahoma. 

    The census is conducted and published every 5 years and is loaded with useful data about U.S. hay production.  In addition to this 5-year look at hay production, USDA Agricultural Marketing Service (AMS) report provides weekly hay prices in many markets and USDA National Agricultural Statistics Service reports annual production, hay stocks, and monthly prices received by farmers.   This wealth of information can aid in pricing knowledge.  

    Drought conditions in recent years has brought attention to hay and forage which is an important input for livestock production.  There are challenges in the valuation of a hay crop.  Given the differences in form, weight, quality, species of forage, and regional availability.  Therefore, no reference price is established.  There are market reports provided by USDA that provide some market data but are geographically limited in the south. The Census of Agriculture reports state level data. 

    All states in the southern region reported price data for hay, excluding alfalfa.  Fig. 1 contains the reported price per ton for hay, excluding alfalfa for the 2022 Census of Agriculture.  To better explain the price of hay, $/ton to $/bale will be assumed to be a 4X5 round bale at 880 lbs.  If the average price was $142/ton, then the bale price was $62.  Fig. 2 illustrates the reported price per ton for alfalfa for the 2022 Census of Agriculture.  As previously stated, $/ton to $/bale conversion is the same calculation.  The average price per ton was $229/ton, which caclulates to $101/bale.  

    Figure 1.  Hay Price per State in the 2022 Census of Agriculture.

    Source: https://www.nass.usda.gov/Publications/AgCensus/2022/index.php

    Figure 2.  Alfalfa Price per State in the 2022 Census of Agriculture.

    Source: https://www.nass.usda.gov/Publications/AgCensus/2022/index.php

  • U.S. Cotton Export and Global Market Share Declined in 2023

    U.S. Cotton Export and Global Market Share Declined in 2023

    Most of the milling, spinning, and textile manufacturing supply chain has moved from the Western world to developing countries, primarily Southeast Asia. U.S. textile manufacturing peaked in the 1994/95 marketing year with domestic use of cotton estimated at 11.198 million 480-pound bales. Since the 1994/95 marketing year, U.S. domestic cotton use has steadily declined to a projected record low of 1.75 million bales in the 2023/24 marketing year. As a result, exports are a significant source of demand for U.S. cotton. Since the early 2000s, exports, as a proportion of U.S. cotton production, have been on an upward trend, increasing from 39% in 2000 to a high of 112% in 2020. For the past decade, the U.S. exported, on average, 85% of the cotton produced domestically. The export market has been the driving force for U.S. cotton demand. 

    The highest quantity of U.S. cotton exports was achieved in 2005, with 17.7 million bales, and the second highest total U.S. cotton exports were achieved in 2020, with 16.4 million bales exported. Since 2020, U.S. cotton exports have been declining. For the 2023/24 marketing year, U.S. cotton exports are projected to be 12.3 million bales, the second-lowest quantity in the past decade. 

    The quantity of U.S. cotton exports is impacted largely by total U.S. cotton production. When production is large, exports typically rise, and with lower production, U.S. cotton exports decline. In 2023, the United States planted 10.2 million acres of upland cotton, the lowest since 2016. The harvested area for upland cotton in 2023 was estimated at 7.06 million acres, down from 7.29 million acres the previous year, the second lowest harvested acres on record since 1866. U.S. cotton production is projected at 12.4 million bales for the 2023 crop, nearly 2 million bales below the 2022 crop and the lowest since 2009. In 2023, due to lower production, U.S. ending stocks were projected at 2.8 million bales. The U.S. stocks-to-use ratio is forecast at 19.9 percent for the 2023/24 marketing year. 

    As a result of lower production and increased competition, the United States is losing global market share, declining from a peak of 39% in both 2016 and 2017 to 29% in 2023. The last time the U.S. market share was below 30% was in 2015, when the Unites States planted the second-fewest annual cotton acres in more than 100 years. After that, the U.S. market share recovered quickly with a rebound in production. However, it could be different for 2023, with more competition in the global cotton export market. Brazil has become a significant global cotton producer and exporter. In 2023, Brazil surpassed the United States and became the third-largest cotton-producing country after China and India. Brazil has become the second largest cotton exporting country and is projected to export 11.2 million bales of cotton in 2023, only 1.1 million bales lower than the United States. Increased competition will make it difficult for the United States to recover global market share. Supply and demand for U.S. cotton determines the prices for U.S. cotton producers. Even though there is a smaller global market share, U.S. production was low in the 2023/24 marketing year, leading to a high percentage of U.S. production being exported and cotton prices staying stable in the low 80s.  This was prior to the bump in the last month in cash prices into the 90-cent range. However, with the increase in global production, a lot will depend on whether U.S. production rebounds, resulting in lower cotton prices.  Lower cotton prices might then result in a decline in future cotton acreage in the United States.

    Figure 1. U.S. cotton exports, market share in the global market, and export as a proportion of U.S. production. 

    References and Resources:

    USDA Foreign Agricultural Service. Production Supply and Distribution. Exports, Production, and Domestic Use.  Available at: https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery.

  • What is a New Generation Cooperative?

    What is a New Generation Cooperative?

    Cooperatives are formed based on some collective economic need, for example, to combat unfair market power, to gain cost efficiency, or to access supply chain services that might not otherwise be available. Despite their ability to overcome these challenges, a traditionally structured cooperative might have difficulty growing and sustaining a profitable business in certain situations.

    Cooperatives that are formed to further process commodities into branded food products have added challenges. For example, a cooperative of wheat farmers that would manufacture and market pasta may face sizeable capital requirements and a require a consistent flow of production. A traditional cooperative model with open-ended commitments from its members may not be geared to these needs. Food processing facilities are designed for a specific capacity and may not operate profitably if forced to purchase unneeded inputs in a surplus year or to operate below break-even in a short crop year. Furthermore, lags and disturbances in the distribution of value-added, branded products may alienate wholesalers, retailers, and consumers, resulting in lost sales and reduced access to retail shelf space.

    Does this mean that agricultural producers can’t cooperate in these value-added markets? No, there is an alternative. A “new generation cooperative” differs from a traditional cooperative in a few important ways: 

    1. Membership is closed
    2. Participation is contracted
    3. Member equity is tied to investment, not use
    4. Ownership is transferrable and can appreciate/depreciate in value

    Closed Membership

    Membership in the new generation cooperative is determined by purchasing a limited number of shares. Each share allows its holder to deliver a specified amount of their crop to the facility. The number of shares available is determined by the annual production needs of the facility. The sale of all shares covers the equity investment needed for the cooperative. 

    Contracted Participation

    The purchase of a share in a new generation cooperative provides the right to deliver a specified amount of a commodity, but also the obligation to deliver the commodity. This ensures the cooperative that it will receive the required amount of input. Members who did not grow enough of the commodity to fill their obligation can make up the difference by purchasing the commodity on the open market. 

    Member Equity

    Because the cooperative requires the purchase of shares to do business with the cooperative, equity is received up front, and not tied to participation from year to year. This gives the cooperative an added degree of security and resilience.

    Value of Ownership

    In a traditional cooperative, profits are allocated to members based on their use of the cooperative. A portion of that allocation is paid to the member in cash, and the rest is held by the cooperative in the member’s name. These “book credits” represent the member’s equity ownership of the cooperative and will be redeemed at some unspecified time in the future at face value. The equity investment in a new generation cooperative lies in the up-front purchase of shares. These shares are transferrable at market value.

    The new generation cooperative provides an alternate business form that might help groups of producers seeking to enter value-adding industries. Interested groups can contact their lawyer, accountant, or cooperative Extension specialist for more information.

    Park , John. “What is a New Generation Cooperative?” Southern Ag Today 4(9.5). March 1, 2024. Permalink

  • Demand for Raising Reference Prices Not Hidden Very Well

    Demand for Raising Reference Prices Not Hidden Very Well

    Recently we were emailed a publication regarding the lack of progress on the farm bill that really gave us pause.  As is normally the case, we agree with much of the article; however, one specific sentence (below) in the conclusions cannot go unaddressed.   

    “Farm Bill reauthorization has failed to launch; it is the hidden demand for increasing reference prices, not matched by any actual proposals and shielded from public scrutiny, that blocks any potential for progress.”

    There are two problems with this sentence.  First, the demand for higher reference prices isn’t really “hidden.”  Last year the House and Senate Agriculture Committees held multiple hearings and listening sessions regarding what producers want in the next farm bill.  The hearings that focused on Title I of the farm bill were on April 26th in the House of Representatives and May 2nd in the Senate.  

    In the House hearing, of the nine witnesses representing covered commodities that receive safety net protection from ARC (Agriculture Risk Coverage) and PLC (Price Loss Coverage) for their crops, only three didn’t explicitly ask for higher statutory reference prices in the next farm bill (USA Dry Pea and Lentil Council, U.S. Canola Association and National Corn Growers Association (NCGA)).  However, the NCGA witness asked to “strengthen the Price Loss Coverage (PLC) effective reference price ‘escalator’” which would cost money and result in higher reference prices for corn.  Thus 7 out of 9 wanted higher reference prices.

    In the Senate hearing, there were seven witnesses representing covered commodities that receive safety net protection from ARC and PLC.  Six of the seven explicitly asked for higher reference prices with the NCGA witness again asking to strengthen the PLC effective reference price escalator. In other words, seven out of seven witnesses from national groups asked to increase the reference price for their commodity.

    The second problem with the statement is this notion that the demand for higher reference prices is “not matched by any proposals and shielded from public scrutiny.”  At this point, the agricultural committees are at the mercy of House and Senate leadership who have provided little to no additional funds for developing the next farm bill.  Committee leadership and staff have been left to “find” savings from other areas of the farm bill to fund higher reference prices.  Thus far, it appears none of the sources of funds found to fund reference price increases have been acceptable to their counterparts across the aisle.  If anything is responsible for the failure of farm bill reauthorization to launch, it is that impasse. As for higher reference prices, the demand is abundantly apparent. Once the impasse is broken, only then will the stage be set for fulsome discussions on the extent to which the reference prices can be raised.

    Outlaw, Joe, Bart L. Fischer, and Katelyn Klawinsky. “Demand for Raising Reference Prices Not Hidden Very Well.” Southern Ag Today 4(9.4). February 29, 2024. Permalink