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  • Cotton Crop Insurance: Unveiling Regional Differences in Projected and Harvest Prices

    Cotton Crop Insurance: Unveiling Regional Differences in Projected and Harvest Prices

    Updated February 8, 2024

    Crop insurance is a tool that helps farmers manage the risks linked to lower yields or revenue in agriculture. The prices used in determining crop insurance indemnities are established in the projected and/or harvest price discovery periods each year. The projected price is determined for each crop by taking an average of the daily closing futures prices across a 30-day window in early spring, when crop planting would normally occur, for a given crop’s harvest month contract. Similarly, the harvest price is determined for each crop by taking an average of the daily closing futures prices across a 30-day window in the fall, when harvest would normally occur for a given crop’s harvest month contract.

    These price discovery periods vary across states and locations due to the timing of planting for each location. Projected and harvest prices for upland cotton hinge on the average daily settlement price of the Inter Continental Exchange (ICE) December futures contract for cotton during the price discovery periods. Commodity Exchange Price Provisions (CEPP) list the variance in price discovery periods across states and locations, aligned with distinct sales closing dates for each specific area, as Table 1 illustrates. Our recent article on Southern Ag Today delved into the regional variations surrounding the Sales Closing Date. Texas, being a sizable state, notably features three distinct Sales Closing Dates. The projected and harvest prices are published by the U.S. Department of Agriculture Risk Management Agency no later than three business days following the end of the price discovery period.

    Projected prices are used when determining the indemnity for yield policies for upland cotton, while both projected and harvest prices are used in determining indemnity for revenue policies. For a comprehensive breakdown of yield protection versus revenue protection policies for upland cotton, refer to Table 1 in Chong, Liu, and Biram (2023). Producers opting for revenue protection policies can choose between the default plan or the harvest price exclusion (HPE) option (Chong and Liu, 2023). Both the default plan and HPE use the projected price to calculate the value of the production guarantee at the beginning of the season. Similarly, both the default plan and HPE use the harvest price to determine the value of the crop actually produced at the end of the season. The difference between the two plans is that the default plan recalculates the value of the production guarantee at the end of the season if the harvest price is higher than the projected price (but no additional premium is owed), while HPE does not recalculate the guarantee.

    In insurance plans featuring HPE, since indemnity calculations rely solely on the projected price, these policies typically come with lower premium costs for producers. One frequent query from producers revolves around choosing between the options—with or without HPE. Figure 1 illustrates the ratio between the harvest price and projected price for upland cotton, from 2011 to 2023, across various projected price and harvest price discovery periods. When the ratio is higher than one, it signifies that the harvest price exceeds the projected price. For example, according to Figure 1.A, cotton harvest prices exceeded projected prices in 6 years out of 13 years. These graphs serve as a tool for producers to make informed decisions regarding their insurance, helping them weigh between the default option and the HPE option.

    Table 1. Projected Price and Harvest Price Discovery Periods for Upland Cotton among Different Regions Based on the Sales Closing Date

       
     Projected Price Discovery PeriodHarvest Price Discovery Period
    StateBeginning DateEnding DateBeginning DateEnding Date
         
    January 31 Sales Closing Date
    TexasDec 15Jan 14Sep 1Sep 30
         
    February 28 Sales Closing Date
    AlabamaJan 15Feb 14Oct 1Oct 31
    ArizonaJan 15Feb 14Oct 1Oct 31
    ArkansasJan 15Feb 14Oct 1Oct 31
    CaliforniaJan 15Feb 14Oct 1Oct 31
    FloridaJan 15Feb 14Oct 1Oct 31
    GeorgiaJan 15Feb 14Oct 1Oct 31
    LouisianaJan 15Feb 14Oct 1Oct 31
    MississippiJan 15Feb 14Oct 1Oct 31
    North CarolinaJan 15Feb 14Oct 1Oct 31
    South CarolinaJan 15Feb 14Oct 1Oct 31
    TexasJan 15Feb 14Oct 1Oct 31
         
    March 15 Sales Closing Date
    KansasFeb 1Feb 28Nov 1Nov 30
    MissouriFeb 1Feb 28Oct 1Oct 31
    New MexicoFeb 1Feb 28Nov 1Nov 30
    OklahomaFeb 1Feb 28Nov 1Nov 30
    TennesseeFeb 1Feb 28Oct 1Oct 31
    TexasFeb 1Feb 28Oct 1Oct 31
    VirginiaFeb 1Feb 28Oct 1Oct 31
    *February 28 Ending Date is extended to February 29 in leap years. 

    Figure 1. The ratio of harvest price (HP) to projected price (PP) for cotton insurance policies across various price discovery periods from 2011 to 2023.

    Data Source: U.S. Department of Agriculture. Price Discovery Reporting Tool. https://prodwebnlb.rma.usda.gov/apps/PriceDiscovery

    Reference:
    Chong, Fayu, and Yangxuan Liu. “Cotton Crop Insurance to Protect Against Revenue Losses: Select Harvest Price Exclusion or Not?” Southern Ag Today 3(3.3). January 18, 2023. 

    Chong, Fayu, Yangxuan Liu, and Hunter Biram. “Exploring Diverse Crop Insurance Options for Cotton Producers.” Southern Ag Today 3(51.3). December 20, 2023. Permalink

    Liu, Yangxuan, Hunter Biram, and Fayu Chong. “Cotton Crop Insurance: Regional Differences in Sales Closing Dates and Cancellation Dates.” Southern Ag Today 4(3.3). January 17, 2024. Permalink

    USDA Federal Crop Insurance Corporation, Commodity Exchange Price Provisions, Section II – Cotton. 24-CEPP-0021, Released June 2023. 

    https://rma.usda.gov/-/media/RMA/Policies/CEPP/2024/Commodity-Exchange-Price-Provisions—Cotton-24-CEPP.ashx

    U.S. Department of Agriculture. Price Discovery Reporting Tool. https://prodwebnlb.rma.usda.gov/apps/PriceDiscovery

    Liu, Yangxuan, Fayu Chong, and Hunter Biram. “Cotton Crop Insurance: Unveiling Regional Differences in Projected and Harvest Prices.” Southern Ag Today 4(4.3). January 24, 2024. Permalink

  • Lower Hay Stocks in Some of the Southeast for Winter

    Lower Hay Stocks in Some of the Southeast for Winter

    December 1st hay stocks and 2023 production were included in the annual Crop Production Summary released recently by USDA. This report gives the best estimates of the amount of hay available for the winter at the state level.

    For this article I’ve focused on states in the Southeastern region excluding Oklahoma and Texas. The 11 states included are AL, AR, FL, GA, KY, LA, MS, NC, SC, TN, and VA. These states represented 18 percent of total U.S. hay production during 2023. I’ve excluded OK and TX only to prevent their large totals from overshadowing the dynamics in the rest of the southeastern region. Hay production in OK and TX is up a combined 42.5 percent with OK hay stocks almost double 2022 levels when the states were suffering from severe drought. 

    Despite 2023 production increasing by 4 percent over 2022 in this 11-state region, the estimated December 1 hay stocks dropped 1.1 percent and were at the lowest level since 1988. 2023 is only the 3rd time since 1986 that hay stocks decreased in a year when production increased for this region which would indicate that more hay was used or transported to another region sooner than usual. For comparison, total U.S. hay production increased by 6.3 percent and December 1st hay stocks were 6.9 percent higher than in 2022.

    There were noteworthy state-level differences within the region as shown in the maps below. While some states experienced increases, AL, LA, and MS all saw decreases in production in 2023 and also saw significant decreases in December 1 hay stocks. This is likely no surprise as these states were impacted severely by the drought conditions that developed and persisted through the second half of 2023. Producers in these states had generally lower production and had to start feeding hay sooner when pasture conditions deteriorated.   

    Lower hay stocks in some states have implications for heifer retention and cow culling decisions. Producers already facing high input costs are less likely to carry cows or heifers through the winter when hay supplies are low. It will be interesting to see the differences in inventory across states when the annual January 1 Cattle Inventory Report is released on January 31st.

    Maples, Josh. “Lower Hay Stocks in Some of the Southeast for Winter.” Southern Ag Today 4(4.2). January 23, 2024. Permalink

  • 2024 Winter Wheat Production Prospects

    2024 Winter Wheat Production Prospects

    Recent reports from USDA provide insight into the supply prospects for the 2024 winter wheat crop. The Winter Wheat and Canola Seedings publication on January 12, 2024, showed U.S. farmers planted 34.425 million acres of winter wheat for 2024, down about 6 percent from the 36.699 million planted for 2023. This is still the second-highest winter wheat seedings number in the last eight years. Texas planted 5.9 million acres compared to 6.4 million last year; Oklahoma planted 4.3 million compared to 4.6 million. Kansas, the top winter wheat producing state in the nation, planted 7.5 million acres for 2024, down from 8.1 million last year. 

    Winter wheat crop condition ratings are well above last year, raising prospects for better winter wheat yields and a better harvested-to-planted ratio in 2024 compared to 2023.  The last USDA report available for the U.S. and specific states was November 26. Kansas updated its wheat crop condition ratings on December 31. The USDA has since suspended weekly crop condition rating reports until the first of April.

    Over the last three years, the average harvested-to-planted percentage for winter wheat is about 71 percent.  With a trendline yield of about 51 bushels per acre and 34.425 million planted acres, an early estimate of 2024 winter wheat production is 1.246 billion bushels, around last year’s production and a little lower than the 10-year average production. Winter wheat production in 2023 was 1.248 billion bushels. The 10-year average production level is 1.286 billion bushels. A higher expected yield and harvested-to-plated ratio are expected to compensate for this season’s lower acreage. 

    References

    USDA, NASS Crop Progress, November 27, 2023 and January 2, 2024

    USDA, NASS Quickstats, accessed January 17, 2024.

    USDA, NASS Small Grains Summary, September 30, 2023

    USDA, NASS Winter Wheat and Canola Seedings, January 12, 2024

    Welch, J. Mark. “2024 Winter Wheat Production Prospects.” Southern Ag Today 4(4.1). January 22, 2024. Permalink

  • Seven Elements Your Farmers’ Market Website Should Include to Attract Consumers

    Seven Elements Your Farmers’ Market Website Should Include to Attract Consumers

    In today’s digital age, where 87 percent of consumers turn to Google to discover and assess local businesses (Paget, 2023), it’s evident that such an online presence as a website plays a pivotal role in shaping consumer purchase decisions. The process mirrors this trend when seeking information about a local farmers’ market: potential visitors will likely “Google it” and then carefully assess the market’s website. The website experience becomes a decisive factor, influencing consumers’ choices on whether to make the trip or explore alternatives. Like businesses, farmers’ markets need to recognize the profound impact of their online representation, understanding that consumers’ evaluations of farmer’s markets often begin with a visit to their digital storefronts.

    Having evaluated small business, agribusiness, non-profit, and personal brand websites for more than a decade through the Bricks-to-Clicks Marketing Program, it is apparent that specific elements are crucial in persuading consumers to engage. For farmers’ markets, where 8,720 establishments in the U.S. connect growers directly with consumers, the importance of a well-designed website becomes even more pronounced. 

    According to the USDA’s Agricultural Marketing Service, the total annual sales at farmers’ markets are estimated at $1 billion. This raises a critical question: could growers increase sales if farmers’ market websites were more effective at attracting consumers? A compelling online presence could be the key to unlocking more significant sales potential for growers and farmers’ market organizers. Here are seven elements a farmers’ market website should include to attract customers. 

    Element One

    An effective website should include an easy-to-understand tagline. Look at this example from Elgin, Texas: https://www.elginfarmersmarket.com/. The tagline is “Buy Local, Eat Fresh.” The purpose of the tagline is to communicate the value of buying at the market quickly. With this tagline, it’s easy to understand that buying local, fresh food is the main message. 

    Element Two

    Visually display the success customers will experience when they visit your market. What are the benefits of visiting your farmers’ market? If access to fresh food is essential, use high-quality images showing people interacting with growers to entice customers to visit. Look at this example from Wichita Falls, Texas: https://farmersmarketwichitafalls.com/. It’s easy to see many consumers enjoying their experience. The same applies to this example from San Francisco, California: https://www.ferrybuildingmarketplace.com/farmers-market/. The ideal visual display also includes images of happy, smiling people enjoying the market. 

    Element Three

    Provide bite-sized categories to explain the products sold at your farmers’ market. Retake a look at the San Francisco, California site: https://www.ferrybuildingmarketplace.com/farmers-market/. Scroll down, and you’ll see bite-sized examples of what’s available at their market, including Tuesdays and Saturdays. For a farmers’ market, it’s more straightforward to communicate what happens each day of the week when the market is open. But the main thing is to be clear about the products sold at the market in easy-to-understand terms. Otherwise, consumers get confused, and they won’t visit the market. 

    Element Four

    Showcase when your farmers’ market is open. Every farmers’ market is different regarding the days and hours it is open, which means clearly communicating available days and hours is critical to success. This information should appear in the header section of your farmers’ market website. The header is the first section of website content. Look at this example from Starkville, Mississippi: https://starkville.org/things-to-do/starkville-community-market/. The website header displays when the farmers’ market is open clearly and concisely.

    Element Five

    Use call-to-action buttons to engage consumers and vendors. When consumers visit a farmers’ market website, it is critical to call them to action to show the experience they can have. For example, a clear call to action button in the header section of the website might be “Plan Your Visit” or “Virtual Tour.” The virtual tour button could provide a short, high-quality video showing consumers enjoying their visit at a farmers’ market. The Plan Your Visit button could list vendors, upcoming events, lodging, restaurants, and more. The idea is to invite consumers to take a step toward planning a visit to their local farmers’ market. 

    A call-to-action button should also be present so vendors can easily apply to sell at the market. A simple button could be labeled “Become A Vendor.” This button could lead growers to an online application to sell at the market. A website programmer could easily build a website to feature both buttons side-by-side in the header of a farmers’ market website. Here is an example of a local food business in Tennessee that uses a two-button design in its website header: https://brownbagnow.com. 

    Element Six

    Build an email list. An effective farmers’ market website should also help build an email list that a farmers’ market manager could use throughout the year to promote upcoming market activities. Lead generators often appear on websites to capture visitor email addresses. A lead generator is content offered freely on websites to encourage consumers to share their email addresses to download the content. Building an email list requires presenting an effective lead generator to pique consumer curiosity and promote downloading free content. The idea is to offer consumers enough value in the free content that they want to exchange their email addresses for access. 

    A practical method of offering a lead generator on a website is to activate a site’s pop-up feature. When a consumer visits a farmers’ market website, a pop-up could be made to appear after a specified amount of time (usually 5-10 seconds) and offer access to the lead generator. If the consumer provides an email address, she gains immediate access to the lead generator.

    As for creating lead generators, many options exist. A market could offer a coupon for 10% off any item or access to a monthly newsletter update of market vendors and seasonal activities. Also, some farmers’ markets may want to develop a free PDF document with the main benefits or attractions available for immediate download. Here is a list of three potential lead generators for the Starkville Farmers’ Market in Mississippi, but each of these could be adapted for any farmers’ market. These include:

    • Win a Bounty Bag of Fresh Delights: Download Now and Enter Our Drawing for a Chance to Taste Starkville’s Farmers’ Market.
    • Craving Local Delights? Here Are 5 Things You Need to Know About Starkville’s Farmers’ Market. 
    • Sip, Shop, and Savor: 3 Reasons Starkville’s Market Is a Culinary Haven.

    Element Seven

    Keep them in the loop. If a lead generator does its job, a farmers’ market will gain access to new email addresses. The problem is most may do this part and fail to remember to engage with these new email subscribers during the year. Instead, develop a set of automated emails explaining the market’s main attractions, seasonal activities, entertainment, and food options throughout the year. Include some emails featuring testimonials. Here are five automated emails that can keep your farmers’ market customers informed:

    • Deliver the lead generator. Send a short email and give consumers the lead generator you promised. Keep it short and sweet. 
    • Feature why your market is unique. Send a short email about the main reason your market is unique. Your tagline on your website should summarize this, but in this email, explain the details of it. People want to know “why” they should visit one market versus others.
    • Explain seasonal activities. Send a short email explaining the seasonal activities you deliver at the market. Include one testimonial in this email as well. 
    • The behind-the-scenes tour. Send a short email this time that includes a short video of a farmers’ market manager working with vendors at the market, welcoming visitors, and so on. Make this a guided tour featuring the farmers’ market manager as the spokesperson. 
    • Feature three testimonials. Send a short email to three people who have given you positive testimonials about why they love visiting the market. These can be quotes or videos. 

    Seven Elements Checklist

    Use this list to evaluate if your farmers’ market website is prepared to attract customers. 

    • Does your website have an easy-to-understand tagline? 
    • Does your website visually display the success customers will experience when they visit the market?
    • Does your website provide bite-sized categories to explain the products sold at the market?
    • Does your website showcase when the market is open? 
    • Does your website feature call-to-action buttons to engage consumers (e.g., Plan Your Visit, Virtual Tour) and producers (e.g., Become A Vendor)? 
    • Does your website offer a lead generator to build your email list? 
    • Do you deliver automated emails after consumers download your lead generator to keep them in the loop? 

    In the era of digital search, farmers’ markets must recognize that the first impression is often a digital one. That’s why it’s imperative for farmer’s markets to understand the pivotal role websites play in shaping perceptions and driving engagement. Remember: A click on a farmers’ market website is the modern-day visit, and a well-crafted farmers’ market website serves as the virtual gateway to the vibrant world of fresh, locally produced foods, connecting growers with a broader consumer audience eager to embrace sustainable living. By effectively integrating these seven elements, your farmers’ market website can showcase the diverse range of locally sourced products available, helping attract more consumers and increase grower and market revenues.

    If you are ready to develop a farmers’ market website that attracts customers, enroll in the Bricks-to-Clicks Marketing Program’s Master Your Marketing Online Course at Mississippi State University. Dr. Barnes teaches this live one-day marketing workshop where you will learn how to develop a farmers’ market website, lead generator, and email series to attract consumers to your farmers’ market. The next class starts on February 6, 2024. To be notified when registration opens, complete this form.

    References

    Paget, S. (2023). Local consumer review survey. Available at https://shorturl.at/kBFLU.  

    Barnes, James. “Seven Elements Your Farmers’ Market Website Should Include to Attract Consumers.” Southern Ag Today 4(3.5). January 19, 2024. Permalink

  • Making the ARC/PLC Election for 2024

    Making the ARC/PLC Election for 2024

    On November 16, 2023, President Biden signed H.R. 6363 – the Further Continuing Appropriations and Other Extensions Act of 2024 – into law. The bill extended the Agriculture Improvement Act of 2018 (2018 Farm Bill), reauthorizing programs like the Agriculture Risk (ARC) and Price Loss Coverage (PLC) programs through September 30, 2024. Producers will have an opportunity to make a one-time election between ARC and PLC for the 2024 crop year. USDA opened the election and enrollment period on December 18, 2023, and it runs through March 15, 2024.[1]

    The ARC/PLC decision for 2024 is against the backdrop of a general softening in prices, but the implications vary by crop. For some crops, the decision may be clear-cut. In this article, we illustrate the case of wheat (Figure 1). While Effective Reference Prices are projected to climb starting next year for wheat, it is important to remember that you are making a one-year decision for crop year 2024, where the Statutory Reference Price remains at $5.50/bu. With a projected Marketing Year Average Price (MYAP) of $6.63/bu, it is unlikely (though not impossible as we are very early in the growing season) that PLC will trigger. While some may be tempted to elect ARC as a result, note that the 86% trigger threshold is at a price of $5.34/bu, largely indicating that any hope of receiving an ARC payment would rest on very low yields. In other words, in the case of wheat, it’s unlikely that either ARC or PLC will trigger (unless there is a disaster that results in low yields).

    Figure 1. Historical and Projected Wheat Prices and What They Mean for the ARC/PLC Decision.

    As we have noted in the past,[2] we highly encourage you to also look at tools like the Supplemental Coverage Option (SCO) or the Enhanced Coverage Option (ECO), both of which provide area-wide coverage for part of the deductible not covered by your underlying policy. Importantly, if you elect ARC, you cannot purchase SCO. In other words, you are essentially evaluating ARC versus PLC + SCO. Even if PLC is not expected to trigger, you may still choose to elect it and purchase SCO, particularly if the value of SCO is expected to exceed that of ARC. 

    For cotton producers, we continue recommending that you first evaluate the Stacked Income Protection Plan (STAX) before making decisions about ARC/PLC. In the case of cotton, STAX cannot be purchased on any farm where the seed cotton base has been enrolled in ARC or PLC for that crop year. As we will discuss at the Red River Crops Conference in Altus, OK, later today, in a scenario where the crop is a total loss, the area-wide policies can provide considerably more coverage than ARC. For example, as noted in the example for Jackson County, OK, in Table 1, STAX can provide more than twice as much support as ARC in a total loss scenario.

    Table 1. ARC versus STAX Comparison for Cotton in 2024, Jackson County, OK

     PracticeMaximum Possible ARC PaymentSTAXRatio: 
    STAX-to-ARC
    Expected County Yield (lint lbs/ac)Maximum Possible IndemnityProducer-Paid PremiumMaximum Possible Net Indemnity
     IRR$1261,273$243$30$2131.69
     DRY$31385$74$9$652.08
    NOTE: this example relies on several key assumptions that are subject to change: (1) a price election of $0.7959/lb (based on CTZ23 as of 1/16/2024); (2) volatility factor of 0.23 (from 2023); (3) 70% Revenue Protection (RP); and (4) 20% STAX Coverage with 120% Protection Factor. Importantly, ARC payments are limited to 85% of base acres and are subject to a number of restrictions, including payment limits.
     

    As always, we aren’t in the business of telling you exactly what to do because, frankly, we don’t know what will end up being the best choice. But, as with previous years, we do have a decision aid available at www.afpc.tamu.edu where you can input your info, and it will show you expected payments under as many different price scenarios as you want to look at. We also have students who will input your information for you and call you to discuss results. All you need to do is call (979) 845-5913 and ask for decision aid help.

    Hopefully we have given you something to think about as you consider your signup decisions. We wish you luck, and don’t hesitate to call for assistance.

    [1] https://www.fsa.usda.gov/programs-and-services/arcplc_program/index

    [2] https://southernagtoday.org/2023/03/02/strongarc-plc-sign-up-deadline-just-weeks-away-strong/

    Fischer, Bart L., and Joe Outlaw. “Making the ARC/PLC Election for 2024.” Southern Ag Today 4(3.4). January 18, 2024. Permalink