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  • Amendments to the Federal Crop Insurance Basic Provisions

    Amendments to the Federal Crop Insurance Basic Provisions

    In June, the Federal Crop Insurance Corporation (“FCIC”) published a final rule amending the basic policy provisions of the federal crop insurance program. See 87 Fed. Reg. 38883 (June 30, 2022). Specifically, the rule brings more flexible production record requirements for producers obtaining crop insurance. Before this rule, producers were generally required to provide production records from disinterested third parties—such as sales receipts, storage records, or settlement sheets—or obtain a pre-harvest appraisal to verify their actual crop production to support their production report. The reports are submitted to an insurance provider to obtain insurance coverage, report annual production, and file loss claims.

    However, not all producers have third-party records. For example, producers that are vertically integrated or market their insured crop directly to consumers do not use an intermediate party to store or sell their crop, eliminating access to these types of records.

    In response, the rule incorporates new recording procedures, allowing producers to support their production report with farm management records; or records documenting the actual production “at the time of harvest, storing of the crop, or use of the crop for feed.” 7 C.F.R. § 457.8, Section 1. In other words, producers may be permitted to use some of their own records when generating required reports.

    Further, the rule adopts a new section addressing situations for producers without either third-party production records or an intention to direct market their crop. These producers must notify their insurance provider or FCIC and complete a marketing certification form. Id. at Section 38(a). The goal of this section is to encourage producers without verifiable records to discuss available records with their insurance provider in advance, with the goal of decreasing pre-harvest appraisals.

    This amendment is applicable for the 2023 and subsequent crop years for crop insurance policies with a change date on or after June 30, 2022. For all other crops, the final rule revisions are applicable for the 2024 and subsequent crop years.

    Brown, Micah. “Amendments to the Federal Crop Insurance Basic Provisions“. Southern Ag Today 2(37.5). September 9, 2022. Permalink

  • USDA: U.S. Agricultural Exports are Projected to Decrease $2.5 Billion in Fiscal Year 2023

    USDA: U.S. Agricultural Exports are Projected to Decrease $2.5 Billion in Fiscal Year 2023

    Given the delay in how U.S. trade data are reported (two-month delay), the value of U.S. agricultural exports for fiscal year (FY) 2022 (October 2021 – September 2022) will not be available until November. However, the latest USDA trade outlook has projected that agricultural exports in FY 2022 will reach a record $196 billion. Which is a 14 percent increase when compared to the previous year (USDA, 2022a). With year-to-date (October 2021 – June 2022) exports at $152.5 billion (USDA, 2022b), it looks like U.S. agricultural exports for FY 2022 are on pace to reach or exceed the projected record. Although FY 2022 is projected to be a record year, the latest projections also indicate that U.S. agricultural exports in FY 2023 will be $193.5 billion, down $2.5 billion when compared to FY 2022 (See Figure 1). 

    The reason for this projected decline is that the global economic outlook for 2023 is growing more uncertain. For instance, global GDP is projected to increase by 3.2 percent in 2022, a downward revision from the prior forecast of 3.6 percent, but is projected to increase by even less in 2023 (2.9 percent). The Russian invasion of Ukraine is still ongoing and continues to impose economic disruptions. The disruptions have thus far led to elevated energy prices that continue to disproportionately affect the European market. Supply chain complications have slowly abated, but spot shipping rates remain elevated compared to pre-pandemic levels. Finally, central banks around the world have begun monetary tightening cycles to combat rising inflation. While this tightening can counter inflation, it can also result in short-term barriers to economic growth and spending.

    USDA is projecting lower exports of cotton, beef, and sorghum in FY 2023. But USDA is also projecting that these decreases will be partially offset by higher exports of soybeans and horticultural products. Cotton exports are projected to decrease by $1.8 billion due to drought-lowering export volumes. Beef exports are forecast down $1.1 billion due to tight U.S. supplies. Overall livestock, poultry, and dairy exports are projected at $41.1 billion, down $1.5 billion. Sorghum exports are forecast at $2.0 billion, down $700 million, on sharply lower supplies. Total grain and feed exports are forecast down $1.3 billion to $46.5 billion and wheat exports are forecast down $300 million, mostly due to an expected fall in prices. That said, soybean exports are forecast up $2.2 billion to a record $35.2 billion based on higher prices, and horticulture exports are projected to rise by $400 million to $39.5 billion as higher exports of fresh and processed fruits and vegetables more than offset a decline in tree nut exports. Exports to major destinations are essentially unchanged. U.S. agricultural exports to China are forecast at $36.0 billion, unchanged from FY 2022, and exports to Canada and Mexico are forecast at $28.5 billion each, also unchanged from FY 2022.

    Figure 1. U.S. Agricultural Exports (Actual and Forecast): FY 2011 – FY 2023

    Note: FY is the fiscal year (October – September) 
    Source: U.S. Department of Agriculture, Foreign Agricultural Service, Global Agricultural Trade System (GATS) (2022) 

    Reference

    U.S. Department of Agriculture (USDA). 2022a. Outlook for U.S. Agricultural Trade: August 2022. Situation and Outlook Report AES-121, Washington, D.C. https://www.ers.usda.gov/webdocs/outlooks/104622/aes-121.pdf?v=8728.2

    U.S. Department of Agriculture (USDA). 2022b. Global Agricultural Trade System (GATS). Foreign Agricultural Service, Washington, D.C. https://apps.fas.usda.gov/GATS/default.aspx

    Muhammad, Andrew. “USDA U.S. Agricultural Exports are Projected to Decrease $2.5 Billion in Fiscal Year 2023“. Southern Ag Today 2(37.4). September 8, 2022. Permalink

  • Farmland Leasing for Young and Beginning Operators

    Farmland Leasing for Young and Beginning Operators

    Farmers and ranchers have been leasing land as a strategy to expand their operations for generations. Today, approximately 39% of farmland operated in the United States is leased, with most farmers operating a mixture of leased and owned land (Bigelow 2016). Leasing farmland is also an affordable way for young and beginning farmers to get started and gain economies of scale in a capital-intensive business where they may not have enough money to buy farmland early in their careers (Katchova and Ahearn, 2016).

    While advantageous from a financial standpoint, the actual process of getting in touch with landowners and developing relationships with them can be a daunting task. Many young farmers develop a relationship with a landowner through parents and grandparents, who facilitate “handing down the farm” from one generation to another within the leasing relationship. Other young and beginning farmers contact potential landowners directly and propose to build a business relationship that starts from scratch.

    The most common claim that young and beginning farmers make about entering the land leasing market is that it is all about being price competitive. In other words, you have to have the highest bid to win over a landowner. But that turns out to be only part of the picture. Information gathered from talking to landowners in focus groups about their preferences for leasing their land suggests that many are interested in helping the next generation of farmers and are just looking for the right fit. 

    As a complementary strategy to being competitive with their lease bids, farmers must consider marketing themselves as a quality tenant to landowners. One way to do that is by building a resume with your farming credentials presented in a professional way (see example). Resumes should include personal and business references, farming experience, and your farming philosophy (e.g., conservation practices you want to employ, and improvements you could contribute to the land). Presenting a resume to the landowner as part of your negotiation strategy could be the effort that makes the leasing relationship happen.

    References:

    Bigelow, D., A. Borshers, and T. Hubbs. (2016) U.S. Farmland Ownership, Tenure, and Transfer. Economic Research Service, Bulletin Number 161.

    Katchova, A. L, & Ahearn, M.C. (2016). Dynamics of Farmland Ownership and Leasing: Implications for Young and Beginning Farmers. Applied Economic Perspectives and Policy, 38(2), 334-350.

    Arnold, Chelsea J., and Mykel R. Taylor. “Farmland Leasing for Young and Beginning Operators.” Southern Ag Today 2(37.3). September 7, 2022. Permalink

  • Cow Slaughter in the South

    Cow Slaughter in the South

    There has been a lot written about beef cow culling this year due to drought and high costs and most of that has focused nationally.  This article looks at cow slaughter in the South.  Federally inspected beef and dairy cow slaughter is reported regionally.  The two regions that cover most of the South are regions 4 and 6.  Region 4 is comprised of 8 states including Alabama, Florida, Georgia, Kentucky, Mississippi, North and South Carolina, and Tennessee.  Region 6 includes Louisiana, Arkansas, Texas, Oklahoma, and New Mexico (a little further afield than the traditional South).  These two regions only leave out Virginia, which is in region 3.  

    Region 6, the Southern region most affected by drought, has culled 668,000 beef cows this year, up 31 percent from last year (157,000 head).  Beef cow slaughter in region 4 is up 55,000 head, or 18 percent, over 2021.  In 2022, these states contained 44 percent of the nation’s beef cows.  Dairy cow slaughter in both regions is slightly below last year.  

    A comparison of cow culling this year to that of 2011, during the last major drought in Texas and other parts of region 6, indicates that 8,000 more beef cows have been culled this year than in 2011.  About 24,000 more beef cows have been culled in region 4 this year than in 2011.  Both regions began 2022 with fewer cows than they had at the beginning of 2011. 

    Significant rainfall in parts of Texas over the last couple of weeks may curtail culling in the near future.  Watch beef cow culling over the next 6 weeks heading into, seasonally, the largest cow culling weeks of the year nationally in October and November.

    Anderson, David. “Cow Slaughter in the South“. Southern Ag Today 2(37.2). September 6, 2022. Permalink

  • High Abandonment Acres for U.S. Cotton Projected Due to Drought

    High Abandonment Acres for U.S. Cotton Projected Due to Drought

    Every year, the U.S. Department of Agriculture’s (USDA) National Agricultural Statistics Service (NASS) releases its projected harvest acres for U.S. cotton starting in August. The report provides updated information about expected U.S. cotton production. In 2022, the U.S. planted 12.3 million acres of upland cotton, the highest in 3 years, which was mainly due to historically high cotton prices during the decision-making and planting window. 

    However, in 2022, the overall U.S. abandonment rate for upland cotton is estimated at 43.4%, which is the highest on record since 1953. The abandonment rate, which measures the percentage of unharvested acres compared to total planted acres, provides an estimate of the number of failed acres versus the number of acres that will be harvested. Severe drought conditions hit the largest cotton production regions in the Southwest (Texas, Oklahoma, and Kansas) and the West (California, Arizona, and New Mexico). The abandonment rate for Texas (Figure 1A) reached 69%. Texas planted 7.1 million acres of cotton in 2022 –  by far the largest of any state – representing 57.6% of total U.S. planted acres (Figure 1B). By contrast, drought impacts were less severe in the Delta (Missouri, Arkansas, Louisiana, Mississippi, and Tennessee) and Southeast (Alabama, Georgia, Florida, South Carolina, North Carolina, and Virginia). 

    As a result of the drought conditions this year, upland cotton harvested acreage in the U.S. is projected at 7.0 million acres, which is the lowest amount of harvested acreage in over 150 years. The projected high abandonment rate in the U.S. reduced expected cotton production to 12.2 million bales, compared to the 10-year average of 16 million bales, according to USDA’s Foreign Agricultural Service. If realized, it would also be the smallest U.S. crop since 2009. U.S. cotton demand (mill use plus exports) for the 2022 crop is forecast at 14.3 million bales, exceeding production. As a result, ending stocks in the U.S. are expected to decline to 1.8 million bales, the lowest on record since 1960. The low supply of U.S. cotton provides support for domestic cotton prices. For the 2022/2023 marketing year, upland cotton prices are forecast at 97 cents per pound. If realized, it would be the highest price on record since 1909. 

    Figure 1A. Abandonment rate for cotton-producing states in the U.S. in 2022

    Figure 1B. Planted acres and harvested acres of the cotton-producing states in the U.S. in 2022 Abandonment Rate = 1 – Harvested Acre/Planted Acre

    References and Resources:

    U.S. Department of Agriculture. 2022a. Production, Supply, and Distribution Database. Washington, DC: U.S. Department of Agriculture, Foreign Agricultural Service. Available online: https://apps.fas.usda.gov/psdonline/

    U.S. Department of Agriculture. 2022b. Quick Stats. Washington, DC: U.S. Department of Agriculture, National Agricultural Statistics Service. Available online: https://quickstats.nass.usda.gov/

    Liu, Yangxuan. “High Abandonment Acres for U.S. Cotton Projected Due to Drought“. Southern Ag Today 2(37.1). September 5, 2022. Permalink