Southern Ag Today

Blog

  • The South as the Nation’s Primary Regional Employer of H-2A Labor

    The South as the Nation’s Primary Regional Employer of H-2A Labor

    In recent years, the South has emerged as the top regional employer of H-2A workers.  The Southern states’ demand for H-2A workers has been increasing (from 118,437 positions in 2019 to 143,415 in 2021), mirroring the same trend in its share of the country’s H-2A pool. Over the same period, the region accounted for 43 to 45 percent of the total number of H-2A positions certified by the Department of Labor. 

    A closer look at the region’s H-2A labor certification requests indicates that most workers work in the fruit, vegetable, and horticulture industries.  The smaller business scales of these Southern industries relative to their peers in other regions can partially explain the region’s strong demand for H-2A workers.  

    When the farm labor shortage problem arose due to stricter immigration controls, domestic workers generally lacked the motivation and willingness to supply replacement farm labor for the evicted undocumented workers.  Under such conditions, farmers’ coping strategies include, among others, input substitution through increased mechanization, optimizing family labor potentials, and shifts in production methods and crop choices.  Smaller farms normally face financing constraints that render the mechanization alternative infeasible for their farming situations.  Hence, when the other non-mechanization strategies have been exhausted, these farms rely on the H-2A solution.

    H-2A employment discussions are inextricably linked to adverse effect wage rates (AEWR), which is the minimum wage that H-2A workers must receive.  The AEWR benchmark is set to ensure that H-2A wages are not too low and would not cause a downward market pressure on U.S. wages of workers in similar occupations.     

    Regional AEWR trends indicate that rates in the South are the lowest among the regional averages during the three-year period.  Interestingly, among the five regions (Figure 1), the South’s average annual agricultural wages per worker are consistently closest (among regions) to the national average annual wages per worker (79 to 81% of wages for ALL industries) and the average annual wages per worker for the economy’s Goods Sector (65 to 69% of combined wages for the sector’s industries that include agriculture, construction, and manufacturing).  Notably, Southern states posted higher annual AEWR increments this year than the other states, so their current rates are now at par with the other regions.  When these two arguments are taken together (the lowest regional gap between agricultural wages and national/goods sector wages AND the 2023 re-adjustment of AEWR levels to national standards), the South has indeed taken an aggressive stance in addressing workers’ welfare issues in the region.

    Table 1.  Regional H-2A Program Patronage and Adverse Effect Wage Rates, 2019 to 2021

     REGIONNUMBER OF H-2A CERTIFICATIONSREGIONAL SHARE of
    H-2A CERTIFICATIONS    		AVERAGE ADVERSE EFFECT WAGE RATES
    201920202021201920202021201920202021
    ATLANTIC48,88737,84339,69317.68%13.75%12.52%12.9513.6814.33
    MIDWEST19,60921,44024,6837.09%7.79%7.78%13.3614.3414.94
    PLAINS12,55014,93116,8204.54%5.42%5.30%13.6614.2214.94
    SOUTH118,437122,247143,41542.84%44.41%45.23%11.5212.1712.44
    WEST76,99178,79092,45827.85%28.62%29.16%13.5514.2314.98
    ALL STATES276,474275,251317,06912.9613.6814.28
    Source:  H-2A Disclosure Datasets, Department of Labor
    The regional groupings of the states are as follows:  ATLANTIC (North Carolina, Virginia, West Virginia, Maryland, Connecticut, Massachusetts, New York, Vermont, New Hampshire, Maine, New Jersey, Rhode Island, Delaware); MIDWEST (Minnesota, Iowa, Wisconsin, Illinois, Missouri, Indiana, Ohio, Pennsylvania, Michigan); PLAINS (Nebraska, Kansas, Texas, North Dakota, South Dakota, Oklahoma); SOUTH (Arkansas, Florida, Georgia, Louisiana, Mississippi, Alabama, Tennessee, South Carolina, Kentucky); WEST (California, Washington, Oregon, Idaho, Montana, Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada, Alaska, Hawaii); PLAINS (Nebraska, Kansas, Texas, North Dakota, South Dakota, Oklahoma); 

    Figure 1. Ratios of Agricultural Wage Per Worker to National (All Industries) and Sectoral (Goods Industries) Wage Rates Per Worker

    Source:  Bureau of Labor Statistics (https://data.bls.gov/cew/apps/data_views/data_views.htm#tab=Tables)

    Escalante, Cesar L., and Shree Ram Acharya. The South as the Nation’s Primary Regional Employer of H-2A Labor. Southern Ag Today 3(25.3). June 21, 2023. Permalink

  • Uptick in Livestock Risk Protection for Fed Cattle

    Uptick in Livestock Risk Protection for Fed Cattle

    In our recent  Southern Ag Today article, Uptick in Livestock for Feeder Cattle, we showed that Livestock Risk Protection (LRP) purchased for feeder cattle has increased starting in 2021. LRP, an insurance policy that cattle producers can purchase daily to insure a minimum price level for a certain period, is also available for fed cattle (cattle greater than 1,000 pounds). One of the reasons why LRP was developed was to provide producers who do not sell 50,000 pounds of cattle at one time, which is a futures and option contract increment, an opportunity to hedge cattle. Fed cattle, however, are typically grouped and sold in larger loads, which better suits them to use futures and options to hedge cattle. The 2019 and 2020 increase in the premium subsidy rate for LRP did lower the cost of LRP to producers (Boyer and Griffith 2023a,2023b) and did appear to influence producers to purchase more fed cattle LRP contracts. In 2021 and 2022, the number of head and contracts sold has increased nearly four times (as opposed to the tripling in feeder cattle policies). Thus far in 2023, there has been a record number of LRP contracts sold and head insured. Similar to the feeder cattle contracts, the number of fed cattle insured with LRP is still relatively small compared to the number of eligible cattle. However, this policy tool seems to be growing in use and with increasing fed cattle prices, it will be interesting to see how many policies are purchased through the rest of the year.  

    References

    Boyer, C.N., and A.P. Griffith. 2023a. “Subsidy Rate Changes on Livestock Risk Protection for Feeder Cattle” Journal of Agricultural and Resource Economics 48(1):31-45. (Link)

    Boyer, C.N., and A.P. Griffith. 2023b. “Increasing Livestock Risk Protection Subsidies Impact on Producer Premiums” Agricultural Finance Review 83(2):201-210. (Link)

    Boyer, Chris, Charley Martinez, Eunchun Park, Andrew P. Griffith, and Karen L. DeLong. “Uptick in Livestock Risk Protection for Fed Cattle.” Southern Ag Today 3(25.2). June 20, 2023. Permalink

  • The Relationship Between Wheat Stocks Held by Exporting Countries, Global Imports, and the U.S. Marketing Year Average Price  

    The Relationship Between Wheat Stocks Held by Exporting Countries, Global Imports, and the U.S. Marketing Year Average Price  

    There is no statistical relationship between the wheat stocks-to-use ratio and the U.S. Marketing Year Average (MYA) price. From 2000 to 2022, the linear relationships between U.S. and world stocks-to-use and price indicated an R-squared of 0.0138 and 0.0024, respectively (Figure 1).  R-squared (R2) is a measure that represents the proportion of the variance for a dependent variable (MYA price) that’s explained by an independent variable (stocks-to-use) in a regression model. Simply stated, U.S. stocks-to-use explains 1.38% of the variance in the MYA wheat price. For comparison, a simple linear regression for U.S. corn price and stocks-to-use ratio results in an R2 of 0.56. Wheat provides many unique challenges for projecting prices. Different classes exist – hard red spring, hard red winter, soft red winter, hard white, soft white, and durum – that influence the USDA wheat MYA price. Additionally, wheat is one of the most geographically dispersed crops, with production in both hemispheres and six continents. U.S. wheat production is a small percentage of global production. From 2000 to 2022 the U.S. has accounted for 5.7% (2022) to 11.5% (2003) of global production. Thus, international forces have a greater impact on U.S. wheat prices compared to corn and soybeans. 

    However, there is a statistical relationship between stocks held by major exporters (Argentina, Australia, Canada, European Union, Russia, Ukraine, and U.S.), world wheat imports, and the U.S. MYA wheat price (Figure 2). This relationship has an R2 of 0.4198 – meaning stocks held by major exporters divided by world imports explains less than half the variance in MYA wheat prices. For the 2022/23 marketing year, the seven major exporters held ending stocks of 60.5 million metric tons (MMT) and total world imports were estimated at 207.2 MMT, a ratio of 0.29:1. The 2022/23 USDA estimated MYA price is $8.85/bu. Using the linear relationship between this ratio and MYA price would have predicted a price of $6.67/bu for the 2022/23 marketing year, or $2.17/bu under the USDA’s May estimate. However, using the linear relationship, this is the largest under estimation of price from 2000 to 2022, and the average miss of MYA price compared to the estimated relationship trendline over this time period is +/- $1.13/bu.  This larger-than-average discrepancy between the predicted price and MYA price can partially be explained by Russia’s invasion of Ukraine which created chaos in global wheat markets in 2022 and skewed prices due to concerns over production and access to supplies in both countries. 

    What does this relationship mean for the wheat MYA price for the 2023/24 marketing year? Currently, USDA projects ending stocks for the seven major wheat exporters at 52.8 MMT and world wheat imports at 207.5 MMT, a ratio of 0.255:1. Using the simple linear relationship in Figure 2, this would predict a U.S. MYA price of $7.06/bu.  However, using plus and minus the average miss, we can obtain a price range of $5.93/bu to $8.19/bu. This projection seems reasonable given the current futures market prices for wheat. However, it should be restated that this relationship has limitations (R2 of 0.4198), meaning that other factors strongly influence wheat MYA prices. An escalation of the Ukraine-Russia conflict or other geopolitical / global events could have a dramatic influence on U.S. MYA wheat prices in 2023/24. 

    Figure 1. The Relationship between U.S. Wheat Marketing Year Average Price and U.S. and World Stocks-to-Use Ratio, 2000/01 to 2022/23

    Figure 2. U.S. Marketing Year Average Price and Stocks held by Major Exporters divided by World Imports, 2000/01 to 2022/23 

    References:

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

    U.S. Department of Agriculture National Agricultural Statistics Service (USDA – NASS). Quick Stats Accessed at: https://www.nass.usda.gov/Quick_Stats/

  • Moon v. Schultz – Damages in Tree Fall Cases

    Moon v. Schultz – Damages in Tree Fall Cases

    What happens when a property owner removes a fence along its property line and allegedly damages the trees of the other property owner as well as their crops? The Minnesota Court of Appeals case of Moon v. Schultz illustrates how a court can properly examine the issue of damages in such cases.[i]

    In Moon v. Schultz, a property owner in Chippewa County, Minnesota replaced a fence along a neighbor’s property line.[ii] However, during the replacement of the fence, the property owner entered upon the other party’s property and cut down several elm trees.[iii] In addition, trees fell onto the neighbor’s adjacent soybean field, allegedly damaging the growing crops.[iv]

    During a bench trial, the trial court ruled in favor of the neighbor who lost several elm trees and allegedly suffered crop damage.[v] The neighbor testified during the trial that he felt that the trees had special value but did not testify as to any loss of property value as a result of the loss of the trees.[vi] In addition, an owner of a nursery and landscaping business testified on behalf of the neighbor that the loss of 19 elm trees could be replaced for a cost between $9,500 and $12,500.[vii] The property owner moved to disqualify the expert, but the trial court denied the motion.[viii]

    On the crop loss claim, the neighbor testified that two acres of soybean crops were damaged and utilizing yields and price information from his crop insurance, calculated damages in the amount of $1,182.04.[ix]

    The trial court ruled in favor of the neighbor and awarded $9,500 for the fallen elm trees, $1,182.04 for the soybean crop loss, and found treble damages[x] applicable under Minnesota law (for a total amount of $32,046.12).[xi]The property owner appealed.[xii]

    The Minnesota Court of Appeals reversed the trial court, finding the district court should not have awarded any damages in the case.[xiii] On the tree loss claim, the Court noted[xiv] that prior caselaw in Minnesota holds that the measure of damages for loss of trees is generally the difference in the value of land before and after the trees are removed.[xv] There is an exception to this rule for cases in which the trees have substantial value for shade or other ornamental purposes, have aesthetic value, or are used as a sound barrier or traffic screen.[xvi] The Minnesota Court of Appeals held that no evidence was presented by the neighbor that the trees had substantial value for shade or ornamental purposes, had aesthetic value, or were utilized as a sound barrier or traffic screen.[xvii] The Court also noted testimony in the case that the elm trees were “bushy,” “weed-like” trees, and if anything, may possibly have a “negative” value.[xviii] Thus, the proper measure of damages is loss of property value, and since the neighbor did not allege any loss in property value, the neighbor did not incur any recoverable damages for the loss of the elm trees.[xix]

    The Minnesota Court of Appeals also held the trial court’s awarding of crop damages and treble damages to be in error.[xx] The Court mentioned that the proper “measure of damages for destruction or injury to growing crops is the value of the crops as they were standing at the time and place of their destruction.”[xxi] In rejecting the neighbor’s crop damage claim, the Court of Appeals found that the trial court did not engage in any legal analysis to arrive at its calculation of damages.[xxii]

    Overall, Moon v. Schultz exemplifies the importance of a plaintiff in establishing proper damages in a fallen tree case.

    [i] See Moon v. Schultz, No. A22-0903, 2023 WL 193682 (Minn. Ct. App. Jan. 17, 2023).

    [ii] Id. at *1.

    [iii] Id.

    [iv] Id.

    [v] Id.

    [vi] Id.

    [vii] Id.

    [viii] Id.

    [ix] Id.

    [x] “Treble damages” are damages awarded by a court when that court awards triple damages. The statute that was applied by the trial court was the following: “Whoever shall carry away, use or destroy wood, timber, lumber, hay, grass, or other personal property of another person without lawful authority, shall be liable to the owner thereof for treble the amount of damages assessed therefor in an action to recover such damages. If upon trial, the defendant proves having probable cause to believe that such property was the defendant’s own, or was owned by the person for whom the defendant acted, judgment shall be given for the actual damages only, and for costs.” See Minn. Stat. Ann. § 548.05 (2023).

    [xi]  See Moon v. Schultz, 2003 WL 193682 at *2.

    [xii] Id.

    [xiii] Id. at *4.

    [xiv] Id. at *2.

    [xv] See Baillon v. Carl Bolander & Sons Co., 235 N.W.2d 613, 614 (Minn. 1975). 

    [xvi] See Moon v. Schultz, 2003 WL 193682 at *2.

    [xvii] Id. 

    [xviii] Id. at *3.

    [xix] Id. 

    [xx] Id. at *3-4.

    [xxi] Id. at *3.

    [xxii] Id.

    Photo by Mike Bird: https://www.pexels.com/photo/uprooted-tree-cut-in-pieces-5351109/

  • U.S. has Experienced Consistent Ag Export Growth to Mexico Under NAFTA and USMCA 

    U.S. has Experienced Consistent Ag Export Growth to Mexico Under NAFTA and USMCA 

    The annual growth in U.S. ag exports to Mexico has mostly been positive since the two countries opened their markets. In 2022, the United States exported 38.9 million metric tons (MMT) of agricultural products to Mexico worth $28.5 billion. Since NAFTA took effect in 1994, exports of U.S. ag products to Mexico have grown from 13.4 MMT and $4.67 billion. Over the 29 years of free trade between the two countries, starting with NAFTA and now USMCA, there was an increase in volume of U.S. ag exports for all but ten years. Note the trade value changed very little in the middle and late 2010’s despite volume growing nearly every year. It is assumed that the reason value did not match the growth in volume these years is because of a decrease in per unit export value of multiple major commodity groups. In only eight of the past twenty-nine years, we have not seen a positive change in the value of U.S. ag exports. 

    Value has grown substantially during this time, while the volume of trade has grown at a less dramatic rate as seen in Chart 1: U.S. Ag Exports to Mexico, 1989-2023. Higher increases in commodity prices are responsible for the different rates of growth. USMCA started in 2020 which coincided with a sudden rise in the value of ag exports; however, it is likely that the Covid-19 pandemic and high inflation caused the steep growth. 

    Texas agricultural exports to Mexico have contributed to the growth in U.S. ag exports to Mexico as seen in Chart 2: U.S. Ag Exports to Mexico, 1989-2023. During 2022, Texas accounted for 19 percent ($5.55 billion) of total U.S. ag exports to Mexico. The total export value of ag products from Texas to Mexico has increased 13 of the past 20 years. The United States has increased 15 of the past 20 years.

    Young, Landyn. “U.S. has Experienced Consistent Ag Export Growth to Mexico Under NAFTA and USMCA.” Southern Ag Today 3(24.4). June 15, 2023. Permalink