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  • Crop Returns Comparison

    Crop Returns Comparison

    Agriculture has experienced a significant amount of change in both crop prices and input prices in the last couple of months. These changes can make it difficult for producers to determine which crop is going to be the most profitable for their situation. When deciding between two different crops a producer should examine what the costs of production for those two systems would be, along with their respective yield potential and crop price. Yield can vary from year to year so evaluating over a range of yield outcomes can give a better idea of how optimal crop choice could change as well.

    Figure 1 is an example output from the Net Returns Comparison Calculator developed at Mississippi State, showing the difference in net returns between an irrigated corn system and an irrigated soybean system across a range of yield outcomes. Returns were compared using costs of production from the Mississippi State Enterprise Budgets and prices of $6.00/bu for corn and $14.68/bu for soybeans. Corn is shown to have higher returns than soybeans at most of the yields examined. Soybeans have higher returns than corn when soybean yields are relatively high. In this situation the producer can see that corn will generally be the more profitable option, unless they have a field that historically produces high yielding soybeans and low yielding corn. These results will change as prices and input costs change. For example, a fertilizer price increase would negatively impact corn more than soybeans, making soybeans more competitive.

    The results shown in Figure 1 are not going to be the same for every producer. Every producer has their own unique costs and yield potential. It is important for them to evaluate their crop choices given their own situation. The Excel tool used to create Figure 1 can be found at https://www.agecon.msstate.edu/whatwedo/budgets.php (select and download the Net Returns Comparison Calculator). Users can compare net returns between various crop production practices for corn, cotton, rice, and soybeans. This tool can even be used for enterprises outside of Mississippi as users can customize the budgets to reflect their own farm’s costs, yields, and prices received. The more information collected on costs of production the more accurate these comparisons will be and ultimately the more informed decision on which crop is going to be the most profitable. 

    Figure 1. Comparison of Net Returns between a Corn and Soybean Production System with MSU Net Returns Comparison Tool

    Difference in Returns Between Corn and Soybeans $/ac

    Corn Yields bu/ac

    190200210220230240250
    45$       246$       303$       361$       419$       476$       534$       592
    50$       173$       231$       289$       347$       404$       462$       520
    55$       101$       159$       217$       275$       332$       390$       448
    60$         29$         87$       145$       202$       260$       318$       376
    65$        (43)$         15$         73$       130$       188$       246$       304
    70$     (115)$        (57)$           1$         58$       116$       174$       231
    75$     (187)$     (129)$        (71)$        (14)$         44$       102$       159

    Note: Any value in white, corn has higher returns than soybeans. Any value in red, soybeans has higher returns than corn

    Mills, Brian E. . “Crop Returns Comparison“. Southern Ag Today 2(13.3). March 23, 2022. Permalink

  • Another Big Placement Month

    Another Big Placement Month

    It’s time for another USDA Cattle on Feed Report to be released on Friday, March 25th.  The most interesting number in the report is going to be placements, e.g. the number of cattle placed on feed, in a feedlot with 1,000 head or more.  Market analysts expect placements to be well above a year ago, almost 10 percent more in some estimates.  Both USDA’s feeder cattle receipts data and the CME feeder cattle index data indicate more feeder cattle sales this February than last.  While feeder cattle imports from Mexico were down about 23,000 head during the month, imports from Canada were up about 29,000 head.  It’s also worth noting that placements in February, 2021 were relatively small.

    Certainly, expanding drought is likely leading to increased placements.  Some profitable recent closeouts also help boost placements.  The war driven boost in corn and wheat prices occurred after the period for this report so placements were likely not driven by the events in Ukraine. 

    Marketings, as related to fed cattle slaughter, were quite good during February.  They are expected to be up about 4.5 percent over last year.  Combining marketings and placements indicate that the number of cattle on feed will be a bit more than 1 percent larger than last year.  That will be close to the record large number of cattle on feed that was set in February. 

    Anderson, David. “Another Big Placement Month“. Southern Ag Today 2(13.2). March 22, 2022. Permalink

  • Peanut Production Up in 2021 Despite Lower Acreage

    Peanut Production Up in 2021 Despite Lower Acreage

    Peanut production was up 4% in the United States in 2021, compared to 2020, as shown in Table 1. This was driven by strong yields nationwide of 4,135 lbs. per acre, just off the 2012 record of 4,211 lbs. per acre. Georgia – the largest peanut producing state – saw a 2% increase in production. This pushed the U.S. average up, as Georgia produces about half of the nation’s peanuts. The increased production comes despite a 5% decrease in peanut planted acreage nationwide. All three main peanut production regions saw declines in acreage, with the Southeast seeing a 5% decline driven by Georgia’s 7% dip.

    Table 1. U.S. Peanut Production (thousand tons)

    State201620172018201920202021% Change
    Alabama      310      352      286      261      319311-2%
    Arkansas         55         77         56         86         91         88-4%
    Florida  277      319      282      295      281296      5%
    Georgia   1,377   1,786   1,438   1,376   1,640   1,6692%
    Mississippi         76         86         47         38         48         36-26%
    Southeast  2,095  2,620  2,109  2,056  2,379  2,3991%
    New Mexico         11         13           8           8           7         1499%
    Oklahoma         22         40         23         28         29         3312%
    Texas      280      349      232      244      245      29219%
    Southwest      313     402     263     280     282     33920%
    North Carolina      175      240      190      224      212      24817%
    South Carolina      170      236      136      118      139      139-1%
    Virginia         38         60         50         56         55         7127%
    Virginia-Carolina     383     536     376     398     407     45712%
    US Total   2,791  3,558  2,748  2,733  3,067  3,1954%
    Source: USDA National Agricultural Statistical Service.

    The strong production, however, has been combined with decreased use that is expected to increase peanut stocks. Peanut use is expected to decline by 4% this marketing year, primarily due to a 5% forecasted decrease in exports. However, food disappearance is expected to increase by 1% from 2020. Increases in consumption of peanut butter (5%), peanut candy (4%), and peanut snacks (3%) drove the domestic peanut food demand increase during the 2020-2021 marketing year, as shown in Figure 1. The peanut butter consumption increase follows the similar-sized increases observed the previous year, as demand has increased throughout the COVID-19 pandemic. Peanut stocks are expected to increase by 5% to 1.1 million tons, which is still a manageable level for the industry.

      Figure 1. U.S. Peanut Food Consumption by Product and Marketing Year

    Source: USDA National Agricultural Statistical Service.

    Sawadgo, Wendiam. “Peanut Production Up in 2021 Despite Lower Acreage“. Southern Ag Today 2(13.1). March 21, 2022. Permalink

  • Digital Divide in Rural Communities

    Digital Divide in Rural Communities

    Broadband access has increasingly become a basic utility, but it is still out of reach for many rural communities. While the Federal Communications Commission (FCC) claims that broadband internet is not available to 24.7 million people in the United States, data from Microsoft indicated that 162.8 million (almost half the population of the United States) do not use internet at broadband speeds. Digital Divide Index provides an overview of the disparity across the United States. COVID-19 pandemic further emphasized the need for broadband as schools and businesses shifted to virtual mode. The digital divide can be addressed by:

    1. Reducing Municipal broadband restrictions: As of 2021, municipal broadband was restricted in eighteen states across the United States. Some states have allowed electric co-operatives to provide broadband in their service territories.
    2. Providing Incentives for Internet Service Providers: Population density in rural areas is much lower than urban areas, thereby increasing the relative cost of installing fiber-optic cable. Providing incentives for internet service providers would help reduce the costs of providing internet to rural areas.
    3. Reducing the Burden on Right-of-way and Easements: Obtaining permissions for right-of-way and easements to lay fiber-optic cable are often difficult and slow. A public-private partnership that can reduce the costs and time delays in obtaining right-of-way and easement will expedite the process.
    4. Improving Adoption and affordability: Lower-income residents experience a higher economic burden due to lack of devices and affordable broadband subscription plans. Programs such as Emergency Broadband Benefit and the new Affordable Connectivity Program can help improve adoption of broadband. Further, demand-side management programs if offered through internet service providers can improve access to broadband.
    5. Supporting Broadband Programs: Library mobile hotspot lending programs, downtown wi-fi programs have been widely successful A public-private partnership promoting these programs will improve education, business development, healthcare, tourism and recreation opportunities across communities.

    Upendram, Sreedhar. “Digital Divide in Rural Communities“. Southern Ag Today 2(12.5). March 18, 2022. Permalink

  • A 2022 Review of the Farm Bill: The Role of USDA Programs in Addressing Climate Change

    A 2022 Review of the Farm Bill: The Role of USDA Programs in Addressing Climate Change

    On March 16, I testified before the House Agriculture Committee at a hearing titled

    “A 2022 Review of the Farm Bill:  The Role of USDA Programs in Addressing Climate Change”.  Working closely with commercial producers has provided the Agricultural and Food Policy Center with a unique perspective on agricultural policy.  While we normally provide the results of policy analyses at committee hearings, on this occasion I was carrying the message from the nearly 675 producers we work with across the United States.

             In preparation for the testimony we emailed our representative farm members the following points that I planned on making and asked them to let us know if they agreed or disagreed with each of the 5 points.  In two days, we received 105 responses and several more after I had submitted my testimony.

    1. Having a strong safety net from Title I programs (ARC/PLC and the marketing loan) and Title XI (crop insurance) remains critical even with new carbon market opportunities. They unanimously agreed with this statement in spite of the fact they expect very little benefit from Title I programs this year. 
    2. USDA conservation programs (CRP, CSP and EQIP) that have incentivized a broad array of conservation practices have worked well in the past. They have just been under funded.  Producers much prefer this type of program to the current carbon program situation where the significant record keeping requirements, additionality requirements, uncertain soil tests, and very low financial benefits have the majority of our representative farm panel members not interested in participating. 
    3. Congress should strongly consider providing financial incentives to early adopters who are not eligible to participate in current carbon programs due to the additionality requirement. If it is good to sequester carbon it should also be good to keep carbon sequestered.  Many of the producers who responded to my request indicated that they are disgusted with a system that only rewards late adopters
    4. All producers regardless of size, region, or crops planted should have opportunities in any new USDA climate programs. This statement appears fairly benign but let me assure you it is not.  If all producers in the U.S. do not have some USDA NRCS identified practice they can undertake in the name of sequestering carbon then there will be regional winners and losers, and by crop, and by size as carbon programs are created.
    5. Congress should consider providing USDA the authority to safeguard producers from being taken advantage of in current carbon markets dealing with private entities. For example, signing a carbon contract with at least one current company would require a producer to forgo commodity and conservation program benefits on that land.  This is really the only point where many producers disagreed with me.  Several producers would rather not have the government get involved in the carbon market at all and asked me to point out that while they see a problem – it could be made worse.

    Link to Full Testimony

    Outaw, Joe. “A 2022 Review of the Farm Bill: The Role of USDA Programs in Addressing Climate Change“. Southern Ag Today 2(12.4). March 17, 2022. Permalink