As reported this week by Jim Wiesemeyer with Pro Farmer, there is renewed interest by some in Washington, D.C., in tying commodity program payments to planted acres rather than base acres. Since the mid-1980s, commodity programs in the U.S. have used base acres of each program crop on a farm to determine a producers’ payment for each crop, with two notable exceptions: (1) the period covered by the 1996 Farm Bill (1996 to 2001) and (2) the Average Crop Revenue Election (ACRE) program in the 2008 Farm Bill which paid on planted acres (not to exceed total base acres on the farm).
The primary argument for using base acres rather than planted acres centers around the desire to not have potential commodity program benefits unduly influence program commodity plantings. On the other hand, using planted acres as the basis for payments would allow producers to more effectively manage their risk, as potential payments would be based on the crop they are actually planting.
So, why is paying on planted acres a topic of discussion in Washington, D.C.? There are producers that plant more acres than they have base all over the United States. These producers and their associations are lobbying Congress to allow them to add base either through a forced base update or alternatively, by basing payments on planted acres, which effectively is the same thing. Either way you look at it, there will be a cost as additional acres are added. Looking at 2022 FSA enrolled base acres and 2022 planted and prevented planted acres reported to FSA shows a difference of about 9 million acres (Table 1). Most of the commodities in the table would have lower bases in the future while soybeans and seed cotton would add acres.
The House version of the 2014 Farm Bill included what some would call a compromise option (similar to payment acres in ACRE in the 2008 Farm Bill) where commodity payments would have been paid on planted acres not to exceed their current base acres. While it was not included in the final bill, this would seem to solve some of the risk management concerns but would still leave producers with more planted acres than base wanting more.
Table 1. FSA Total Enrolled Base Acres and Planted and Prevented Planted Acres Reported to FSA in 2022.
Source: USDA, https://www.fsa.usda.gov/programs-and-services/arcplc_program/arcplc-program-data/index and https://www.fsa.usda.gov/news-room/efoia/electronic-reading-room/frequently-requested-information/crop-acreage-data/index
Agriculture is considered a stressful profession, not just because of the complexity of decisions that must be made to successfully run a farm or ranch operation but primarily because there is uncertainty. Whenever uncertainty is involved in the farm business, risks must be taken.
There are five main areas of risk in agriculture: production, marketing, financial, legal, and human. The ability to identify risks in agriculture is the first step in managing those risks.
Production risk is first because it involves the primary livelihood of the agricultural operation. Production risk impacts the ability to produce a crop, raise livestock and poultry, or provide a service. Production risk occurs because of the uncertainty of weather events, pest (weed, disease, or insect) problems, and the availability of inputs – from fertilizers to seed to production technologies.
The second type of risk is marketing. Marketing risk brings the price component into play. Thinking back to when we took basic economics, we learned farmers were price takers who produce similar products. For example, a bale of cotton on your farm is not much different than a bale of cotton in the next county or neighboring state. Furthermore, the prices of agricultural products and inputs are impacted by things happening nearby and globally. Two recent examples include 1) the Covid pandemic, which caused prices to drop for many inputs and commodities, and 2) the war in Ukraine drove prices for some commodities like wheat up, as well as increased in the cost of fertilizer and fuel. These events were out of the producers’ control and difficult to predict.
The third type of risk is financial. Financial risk involves the ability of the operation to cash flow and gain access to capital to maintain and expand the operation. In today’s environment, financial risk is impacted by inflation and interest rates. Inflation makes inputs “more expensive” to buy, and consumers are unable to purchase as much with their dollar. In addition, the Federal Reserve has increased interest rates to try to get inflation in check. Higher interest rates result in a higher cost to borrow funds. Farmers are seeing higher interest expenses, even without expanding their operations.
The next area of risk is legal. Legal risk includes the knowledge of, and compliance with, regulations and laws related to the production and marketing of agricultural products and services. A recent example has been with the ability to apply dicamba herbicides which are regulated by the United States Environmental Protection Agency. Although laws vary by state, any certified applicator who plans to apply dicamba herbicides must be trained specifically on their application to ensure label compliance and stewardship. This training must be completed annually and prior to the use of any dicamba herbicides. Legal risk also encompasses the other two areas of risk: financial (requirements to follow the terms of debt) and human (labor rules and regulations). Those who do not comply with laws and regulations will be subject to liability. Liability occurs when a person or entity is held legally responsible for any potential damage or losses that result from the non-compliance.
The final area of risk is human. Although listed as the final area of risk, the figure shows it as the topmost circle in the stack of risk circles – meaning it is one of the most important areas of risk. Human risk involves the people of the agricultural operation, from management to employees to future heirs. Human risk includes the health and well-being of the people who maintain the day-to-day operations. It should also include plans to transition the operation if a change in management were to occur.
For more information on risk in agriculture and how to manage it, refer to the handbook linked in the resources, titled: “Introduction to Risk Management. Understanding Agricultural Risks: Production, Marketing, Financial, Legal, and Human.”
Five Types of Risk in Agriculture
Figure Source: Author compiled.
Resource: Crane, L., G. Gantz, S. Isaacs, D. Jose, and R. Sharp. “Introduction to Risk Management. Understanding Agricultural Risks: Production, Marketing, Financial, Legal, and Human.” Extension Risk Management Education Programs and USDA, Risk Management Agency. Handbook Second Edition, 2013. http://extensionrme.org/Pubs/Introduction-to-Risk-Management-ENGLISH.pdf
For the last three years, Clemson Cooperative Extension has been heavily involved in researching local meat supply and demand. Extension associates interviewed and surveyed livestock producers, processing facilities, and local meat consumers. As a result of this research, South Carolina is the most recent of the southern states[1] to invest in expanding local meat processing.
Assuming these investments solve local processing bottlenecks, the consumer demand study results are now the most important piece of the puzzle: will consumers purchase additional amounts of locally raised meat? The South Carolina consumer study seeks to provide direct-to-consumer livestock producers with additional marketing information for locally raised beef, chicken, pork, turkey, lamb, and goat. A summary of the results:
Consumers of locally raised meats
Consumers tend to be younger (<45 years of age), reside in larger households, have higher educational attainment and household income, and are long-term residents of South Carolina.
Local meat consumers are generally willing to pay up to a 24% premium for locally raised meats to eat at home, and this holds true for all meats studied.
Beef is the most popular local meat consumed, which is different from overall US meat consumption, where chicken is the most consumed meat.
The most desirable attributes of local meats are hormone-free, all-natural, no antibiotics, and grass-fed. Knowing the farmer was the lowest ranked, or least important, attribute.
Marketing challenges and opportunities for locally raised meats
Stated barriers to purchasing (or purchasing more) locally raised meats are product unavailability, high prices, food safety concerns, convenience, and ease of preparation.
Consumer-preferred buying locations (ranked) were grocery stores, directly from farms, farmers markets, butcher shops, and online orders.
Most consumers are unwilling to drive more than 20 miles to purchase locally raised meat.
Due to the first three bullets in this section, availability becomes a larger issue: locally raised meats are not typically offered in grocery stores, consumers are unwilling to drive to remote farms, farmers markets have limited days and times of operation, and there are relatively few specialty butcher shops.
Ease of preparation is important, and most locally raised meats are sold frozen.
Consumers are accustomed to seeing meats on display before purchasing, while many direct-to-consumer livestock producers at farm markets keep their meats in closed coolers.
The full study, with additional findings and research, is published in an open-access journal at this link https://doi.org/10.5304/jafscd.2023.122.009. Also, please feel free to contact the author with any questions.
[1] According to the Niche Meat Processing Assistance Network (www.nichemeatprocessing.org), Arkansas, Kansas, Kentucky, Missouri, North Carolina, and Oklahoma have also invested in local meat processing facilities.
In 2022, the U.S. had a sizable decrease in peanut acreage, as farmers shifted cropland to more cotton acres across the region. This was likely due to price pressure from other crops around planting time in 2022, most notably cotton. However, with the average peanut price received by farmers projected to reach a ten-year high for the 2022/2023 marketing year – at an estimated $540 per ton – what is peanut acreage expected to look like in 2023?
The USDA projects planted peanut acres to increase by 7%, reaching 1.547 million acres nationwide in 2023 (figure 1).[i] This increase in projected peanut acreage comes as prices for other crops have dropped. As of April 20th, December 2023 cotton futures closed at 80.58 cents per lb, which is 40.44 cents per lb less than what December 2022 cotton futures were traded at on the same date last year. The rise in peanut acreage is driven by forecasted increases in two of the three peanut-producing regions – the Southeast and Virginia-Carolina. None of the peanut producing states in these two regions are expected to see declines in planted acreage compared to last year. Georgia is projected to lead the way with 740 thousand planted peanut acres, which would mark an 8% increase from 2022. Conversely, the three peanut-producing states in the Southwest region are all expected to decrease acres planted to the crop in 2023, which has possibly come at the expense of their large increases in wheat acreage this year.
Figure 1. 2023 U.S. Intended Peanut Planted Acres Compared to Previous Year, by State
Data Source: USDA-NASS. Prospective Plantings. March 31st, 2023. Note: Peanut acreage data not collected for Louisiana and Tennessee.
Now, how accurate have peanut planted acreage forecasts been in recent years? Over the past decade, the error in peanut projections has been relatively small. The final peanut planted acreage estimate has exceeded the intended planted acres forecast in four out of the last nine years, by an average of 2.2%. For example, peanut planted acreage ended up being 7.7% lower than was predicted in 2022, as shown in figure 2. The accuracy of the intended peanut plantings is similar to those for rice and cotton – two other predominantly Southern crops – which are typically less accurately predicted than nationwide crops, such as corn and soybeans.[i]
Figure 2. U.S. Peanut Intended Planted Acres vs. Final Estimates, 2019-2023
Data Source: USDA-NASS Prospective Plantings. March 31st, 2023.
With peanut prices elevated for last year’s crop, it remains uncertain how increased planted acreage would affect peanut markets moving forward. Last year’s decrease in peanut acreage led to an almost 400-thousand ton drop in peanut production.[i] While peanut acreage is expected to be above last year’s level, the forecasted mark would fall short of what was planted in 2020 and 2021. Coupled with the lower expected peanut consumption this current marketing year, a bumper crop could see peanut stocks soar and prices decline during the 2023/2024 marketing year, whereas a more moderate crop could see stocks remain at a similar level to where they are currently. In all, combining the projected higher peanut production with the lower competition from other crops, it is likely that peanut contract prices for this year’s crop will decrease.
[i] Sawadgo, Wendiam. “2023 Peanut Market Outlook.” Southern Ag Today 3(8.1). February 20, 2023. Permalink
[i] Biram, Hunter, and William E. Maples. “Key Takeaways and Reliability of the 2023 Prospective Plantings Report.” Southern Ag Today 3(14.1). April 1, 2023. Permalink
When speaking to a newly elected director of a cooperative about the challenges they face, I often hear about the typical stresses of responsibility, understanding the cooperative’s financial statements, and, occasionally, comments about board meetings. Sometimes directors view board meetings as an unpleasant task that lasts longer than necessary, lacks focus, full of information without discussion, and generally, does not seem to accomplish anything meaningful. “Why,” they ask, “did I need to interrupt my busy schedule for something that could just as easily been handled with an email?” If this sounds like your experience, I suggest that you are missing out on perhaps the greatest tool your cooperative has for achieving competitive success. Here are four tips to get your cooperative’s board meetings back on track.
Know your duty and stick to it.
Build connections with other directors.
Take the agenda seriously.
Speak with one voice.
Know your duty and stick to it.
The responsibilities of a director are often summarized with the phrase, “fiduciary duties”. These duties refer to the trust cooperative members place in their directors to act in good faith on their behalf in an ethical, legal, and prudent manner to the benefit of the cooperative. Your duties as a director are to provide strategic direction, financial oversight, and to set organizational policy. The board is responsible for the hiring and compensation of only one employee, namely the general manager. Any board discussions that address specific managerial decisions, like hiring, raises, inventory, or pricing are in danger of taking the meeting off topic, distracting the board from their true responsibility, and needlessly spending time on decisions that should be left to management.
Build connections among directors.
A good board meeting thrives on properly focused discussion. However, it is common for some directors to say nothing at all during meetings. This might be due to their personality, a lack of confidence, a lack of familiarity in the topic, or even the participation of another outspoken and highly opinionated director. In any case, silence is not in the best interest of the board. One key to promoting discussion is to create connections among the directors. The psychological or emotional risk from speaking in a group setting is lessened as personal relationships and trust are strengthened. Connected directors not only ask more questions and make more comments, but they are also better listeners. Perhaps the best suggestion for building connections among your board members is to participate in a board retreat or strategic planning session.
Take your agenda seriously.
One thing that is a frustration to new directors is that meetings don’t start or end on time. To help directors be fully engaged during meetings, you must respect their time. If you find that friendly conversation (which builds connections!) is delaying the start of your meeting, try putting social time on the agenda prior to the start of the meeting. Then, start on time. Some other things to consider – are directors invited to add to the agenda? Do directors see the agenda in the days prior to the meeting? Are times listed on your agenda? If your meeting is going long, do you suggest tabling discussions for the next time, or with group consensus, extend the meeting? The agenda is the best tool for keeping the board on schedule and focused. A proper agenda is set by the board with the help of management.
Speak with one voice.
Some boards that I work with proudly claim they have complete unity on all decisions. These same board members will also freely admit that they have plenty of disagreements during board meetings. When handled with respect and conscious conduct, disagreements and debates are a healthy part of the board decision process. Not all items require a unanimous vote, but they do require unity once a decision has been properly made. When board members leave the meeting and need to converse with members or the public, references should be about what “the board” decided. Confidentiality is required for board unity. Directors who share board conversations outside the board room or openly criticize board decisions undermine the trust of their fellow board members and destroy open conversation during board meetings.
What has been described here is a board culture that is conducive to conversation, respect, inclusion, trust, and overall better decision making. Meetings in such a culture will be more productive and leave directors feeling energized, not deflated. Your board chair plays a critical role in leading the board in these efforts.
