Southern Ag Today

Blog

  • Expanded U.S.-Mexico Trade in Avocados Benefits U.S. Consumers

    Expanded U.S.-Mexico Trade in Avocados Benefits U.S. Consumers

    Approximately 90% of the avocados consumed in the U.S. are imported from Mexico. However, before last year, the U.S. only allowed the importation of avocados from one Mexican state—Michoacán—due to phytosanitary concerns about seed weevils and fruit flies. The Michoacán avocado industry is heavily controlled by the cartel, which has sometimes led to shaky trade relations with Mexico. 

    In late 2021, the U.S. Animal and Plant Health Inspection Service (APHIS) and the Association of Avocado Exporting Producers and Packers of Mexico (APEAM) reached an agreement to allow avocado imports from an additional Mexican state—Jalisco (see Figure 1). The first shipments of avocados from Jalisco entered the U.S. in August 2022. 

    This regulatory change is the focus of some of my current research with co-author Irvin Rojas at the Centro de Investigación y Docencia Económicas (CIDE) in Mexico City. We investigate the economic impacts of expanding this phytosanitary exclusion zone to include Jalisco on U.S.-Mexico avocado trade. We have also collected price information from 37 markets around Mexico to see the impacts of the policy change on local Mexican markets. 

    What did we find? 

    We find that this policy change was unequivocally beneficial from the perspective of U.S. avocado users and consumers. Authorization of avocado imports from Jalisco led to about a 10% reduction in the border price for Mexican avocados (see Figure 2), relative to what prices would have been had we continued to source only from Michoacán. The policy change also had a dramatic effect on U.S. access to Mexican avocados. The volume of avocado imports increased by almost 35% relative to a scenario in which the U.S. continued to source exclusively from Michoacán. In total, we estimate that the policy change leads to an economic welfare gain of approximately $229.5 million per year for U.S. avocado users and consumers. 

    Economic outcomes in the Mexican domestic market are slightly more nuanced. We find that—among the 37 markets studied—the policy led to a price increase for avocados sourced from Jalisco, but only for the range of avocados that were already being priced highest in the market. We did not detect a price impact for the “average” avocado sourced from Jalisco. Mexican domestic prices fell for avocados sourced from Michoacán. This result held across all ranges of avocado price tiers. 

    The trade and domestic market impacts we measure certainly change the incentive structure within (and outside) the Mexican avocado industry. Time will tell what these shifting incentives mean for cartel activity in Michoacán and Jalisco. 

    Figure 1: Location of Michoacán and Jalisco in Mexico

    Figure 2: Avocado Imports from Jalisco and U.S.-Mexico Trade Outcomes

    Schaefer, K. Aleks. “Expanded U.S.-Mexico Trade in Avocados Benefits U.S. Consumers.” Southern Ag Today 3(14.4). April 4, 2023. Permalink

  • Days Suitable for Planting Rice in Arkansas

    Days Suitable for Planting Rice in Arkansas

    Rice planting can be very stressful during the spring in Arkansas and across the rice belt, as weather greatly affects the timing of planting. Extreme weather events like excessive spring rainfall and cooler-than-average temperatures can reduce the number of days available for planting rice early. Excessive rainfall and flooding events have delayed the timing of rice planting in Arkansas in three of the last four years (2022, 2020, 2019). The years 2019 and 2020 also had the largest and second-largest numbers of rice prevented planting acres on record. Optimum planting dates in Arkansas range from March 28th to May 20th in eastern Arkansas based on the Arkansas Rice Production Handbook. Planting rice outside of these dates can significantly reduce rice yields. A late planting season can also lead to delayed harvest in the fall, where rain and dew could lead to reduced rice kernel quality and additional drying costs associated with the late harvest.

    Given these reasons, an analysis of historical weekly Crop Progress and Condition Report data from 1981 to 2022 was undertaken to better understand the number of suitable fieldwork days that have been available for planting the Arkansas rice crop by (USDA-NASS, 2023). We calculated a frequency distribution from these data to determine historical probabilities for the number of suitable fieldwork days per week available during the recommended rice planting window in Arkansas. The results are reported in the attached figure. There is a wide range in the number of days available per week, mainly reflecting extreme weather conditions during the recommended planting window. However, four days per week have the highest percentage of chance occurrence (29% likelihood), followed by five or six days per week (21% likelihood each). The likelihood of having three or fewer days per week to plant rice is 23% (approximately 1 out of four years), while the likelihood of having a whole week to plant the rice crop is 7%. 

    The average number of fieldwork days per week during the recommended planting window is 4.5 days.  Rice producers can use this information to estimate the number of days available to complete a rice planting in years when planting has been delayed. For example, if most of a producer’s rice acres have not been planted by the end of April due to weather conditions, the rice producer has roughly three weeks left to complete rice planting within the optimal planting window. Assuming the average of 4.5 suitable fieldwork days over the next three weeks, the rice producer would expect to have approximately 13.5 days available to plant the remaining rice acres. The producer then can decide whether to plant rice or soybeans on the remaining acres based on the economic feasibility. 

    References and Resources

    University of Arkansas System Division of Agriculture, Cooperative Extension Service. 2021. Arkansas Rice Production Handbook. https://www.uaex.uada.edu/farm-ranch/crops-commercial-horticulture/rice/

    USDA-NASS. 2023. United States Department of Agriculture, National Agricultural Statistics Service, Arkansas Field Office. Crop Progress & Condition Report. https://www.nass.usda.gov/Statistics_by_State/Arkansas/Publications/Crop_Progress_&_Condition/index.php

    Badarch, Bayarbat, and Brad Watkins. “Days Suitable for Planting Rice in Arkansas.” Southern Ag Today 3(14.3). April 3, 2023. Permalink

    Photo by Pixabay: https://www.pexels.com/photo/rice-grain-164504/

  • ‘Tis The Season for Lamb

    ‘Tis The Season for Lamb

    Many meat items have holiday driven or seasonal peaks in demand.  For example, turkeys at Thanksgiving, chicken wings and the Super Bowl, hamburgers in grilling season, and lamb at Spring religious holidays. Christians, Jews, and Muslims have holidays where lamb may feature and we are now in the midst of those Spring holidays.

    Live lamb prices hit record highs in 2021 and early 2022 due to relatively tight supplies and the continued strong demand due to people trying new food items during the pandemic.  As consumers returned to their normal habits following the pandemic and budgets tightened due to inflation, lamb demand contracted and prices collapsed.  More lamb supplies are also pressuring lamb prices lower this year.  Of course, imported lamb plays a large role in lamb supplies.

    Average light weight 60-70 pound lambs in San Angelo, TX (the largest lamb auction market in the U.S.) averaged $230-$240 per cwt last week compared to $340-$350 per cwt last year.  These are light weight lambs heading to a meat packer.  Prices typically peak a couple of weeks before Easter and then decline as the holiday demand passes.  Currently, It looks like prices have already hit their seasonal peak.  

    Wholesale lamb prices have declined along with live lamb prices.  Lamb leg prices were $4.10 per pound last week compared to $5.87 at this time last year.  Wholesale rack of lamb is about $2.00 pound cheaper than last year at $11.52.  Lower retail prices have begun to show up in special features at grocery stores. 

    Over the last two decades, an important shift has occurred in lamb markets.  A “non-traditional” market has emerged driven by growing ethnic markets, direct sales to consumers, and some direct to restaurant trade.  Hair sheep breeds replacing wool breeds have aided some of this change.  Hair sheep breeds are allowing producers in the South to enter this market again.  Statistics on sheep numbers for most Southern states were discontinued back in the 1970s as fewer and fewer sheep were in the South.  It appears that growing non-traditional markets are providing some opportunities for farmers in the South.  

    Anderson, David. “‘Tis the Season for Lamb.” Southern Ag Today 3(14.2). April 2, 2023. Permalink

  • Key Takeaways and Reliability of the 2023 Prospective Plantings Report

    Key Takeaways and Reliability of the 2023 Prospective Plantings Report

    On Friday, March 31st, USDA released the Prospective Plantings report. These acreage estimates are based primarily on surveys conducted by the National Agricultural Statistics Service (NASS) during the first two weeks of March. Principal crop acres planted were projected nationally at nearly 312 million acres, up roughly six million acres compared to last year. Corn acres are estimated at 92.0 million, up 3.42 million from last year. Soybean planted acres are estimated at 87.5 million, up slightly from last year by 55 thousand acres. Cotton acres are projected to be down 18% from last year, at 11.3 million acres. Peanut acreage is projected at 1.55 million acres, up 7% from last year, and rice area is projected at 2.58 million acres, up 16% from last year. All wheat acreage is projected at 49.86 million, up 9% from last year. Projections from the Prospective Planting results are comparable to recent projections released at the February USDA Outlook Forum which had March projections calling for 1 million more acres of corn, no difference in soybean acres, and 500,000 fewer acres of cotton. 

    The market expected more corn acres in 2023 compared to last year. Corn plantings were held back in 2022 due to high fertilizer prices, which have been alleviated slightly, allowing for a rebound in acreage.  Cotton was expected to struggle to retain acres this year due to struggling demand and lower prices compared to other commodities. Every state, besides Arizona, is projected to remain steady or see a decrease in cotton acreage from last year. Rice acres are seeing a rebound on higher prices, but a forecast of wet weather in the Midsouth over the next couple of weeks could lower plantings. Price reaction from the report was mixed, with harvest contract corn unchanged, soybeans 10-15 cents higher, cotton 0.40 cents lower, and rice unchanged.

    How reliable are the March prospective planting numbers? The NASS planted acreage projections across the U.S. generally hold well with low predictive error and hold especially well for corn and soybeans (Figure 1). There appears to be a larger error, albeit still quite small, when predicting planted acreage for cotton and rice. This is likely for two reasons stemming from the fact that cotton and rice are grown primarily in southern states.  The larger variance can be due to (1) the smaller sample size of farms and (2) the alternative crops available to plant in place of corn and soybeans. Most of the U.S. corn and soybean acreage is grown in the upper Midwest but tends to take up acreage across the entire U.S. which allows for a larger sample of farmers and less variance. In the south, farmers rotate corn and soybean crops with cotton, peanuts, and even some vegetables.  This makes it more difficult to project acres that may shift based on rotational needs, commodity prices, input costs, and weather.  

    One way to investigate the difficulty in projecting acreage is by choosing the subsample of southern states to see if 1) there is more variance across the changes in corn and soybean acreages given a smaller sample and 2) the pattern of acreage changes across cotton and rice still holds in the subsample. We find this to be true (Figure 2). We see more differences each year between prospective and actual planted acreages in corn and soybeans across southern states, and the general pattern of differences each year for cotton and rice still holds between the full U.S. sample and the southern subsample. This implies that we should generally not expect any significant changes in harvest price expectations driven by differences in planted acreages but rather look to future market-moving events.

    Figure 1. Comparison of Prospective vs. Actual Planted Acreage across the U.S. (2014-2023)

    Source: USDA-NASS Prospective Plantings Report (2023)
     

    Figure 2. Comparison of Prospective vs. Actual Planted Acreage across Southern[1] States (2014-2023)

    Source: USDA-NASS Prospective Plantings Report (2023)

    [1] States included are Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia.

    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

  • What is an “Ag-Gag” Law?

    What is an “Ag-Gag” Law?

    There is understandable concern within the livestock production community and processing industry that footage of production practices may be used to build public opinion against the accepted practices of their trade. One known purpose of so-called “ag gag” laws is to prevent animal rights organizations from directing an individual to infiltrate an animal agriculture operation as an employee of that operation – usually a swine, poultry, or dairy farm – to secretly record activities, which may then be used to publicize perceived animal cruelty and the like. Such laws variously impose criminal or civil penalties on farm employees who clandestinely gather imagery and may also hold accountable a third party (i.e., an animal rights organization) directing such activity. Ag gag laws have generally been challenged in federal courts as violations of free speech.

    Early iterations of ag gag laws focused squarely on agricultural protection – such as Alabama’s 2002 Farm Animal, Crop, and Research Facilities Protection Act – in an era of bioterrorism fears. More recent laws – such as those passed in Arkansas and North Carolina – do not specifically target agricultural protection. Though initially dismissed, the challenge to Arkansas’ statute was revived in 2022 by the 8th Circuit Court of Appeals and remains under review.

    North Carolina’s “ag gag” law – The Property Protection Act (N.C.G.S. 99A-1)[1]  – was recently tested before the U.S. Court of Appeals for the 4th Circuit, which limited the application of the statute but did not invalidate it. The NC Property Protection Act creates a right of action on behalf of employers against employees who, without permission, collect information by various means, including unattended recording devices, offering employers recoverable damages up to $5,000 per day, plus attorney’s fees. The Act also holds accountable those who intentionally direct, assist, compensate, or induce another person to trespass (i.e., animal rights organizations).

    The 4th Circuit Court’s opinion, North Carolina v. PETA, illustrates how language in an ag gag statute can run afoul of U.S. constitutional protections on newsgathering and free speech, and declined to apply principles of common law trespass or an employee’s “duty of loyalty” to supersede free speech protections of employees and their newsgathering efforts. Because the NC law has not been tested, the Court limited the bar of its application only to the parties in the case (i.e., PETA and others), and declined to invalidate the law, adopting a wait and see approach to how it might be used in the future.

    A more in-depth look at the Court’s opinion can be found in this article.

    Branan, Robert Andrew. “What is an “Ag-Gag” Law?” Southern Ag Today 3(13.5). March 31, 2023. Permalink

    Photo by CQF-Avocat: https://www.pexels.com/photo/scrabble-tiles-613508/