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Exports to Canada and Mexico Provide Stability to Peanut Market

In a typical year, about a quarter of the U.S. peanut crop is exported to foreign countries with the primary destinations being Canada and Mexico. As seen in Figure 1, these two closest neighbors to the U.S. have continued a steady growth of purchasing of U.S. peanut products. This has provided a stable base to the peanut export market over the years, accounting for between 33% and 48% of the overall exports during the last five years. This trend has continued in 2021, where the period of January to July has seen a 5% increase in exports to Canada and Mexico compared to the same period during 2020.

Alternatively, China has been a relatively new buyer of U.S. peanuts over the last decade. Early in the decade, China had purchased U.S. peanuts through third-country agreements, The first substantial shipments directly to China came in 2016 when low priced in-shell peanuts were purchased for oil production. After buying 30% of the U.S. exports in 2016, China pulled back in subsequent years, averaging roughly 13% of the U.S. export market from 2017-2019. While this did result in a general upward trend in overall exports (excluding 2016), a combination of trade disputes, tariffs and higher prices played a factor in the decline of exports to China after 2016. In 2020, China once again substantially increased their purchasing to a record level for that country. However, from January to July 2021, exports to China have dropped 55% compared to the same period in 2020. At the current pace, this will result in the third highest export quantity to China.

While it is promising in terms of trade with China, competition from India, higher prices, and the potential for current purchases being related to the Phase One trade agreement raise questions about the stability of peanut exports to that market.

The European Union (E.U.) is another market of concern, with export quantities included in the rest of the world data in Figure 1. Challenges with trade to the E.U. have focused on aflatoxin testing where standards target a four (4) parts per billion (ppb) aflatoxin level instead of the U.S. 15 ppb. Furthermore, with at least 10% of the shipments being subject to testing and failed shipments being returned or requiring cleaning, there are concerns about sending peanuts to that market. While peanut exports to the rest of the world are up 17% for the period of January to July 2021 compared to the same period in 2020, they are down 40% compared to the same period in 2019. All things considered for the peanut market, trade to Canada and Mexico provides the stable foundation for what appears to be a changing landscape of export markets for the industry.

Figure 1. Peanut Exports to Canada, Mexico, China, and the Rest of the World: 2010-2020
Source: Data from the USDA Foreign Agricultural Service

Rabinowitz, Adam. “Exports to Canada and Mexico Provide Stability to Peanut Market.” Southern Ag Today 1(43.1d). October 18, 2021. Permalink

October 18, 2021
Legal Outlook for 2022 Shows Several Ongoing Issues Will Be Top of Mind for Agricultural Producers

Forecasting legal developments is never an easy task, but we can often look at what is currently happening to get a sense of what to keep an eye on in 2022. Below are just a few issues discussed at the recent Southern Outlook Conference in Atlanta.

As we move into 2022, producers will need to pay attention to the ongoing Roundup/Glyphosate class action settlement process. A federal judge has now rejected Bayer’s settlement with class members for a second time. This rejection is based on how the settlement handles future class members who may not be aware of all potential medical costs until years from now. Nevertheless, Bayer continues to settle individual claims and has put an additional $4.5 billion into settling these claims.

CAFO (Concentrated Animal Feeding Operations) legal issues always seem to be on the list each year, and 2022 will likely be no exception. One such issue to watch involved an appeal out of Maryland from an interesting lower court decision. A group challenged the state’s Animal Feeding Operation Discharge permit (a water discharge permit), claiming the State should have considered air emission of ammonia that could eventually reach waters in the state. The lower court agreed with this approach, and the State has appealed this decision with a decision expected later in 2022.

Additionally, Texas has seen a challenge to a poultry farm after complaints by neighbors who lived in the area where the farm was recently constructed. The Court of Appeals upheld a permanent injunction against the poultry integrator and poultry growers from continuing poultry farms in the area, click here to read an overview. This decision has been appealed to the Texas Supreme Court, and we should see a decision in 2022.

2022 will continue to see developments that could have significant legal implications for producers in the South and across the country.

Goeringer, Paul. “Legal Outlook for 2022 Shows Several Ongoing Issues Will Be Top of Mind for Agricultural Producers.” Southern Ag Today 1(42.5). October 15, 2021. Permalink

October 15, 2021
Importance of Southeastern Ports for US Agricultural Exports

The US is the largest agricultural exporter in the world reaching almost $150 billion in 2020 and the Southeastern ports are very important to get those commodities overseas. In 2020, a total of $62.3 billion were exported through the ports in Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas, and Virginia. Louisiana led the way with $25.6 billion in agricultural exports and its top five commodities exported were soybeans, corn, soybean cake, wheat, and DDG. Exports from Florida and Texas ports seem to be the most diverse as their top five commodities exported accounted for 23.5 and 38.4 percent, respectively. On the other hand, exports through Louisiana and Alabama ports seem to be more concentrated as their top five commodities accounted for 89.5 and 85.7 percent total ag exports, respectively. The most common crops exported by these ports were cotton and soybeans, while the most common meats were frozen chicken and frozen pork.

Ribera, Luis. “Importance of Southeastern Ports for US Agricultural Exports.” Southern Ag Today 1(42.4). October 14, 2021. Permalink

October 14, 2021
Adopting Farm Management Practices for Carbon Credit Payments?

The emergence of developing carbon markets and programs aimed at the agriculture sector have provided farmers with the opportunity to receive payments for adopting management practices that reduce greenhouse gas emissions. The United States Environmental Protection Agency (EPA) estimates that over half of the greenhouse gases emitted in the agriculture sector come from soil management (Figure 1). Therefore, most carbon programs in the agricultural sector provide payments to farmers who generate carbon credits by adopting no-till or conservation tillage practices or cover crops. The majority of current carbon programs require the concept of additionality; meaning they will only pay for new (added) carbon-sequestering practices. Therefore, if you were an early adopter of conservation practices like no-till or cover crops and are standard practices on your farm, today you are not eligible to enroll those acres in most carbon programs. Current contracts offer farmers a range from $15-$20 per ton of carbon sequestered, but capacity to sequester (tons/acre) and the conservation practices adopted will vary by individual farm. It is essential to understand the costs and risks of implementing new practices and critically compare those to the potential benefits before enrolling in any carbon market program. Furthermore, due to the complexity and nuances of current carbon market programs, it is recommended you seek legal advice before entering into any contract.

Figure 1. Percent of U.S. greenhouse gas emissions from agriculture activities (source: U.S. EPA Inventory of Greenhouse Gas Emissions)

Shockley, Jordan. “Adopting Farm Management Practices for Carbon Credit Payments?”. Southern Ag Today 1(42.3). October 13, 2021. Permalink

October 13, 2021
Cow Prices Start Seasonal Slump

Fall is here and cow prices have begun to decline from their summer seasonal highs. Cull cow prices in the Southern Plains that hit $64 mid-year have given back about 22 percent of that price as of last week. Over the last five years, cow prices have declined by about one-third from mid-year to November.

Cow prices normally decline this time of the year because culling picks up across the country. Beef cow culling normally hits its annual peak in October-November each year. This year, beef cow slaughter remains well above last year (up 10 percent), likely encouraged by drought in the West. Dairy cow culling normally peaks in January-February and again late in the year. Beef and dairy cow sales, increasing at the same time in the Fall, combine to force lower cull prices.

A couple of good questions remain for the Fall. Did the surge in beef cow culling over the Summer pull ahead cow slaughter so there are fewer to go to market this Fall? Will high feed costs and struggling milk prices push more dairy cow culling? A long-used strategy has been to buy cows (or keep some cows) at depressed prices in the Fall to take advantage of seasonal price increases the next Spring. A smaller beef cow herd will likely support higher cow prices in 2022, but it will be important to consider high feed costs in this strategy.

Anderson, David. “Cow Prices Start Seasonal Slump.” Southern Ag Today 1(42.2). October 12, 2021. Permalink

October 12, 2021