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U.S. Agricultural Exports Set Another Record in 2022, but Higher Prices Appear to be the Cause

The 2022 data on U.S. agricultural exports are now available and it looks like another record year. U.S. agricultural exports were $196 billion in 2022, up $20 billion (up 11%) when compared to the previous year. Note that 2021 was also a record year for U.S. agricultural exports ($177 billion). It appears that record sales were more so due to higher commodity prices and global inflation than an increase in real export sales. That is, the U.S. did not necessarily sell more soybeans, grains, meats, or other products to the world, we simply sold the same or even lower volumes at higher prices.

Figure 1 shows both the agricultural export value ($ billion) and volume (million metric tons [MT]), as well as the average export price or unit value ($/MT) for the U.S. Given the broad range of exported products, a total volume measure is clearly a representative equivalent. However, as long as the U.S. Department of Agriculture is consistent every year with how volumes are measured, comparisons over time can reveal what is driving recent export growth. In 2021, U.S. agricultural exports increased from $150 to $177 billion, which was an 18% increase. However, the export volume during this period increased by only 2%: 226 million MT in 2020 to 230 million MT in 2021. Given the larger increase in value, clearly, the record in 2021 was more so due to prices. However, albeit relatively smaller, the volume did increase. In 2022, however, the volume of U.S. agricultural exports (216 million MT) was down by 6%, despite the value being up by 11% to a record level. Note that the average export price or per-unit export value in 2022 ($906/MT) was up 18% when compared to the previous year ($768/MT). Thus, the most recent record is all due to higher prices.

In closing, record export sales in the last two years being more inflationary than representative of real export growth is not necessarily a bad thing and is in fact, quite laudable. Most important, higher values do suggest higher revenues for U.S. producers regardless of the quantities being sold. When taking a longer view, there is another positive takeaway. Note that export volumes significantly decreased with rising prices in past years (e.g., 2010 – 2013), resulting in negligible increases in export values. Whereas in the last two years, export volumes have remained relatively stable despite significantly higher prices.

Figure 1. U.S. Agricultural Exports (Volume, Value, and Unit Value): 2010-2022

Source: USDA, Foreign Agricultural Service, Global Agricultural Trade System (GATS) (2022)

References

US. Department of Agriculture. 2023. Global Agricultural Trade System (GATS). Foreign Agricultural Service, Washington, DC.

Muhammad, Andrew. “U.S. Agricultural Exports Set Another Record in 2022, but Higher Prices Appear to be the Cause.” Southern Ag Today 3(6.4). February 9, 2023. Permalink

February 9, 2023
Chapter 12 Bankruptcy as an Option to Relieve Financial Distress
During the farm financial crisis in the 1980s, Congress created a temporary title to the bankruptcy code designed to assist family farmers, which has since been expanded to help family fishermen. This Chapter was set to expire in 1993 but was extended by Congress and made permanent in 2005. Chapter 12 allows agricultural operations to reorganize, which the other Chapters do not allow. The idea of this Chapter is to prevent debtors from needing to sell off assets and enable the operation to continue operating through the process.

Agricultural operations and fishermen must qualify for Chapter 12. Current qualifications include:
- Engaged in farming or commercial fishing operations.
- Having total debt of less than $11,097,350 for a family farm or $2,268,550 for a family fishing operation.
- Total farm-related debts of at least 50% or fishing-related debts of at least 80% of all filer debt.
- More than 50% of the filer’s gross income originates from the farm or fishing operation.
One unique feature of Chapter 12 is the “cram down” provision.  The cram down allows the debtor to reduce the obligation on secured debt to the value of the collateral.  For example, suppose an agricultural operation has a secured debt of $200,000 secured by collateral valuing $100,000.  In a Chapter 12 case, the value of the debt would be reduced to $100,000, and the remaining $100,000 would become an unsecured debt.  This unsecured debt, like other unsecured debt, could be discharged in bankruptcy proceedings.^[1]

Data were obtained on Chapter 12 filings from the Federal Judicial Center for October 1, 2013 to September 30, 2022, representing Fiscal Years 2014-2022.  During this ten-year period, 4,284 Chapter 12 bankruptcy cases were filed in the U.S. courts.  Southern states, on average, make up 32% of the national Chapter 12 filings each year.  That proportion ranges between a low of 26% in 2020 and 2021 to a high of 37% from 2015-2017.  Figure 1 shows the percentage of cases filed during this period across the region in each southern state.  Georgia leads the region with 19.5%, followed by Florida with 12.9% and Texas with 12.8%.  The states with the least number of filings in the region are West Virginia at 0.9%, South Carolina at 2.1%, and Maryland at 2.2%.

Bankruptcy is not something that should be taken lightly.  It can have potential impacts on your credit down the road.  Before considering bankruptcy, you should always work with creditors to determine if more favorable repayment arrangements can be made.  Most creditors would prefer communication from debtors rather than silence.  Options other than bankruptcy may exist and working with creditors is always preferred before looking to the court for help.

Figure 1.

This work is supported by the Agriculture and Food Research Initiative (AFRI) program, grant no. 2022-67023-36112/project accession no. 1028056, from the U.S. Department of Agriculture, National Institute of Food and Agriculture.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and should not be construed to represent any official USDA or U.S. Government determination or policy.

^[1] Like in some other Chapters, secured debt may be restructured. This restructuring may change the interest rate, maturity, or other terms of the debt agreement.

Goeringer, Paul, William Secor, and Adam Rabinowitz. “Chapter 12 Bankruptcy as an Option to Relieve Financial Distress.” Southern Ag Today 3(6.3). February 8, 2023. Permalink

Photo by Melinda Gimpel on Unsplash
February 8, 2023
Observations on the Cattle Report in the South

Plenty has been written on USDA’s Cattle inventory report released on January 31^st.  In today’s writeup we are going to focus on some observations by a few of our Southern Ag Today livestock economists from around the South.

Andrew Griffith, University of Tennessee.  Despite the bullishness of the cattle inventory report, beef cattle herd expansion will not be able to begin until the fall calf crop is ready to hit the ground, and it will only start if ample supplies of hay are harvested in 2023 and fall grazing looks promising. This means most of the heifers in the 2022 calf crop will be entering feedlots. It will be the 2023 calf crop where there is opportunity for heifers to be retained for beef cow replacements. The issue with the 2023 calf crop is that it will likely be 900,000 head smaller than the 2022 calf crop, which means 450,000 fewer heifers to choose from. The majority of the room for expansion will be in the Plains from Texas to Nebraska and the Mid-South (i.e. Kentucky, Tennessee).

Kenny Burdine, University of Kentucky.  The Kentucky beef cow herd was estimated to be down by 7% year-over-year. I have to go back to 1967 to find a beef cow inventory that small for the Commonwealth – over 50 years!  After many years of decreasing dairy cow inventory, Kentucky saw an increase in dairy cow numbers during 2022. This is significant and may speak to a reversal of that long-run trend.

On a little less Kentucky oriented note, monthly on-feed numbers finally moved below year-ago levels this fall. The 4% decrease from 2022 levels in this report really speaks to lower 2023 beef production. This will be our first year-over-year decrease in beef production since 2015. Last year was not a good year for wheat grazing in the Southern Plains due to dry weather and high wheat prices. The fact that the January 2023 Inventory report showed an additional 5% decrease in the number of cattle grazing on small grains in that region is significant. Winter wheat grazing represents a significant opportunity for spring born calves that move through markets in late fall / early winter and Southern calf markets feel these impacts when winter grazing demand is not there.

Max Runge and Ken Kelley, Auburn University.  Alabama’s beef cow herd for January 1, 2023 was virtually unchanged from the inventory of January 2022. There was a one percent increase for beef cows that have calved, but when combined with a smaller number of heifers over 500 lbs. held as beef replacement heifers and a smaller number of milk cows that have calved (-33% YOY), the difference in reproductive females only equates to a 5,000 head increase in 2023- or less than 1%. The number of steers and bull over 500 lbs. remained the same with the only difference being the percentage of steers versus bulls. In 2022, there were 4,000 more steers than bulls but in 2023, bulls totaled 4,000 head more than steers. Calves less than 500 lbs., totaled 10,000 more in 2023. Overall, the beef cattle numbers were less than ½ percent less in 2023.

David Anderson, Texas A&M University.  The number of beef cows in Texas declined by 125,000 head or, 2.8 percent, to 4.3 million head.  That was the fewest since 2016.  It is interesting to note that USDA revised the 2022 beef cow numbers down 50,000 head.  That decline might have been a little smaller than expected given the large increase in beef cow slaughter in the region which includes Texas, New Mexico, Oklahoma, Arkansas, and Louisiana.  Those states saw a 325,000 head decline in beef cow inventory, closer to in line with the increase in the regional beef cow slaughter data.  Heifers held for beef cow replacement were down 9.9 percent, well more than the beef cows.  The ratio of heifers to beef cows is consistent with a cow herd continuing to decline.  Also of note is the Texas dairy herd.  Dairy cows increased another 25,000 head to 650,000 head, the most since 1959 and speaks to the continued rapid growth in the Texas Panhandle.  The growth in beef on dairy breeding will continue to expand a steady new supply of feeder cattle to High Plains feeders.

February 7, 2023
Do Corn and Soybean Harvest Futures Rise or Fall During the February Projected Crop Insurance Price Determination Period?

For corn and soybean producers, activity in futures markets in February is very important. For many producers, projected crop insurance prices and volatility factors are determined from February 1-28. The projected price will set revenue guarantees and potentially affect planting decisions. At the start of February 2023, December 2023 corn futures ($5.94) were slightly above last year’s projected crop insurance price of $5.90 per bushel and November 2023 soybean futures ($13.65) were well below last year’s futures price of $14.40. The direction of prices from now until the end of February will be key for producers when examining risk management and marketing strategies for the 2023 crop.

Every year, during winter producer meetings, when discussions turn to risk management and marketing strategies, someone inevitably states that December corn and November soybean futures tend to fall during the projected crop insurance price determination period (February 1-February 28, in Tennessee and numerous other Mid-South states). This statement usually coincides with the assertion that external forces (government and/or global grain companies) are moving markets to reduce premium expense or foster utilization of other price risk management tools to boost profits.

Does a simple analysis support this? No. From 2010 to 2022, the data does not back this claim (Figures 1 and 2). Instead, the data shows prices follow the month-over-month price trend. For example, December corn average monthly prices from December to April declined in 2010, 2013, 2015, 2019, and 2020. For 2011, 2014, 2018, 2021, and 2022, December corn futures prices increased. The remaining years 2012, 2016, and 2017, showed no trend and moved mostly sideways over the five-month interval. For the November soybean contract, average monthly prices from December to April declined in 2013, 2015, 2017, 2019, and 2020. For 2011, 2012, 2014, 2016, 2018, 2021, and 2022, November futures contract price increased. The remaining year, 2010, had no trend and moved mostly sideways over the five-month interval.

What does this mean for the 2023 crop insurance price determination period? Not much. This is a backward-looking metric; the trend is not revealed until the trend has occurred. However, a small month-over-month average decline occurred between December and January for both corn and soybean harvest futures. The final projected crop insurance prices for corn and soybeans will be important to producer marketing and risk management decisions moving forward.

Figure 1. Monthly average December corn futures prices from December to April, 2010-2023

Figure 2. Monthly average November soybean futures prices from December to April, 2010-2023

References

Barchart.com. December Corn and November Soybean Historical Daily Closing Prices. Accessed at: https://www.barchart.com/futures/quotes/ZCZ23/historical-download and https://www.barchart.com/futures/quotes/ZSX23/historical-download

USDA – Risk Management Agency (RMA). Price Discovery. https://prodwebnlb.rma.usda.gov/apps/pricediscovery

Author: S. Aaron Smith

Associate Professor, Crop Marketing Specialist

University of Tennessee

Smith, S. Aaron. “Do Corn and Soybean Harvest Futures Rise or Fall During the February Projected Crop Insurance Price Determination Period?” Southern Ag Today 3(6.1). February 6, 2023. Permalink

February 6, 2023
Curiosity to Cash: Successful Web Marketing

Too many agribusiness owners struggle to convert website visits into sales. The first step is to answer three critical questions in less than ten seconds with the content in the header section of your website.

To demonstrate the use of these three questions, we reviewed the Palo Blanco Farms website and gave them suggestions for their website.

What Do You Offer?

Palo Blanco Farms first noted that they sold healthy and sustainable food in the header section of their website, which was vague. We learned that they earn 70% of their revenue from selling organic microgreens, so this main product should be featured in the header. Also, we suggested they add details about what microgreens are. Microgreens are a nutritious and natural way to add veggies to your diet. These details tell their customers what they are selling.

Why Do I Want It?

Palo Blanco Farms could state that microgreens are a healthier, safer alternative to nutritional supplements. They could also explain that consuming microgreens brings health benefits from essential vitamins, minerals, and antioxidants.

How Do I Get It?

The primary call to action is to buy now. We suggested: (1) Buy the product; (2) Receive the Greens; and (3) Live Well, Be Healthy. Since Palo Blanco focuses primarily on subscription deliveries in Laredo, we suggested they design a buy-now experience that minimizes clicks – as Amazon does.

Want to learn more about how you can convert more of your website visitors into sales? Visit http://brickstoclicks.extension.msstate.edu/ to watch the free Website Mini-Masterclass video series or enroll now in the Master Your Marketing course coming in April 2023.

Data from Gallup, OECD, and the Bureau of Labor Statistics.

Image from https://www.paloblancofarmandranch.com/.

Barnes, James and Rebekka Dudensing. “Curiosity to Cash: Successful Web Marketing.” Southern Ag Today 3(5.5). February 3, 2023. Permalink

February 3, 2023