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  • What If We Don’t Get a Farm Bill in 2023?

    What If We Don’t Get a Farm Bill in 2023?

    One of the questions we have been getting the most as agricultural policy economists is whether we are going to get a 2023 Farm Bill on time.  While there are dedicated teams of ag committee members and staff in the House of Representatives and Senate who are going to do their best to get a farm bill done on time, history is not on their side.  This article isn’t going to focus on the probability or odds of getting a bill in 2023 but rather – how much would it matter if it doesn’t get done? 

    Figure 1 contains our estimate of the mandatory spending associated with programs that will expire on September 30, 2023.  It may come as a surprise to many of our readers that only about 5% of the funding is actually facing the threat of expiration.  Why?  The Supplemental Nutrition Assistance Program (SNAP) is what’s known as an appropriated entitlement.  In other words, if the farm bill expires, the appropriators will continue to fund SNAP.  Beyond that, crop insurance is permanently authorized by legislation outside of the farm bill.  In addition, the Inflation Reduction Act (IRA) recently reauthorized spending for the major conservation programs.  Further, annual appropriations bills have provided significant funding for ad hoc disaster programs over the past four years for programs such as WHIP, WHIP+, and ERP.

    So – what does this information mean?  It means that the impending expiration of the 2018 Farm Bill means very little for the vast majority (i.e., 95%) of the mandatory spending in the farm bill.  It also means that unless policymakers are able to significantly enhance Title I commodity programs, this is little reason to go through the process that invariably will include damaging amendments to farm policy.  While this still leaves a number of programs in limbo (particularly those without mandatory baseline spending),  a simple extension of the 2018 Farm Bill would maintain the status quo.

    Figure 1.  Estimated mandatory spending in the 2018 Farm Bill that will expire on September 30, 2023.

    Outlaw, Joe, and Bart Fischer. “What If We Don’t Get a Farm Bill in 2023?” Southern Ag Today 3(1.4). January 5, 2023. Permalink

    Photograph by Mark Stebnicki

  • Summary of High Avian Influenza in 2022

    Summary of High Avian Influenza in 2022

    As we begin 2023, high path avian influenza (HPAI) continues to devastate the poultry industry across the U.S.  While many experts anticipated a summer lull in outbreaks and maybe even a disappearance like the 2014/15 HPAI outbreak, that was not the case. Since the first case back in February 2022, there has been at least one case of HPAI in a commercial poultry operation in each month in 2022. The total number of birds affected by HPAI in 2022 totaled 57.82 million, with 206 commercial flocks and 409 backyard flocks impacted. To put that into perspective, the HPAI outbreak of 2014/15 had 232 confirmed cases, with over 50 million birds affected. However, most of the 2014/15 outbreak was concentrated to egg layers and turkeys grown for meat in Iowa and Minnesota. The map below illustrates that in 2022, HPAI affected all but three states across the U.S. Most birds affected by HPAI in 2022 were commercial table egg layers, accounting for 75% of the total bird loss (43 million birds). While the southern region is known for broiler production, four of the top ten egg-producing states are in the southern region (Texas, Georgia, Arkansas, and North Carolina). For 2022, a total of 2.7 million birds were impacted by HPAI in the southern region, the largest case being a commercial table egg layer operation.  

    It is anticipated that we will have continued cases of HPAI across the region. The most recent outbreak was in Tennessee on December 28th in a commercial broiler breeder operation. Therefore, you must continue to enforce strict biosecurity measures to manage and protect your flocks. While the federal government provides financial assistance for depopulation, cleaning, and indemnity payments for the birds directly impacted, there are currently no insurance products or federal support from a loss of revenue due to delayed placements and loss of future flocks while houses are cleared of HPAI. Therefore, you should have a management plan in place in for an HPAI outbreak.  

    Source: USDA-APHIS 

    Resources:

    USDA-APHIS. “2022 Confirmations of High Pathogenic Avian Influenza in Commercial and Backyard Flocks”. Available online: https://www.aphis.usda.gov/aphis/ourfocus/animalhealth/animal-disease-information/avian/avian-influenza/hpai-2022/2022-hpai-commercial-backyard-flocks

    Shockley, J.M., T. Mark, K. Burdine, and L. Russell.  “Financial Implications from Contracting Avian Influenza in a U.S. Broiler Operation”. Journal of Applied Farm Economics 3, no. 1 (Spring 2020). Available Online: https://docs.lib.purdue.edu/cgi/viewcontent.cgi?article=1034&context=jafe

    University of Kentucky Ag Logo
    University of Kentucky Ag Logo

    Author: Jordan Shockley

    Associate Extension Professor

    jordan.shockley@uky.edu

    Shockley, Jordan. “Summary of High Pathogenic Avian Influenza in 2022.” Southern Ag Today 3(1.3). January 4, 2023. Permalink

  • Smaller Weekly Beef Cow Culling, Finally

    Smaller Weekly Beef Cow Culling, Finally

    Looks like we’re starting the new year where we left off the last one: with beef cow slaughter.  But, this time with some good news.  Beef cow slaughter for the last two reported weeks, to date, in December were smaller than the same weeks the year before.  For the first time in 2022, weekly beef cow slaughter declined.  These weeks were the first year-over-year decline since July 2021.

    Weekly beef cow slaughter for the weeks ending December 10th and 17th totaled 75,900 and 76,900, respectively.  Weekly beef cow culling during the same weeks of 2021 totaled 79,800 head.  Cow slaughter in the South has been a little below last year during most weeks since October.  In Region 6, which includes Texas, Arkansas, and Louisiana slaughter was only below last year for the week ending December 10th. 

    Some of the decline is seasonal.  Beef cow slaughter tends to drop off in December after the highs of October and November.  The fact that slaughter has been so large in 2022 may also contribute to some decline.  Some winter weather might have also contributed to a bit lower slaughter.  Beef cow slaughter often picks up briefly in January after the rush of the holidays and also after the 1st to get to the next calendar/tax year.  In the coming weeks, watch to see if cow culling is below that of early 2022.  Reduced culling will be needed to begin to slow cattle herd shrinking, but it’s likely too early to see any evidence of that.

    Author: David Anderson

    Professor and Extension Economist Livestock and Food Products Marketing, Dairy, Policy

    danderson@tamu.edu

    Anderson, David . “Smaller Weekly Beef Cow Culling, Finally.” Southern Ag Today 3(1.2). January 3, 2023. Permalink

  • Navigating the “Winter” in Cotton Farming in 2023

    Navigating the “Winter” in Cotton Farming in 2023

    Cotton prices in 2022 were like a roller coaster ride, including increased volatility and the highest price achieved for the past decade (Figure 1). Multiple rapid market rallies in the cotton market were observed in 2022, followed by a quick withdrawal of speculative money, resulting in an immediate plunge in cotton prices after the rally. The highest daily spot cotton price for 2022 was achieved on May 4th at 149.76 cents per pound, and the lowest daily spot cotton price in 2022 was observed on October 31st at 72.26 cents per pound. Several factors contributed to the price volatility in 2022, including stock market volatility, soaring inflation, supply chain disruptions, rising interest rates, appreciation of the U.S. dollar, and severe drought in major cotton production areas.

    In 2022, the U.S. planted 13.6 million acres of upland cotton, the highest in 3 years. However, harvested acres are forecasted by the U.S. Department of Agriculture to be only 7.7 million acres, indicating an overall U.S. abandonment rate for upland cotton of 43.4%, the highest on record. Severe drought conditions hit major cotton production areas, including Texas, Oklahoma, Kansas, and Missouri. The abandonment rate is estimated to be 68% for Texas which accounted for 58% of total U.S. planted cotton acres (7.9 million) in 2022. Due to drought, cotton production in the U.S. plunged in 2022 resulting in a 2.37 million bale year-over-year decline in cotton exports. The December 2022 USDA World Agricultural Supply and Demand Estimates (WASDE) report projected U.S. cotton production at 14.2 million bales for the 2022/2023 marketing year, slightly below U.S. cotton demand – 12.3 million bales of exports and 2.2 million bales of domestic mill use. Globally, in 2022, cotton production is projected at 115.7 million bales, above the world cotton mill use at 111.7 million bales.

    Looking ahead, 2023 could be a challenging year for cotton producers. According to the International Monetary Fund October 2022 World Economic Outlook report, global economic growth is expected to slow down to 2.7%, combined with high inflation worldwide at 6.5%. The reduction in economic activity and high inflation in 2023 will likely continue to reduce consumer demand for discretionary items, such as textiles and apparel, thus suppressing cotton prices. 

    In response to high inflation, the Federal Reserve increased the federal funds rate from about 0% in February to 4.25-4.50% in December. The interest rate increases were the largest since the 1980s. The Federal Reserve’s commitment to bringing inflation back down to its target of 2% will likely result in higher interest rates for producers in 2023. The bank prime loan rate has risen to 7.5% in December, up 4.25% since the start of 2022. Rising interest rates further accelerated the appreciation of the U.S. dollar. Cotton is a global commodity; on average, over 80% of cotton produced in the U.S. is exported. The appreciation of the U.S. dollar increases prices paid by foreign consumers and makes U.S. cotton less attractive compared to other cotton exporting countries with a relatively weaker currency. This could result in a further decline in cotton demand from the U.S. and lower cotton prices for U.S. producers in 2023. 

    U.S. cotton acreage and production are likely to decline in 2023, due to a lower relative price expectations compared to competing crops. Additionally, profit margins for cotton producers have been adversely affected due to high input costs and low prices. As of December 15, 2022, December cotton futures prices, CTZ23 (Dec’ 23), are currently at 79.29 cents per pound. An optimistic futures price for cotton in 2023 is 80 to 85 cents per pound, and a pessimistic price for 2023 is 69 to 75 cents per pound. For planning and budgeting projections, a price of 72 to 78 cents per pound is suggested for 2023. On a positive note, an economic recovery could occur in the fourth quarter of 2023, and the winter ice in the cotton market could start to melt during the cotton harvest in 2023. 

    Figure 1. Cotton Cash Prices for the past decade.

    Source: Board of Governors of the Federal Reserve System

    Yangxuan Liu

    Assistant Professor

    yangxuan.liu@uga.edu

  • The Supreme Court and Agriculture

    The Supreme Court and Agriculture

    The Supreme Court of the United States (“SCOTUS”) has recently had a significant docket of cases with an impact on agriculture.  Two cases have been heard this fall, with another hearing set for next spring.

    In Sackett v. EPA, the Supreme Court once again considered the scope of wetlands jurisdiction under the Clean Water Act (“CWA”). Specifically, the Court was asked to revisit its landmark Rapanos ruling which resulted in two tests to establish when a wetland should receive CWA protection.  However, the Court rules are sure to impact the scope of CWA jurisdiction, and potentially impact EPA’s ongoing attempt to redefine the key CWA term “waters of the United States.” To learn more about the case, click here.

    In National Pork Producers Council v. Ross, SCOTUS considered the constitutionality of “Prop 12,” a California law regulating space requirements for farm animals.  Specifically, the court heard arguments about the circumstances under which a state government can pass laws that primarily affect the actions of people in other states.  To learn more about this and other similar challenges to Prop 12, click here. 

    The upcoming case involves water rights in the Colorado River basin, an area where drought conditions are already causing existing water allocations to be substantially reduced. In November, SCOTUS agreed to hear two cases involving the Navajo Nation’s potential rights to Colorado River water.  These cases have been consolidated so that there will be only one hearing, which is expected to be in early 2023. To read more, click here. 

    In all three cases, a decision is expected by June 2023.

    Author: Elizabeth Rumley

    Senior Staff Attorney

    erumley@uark.edu

    Rumley, Beth. “The Supreme Court and Agriculture.” Southern Ag Today 2(53.5). December 30, 2022. Permalink