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  • The U.S. and Brazil in International Beef Markets

    The U.S. and Brazil in International Beef Markets

    The United States and Brazil are the leading beef exporters (Figure 1). However, they focus on different markets. Figure 2 illustrates the world trade flow value in 2020. Accordingly, China is the leading destination for Brazilian beef ($4.1bn), while Japan is the primary consumer of American meat ($2bn). Nevertheless, the U.S. has a more diversified client portfolio, with relevant exports to Japan (27%[1]), Korea (24%), Mexico (10%), Hong Kong (8.5%), and Canada (7.5%). As for Brazil, most exports are destined for China (50%), Hong Kong (14%), and Egypt (8.7%). 

    Figure 1 – 2020 Beef Trade: Top, Growing, and Declining Exporters (Value) 

    Source: CHRTD, 2022

    The two countries compete in the Hong Kong market more directly, which imported 42% (309k tons) of its beef from Brazil and 11% (81.3k tons) from the U.S. in 2020. However, when we compare the values of meat imports from Hong Kong, Brazil’s share drops to 39% ($1.1bn), and the U.S. rises to 22% ($635m). Boneless beef cuts (frozen) show America’s superior ability to market its product. Worldwide, American frozen beef had an average premium of 24% over Brazilian meat in 2020. In the case of Hong Kong, that year, Brazil exported 182k tons ($771m) and the U.S. 56.9k tons ($462m) of frozen beef, a 92% premium for the American product. Furthermore, the 2020 Phase One Trade Agreement opened the Chinese market to the U.S., bringing competition from the two largest exporters to the most prominent and growing consumer market.

    Figure 2 – 2020 World Beef Trade (Value) 

    Source: CHRTD, 2022

    Unlike Brazil, the U.S. is a significant beef importer (Figure 3), mainly from Canada ($1.8bn), Australia ($1.5bn), and Mexico ($1.5bn). Australia competes for the Korean and Japanese markets with the U.S. and the Chinese markets with Brazil. Beef trade between the U.S. and Brazil is timid, as the U.S. exported $33m to Brazil and imported $154m from the country between 2015 and 2020 (CHRTD, 2022).

    Figure 3 – 2020 Beef Trade: Top, Growing, and Declining Importers (Value) 

    Source: CHRTD, 2022

    [1] The percentages correspond to the total value exported in 2020.

    Reference

    CHRTD – Chatham House Resource Trade Earth. Trade Data. 2022. Available online: https://resourcetrade.earth/

    Author: Yuri Clements Daglia Calil 

    Assistant Professor and Extension Specialist

    Texas A&M University

    yuri.calil@ag.tamu.edu

    Clemets Daglia Calil, Yuri . “The U.S. and Brazil in International Beef Markets.” Southern Ag Today 2(51.4). December 15, 2022. Permalink

  • Prevented Planting

    Prevented Planting

    In the mid-south, the prevented planting provision of crop insurance is of particular importance. Prevented planting claims have grown 500% since 2012 in the Mid-South. The table below illustrates prevented planting indemnities averaged roughly 10% of all crop insurance claims before 2012, growing to an average of 51% of all claims since that time. In contrast, prevented planting claims in the Midwest comprised only 8% of all claims since 2012, highlighting the importance of the provision to Mid-South row crop production. The use of prevented planting in the Mid-South can partially be attributed to a rise in early-season precipitation in the region (over 90% of all prevented planting claims nationally are due to excess moisture-related issues). Row crop acres located in high moisture areas of the delta also contribute. It is critical to understand the important aspects of prevented planting and how to incorporate crop insurance into farm operating plans and financial risk management strategies.

    1) If a prevented planting claim is made and a second harvested crop is not planted, the prevented planting claim will not affect the producer’s APH. 2) If a second crop is planted, the second crop must be insured. The producer will receive 60% of their APH for that year for the first crop and the actual yield for the second crop. The producer will only receive 35% of the indemnity but only pay 35% of the premium owed on the first crop. If there is no claim on the second crop, the producer is eligible to receive the remaining 65% of the prevented planting indemnity for the first crop. Note the producer must also pay the remaining premium on the first crop as well. 3) It is worth being aware that while prevented planting claims do not affect rates through APH, they will typically affect rates through a load factor. Load factors are added to premium rates to help cover administrative costs and to ensure sufficient reserves exist to handle non-yield or extreme claims. Prevented planting adjustments are added through such load factors, and the size of the load will depend on the total amount of prevented planting indemnities made across the state. 4) Before making a prevented planting claim, producers should ensure that they have sufficient eligible acres for the number of prevented planting acres they need to make. A producer is not allowed to claim more prevented planting acres than they have planted in the past. However, a producer can “roll” prevented planting acres into other eligible acres they may have of a different crop. Producers should be sure they have sufficient roll acres of the second crop and that the prevented planting indemnity calculated for the second crop would be sufficient to cover the necessary costs associated with the first crop. 5) Be sure that any land with an intended prevented planting claim satisfies the “1 in 4 rule”. For land to be eligible for prevented planting, it must have been planted, insured, and harvested in one of the last four years. Otherwise, the land must have been adjusted for claims other than excess moisture, flood, or drought in one of the last four years. Land that failed the 1 in 4 rule must meet the mentioned requirement for two consecutive years before becoming eligible again for prevented planting.

    Keeping the above points in mind, producers can reap risk protection from prevented planting without unwanted surprises and/or adversely affecting their crop insurance rates.

    Author: Lawson Connor

    Assistant Professor

    lconnor@uark.edu

    Connor, Lawson. “Prevented Planting.” Southern Ag Today 2(51.3). December 14, 2022. Permalink

  • Feeding Efficiency Gains Over Time

    Feeding Efficiency Gains Over Time

    The cattle feeding industry has experienced large increases in feeding efficiency over time.  In this case, efficiency means fewer pounds of feed to produce the same or more amount of beef, pounds of feed per pound of gain.  Not only has efficiency increased, long term, but fed cattle finished weights have increased also.  Greater efficiency in feed use is one way to offset higher feed costs.  

    The Kansas State University Focus on Feedlots is a long running survey (since 1990) of a few feedlots that includes data on in-weights and out-weights, days on feed, average daily gains, and pounds of feed per pound of gain.  The data is also divided by steers and heifers.  

    In 1990, 6.51 pounds of feed were fed to get 1 pound of gain.  So far in 2022, 6.16 pounds of feed fed have produced a pound of gain.  That represents a 5.3 percent decline in feed needed to get a pound of live weight.  Examining 5-year averages, feed per pound of gain average 5.99 over the 2011-2016 period.  Feed per pound of gain has increased in recent years but, finished weights have continued to increase.  It does take more feed to get those last few pounds on each animal.  In this dataset, steer finished weights have increased from 1187 pounds to 1429 pounds, a 20.4 percent increase.  Similar to steers, feed per pound of gain for heifers has declined 3.7 percent since 1990, from 6.75 pounds of feed to 6.49 pounds.  

    Feed per pound of gain exhibits significant seasonality, with the most feed needed in the February-March period.  That may make some sense given winter feeding conditions and the animal using more feed to keep warm rather than gain weight.  The least amount of feed to get a pound of gain tends to occur in September. 

    Increasing feed efficiency is another area of improvement in beef production over the last few decades. Efficiency increases are allowing feeder cattle and calf prices to not decline in response to high feed costs as much as they might have in the past.

    Author: David Anderson

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

    danderson@tamu.edu

    Anderson, David. “Feeding Efficiency Gains Over Time.” Southern Ag Today 2(51.2). December 13, 2022. Permalink

  • Corn Exports: Quality, Value, and Prices

    Corn Exports: Quality, Value, and Prices

    U.S. corn exports are important in determining farm level prices. For the 2022/2023 marketing year, the November USDA World Agricultural Supply and Demand Estimates (WASDE) report estimates 15.4% (2.15 billion bushels) of U.S. corn production will be exported to foreign markets. This does not include the export of corn products, such as ethanol and DDGS. 

    Figure 1. U.S. corn exports (quantity, value, and price) and USDA – National Agricultural Statistics Service (NASS) average monthly price, 5-year average, 2021, and 2022.

    Exports fluctuate month-to-month, with the majority of U.S. corn exports occurring January through July (Figure 1). In calendar year 2022, the quantity of U.S. corn exports has lagged behind last year’s pace – 2.038 billion bushels compared to 2.363 billion bushels in 2021 as of the end of October (Figure 1; Export Quantity). However, in terms of value, the U.S. has exported $400 million more in 2022 ($16.53 billion), than 2021 ($16.11 billion) (Figure 1; Export Value). 

    Price is the reason for the difference between lower quantity and greater value. USDA export sales do not report prices, but a monthly export price can be calculated by dividing value by quantity (Figure 1; Calculated Export Price). The calculated export price needs to be interpreted cautiously as this price does not represent prices established only in the month reported (prices can be established months in advance of exports). That being said, the calculated export price does provide a point of reference for comparison to other prices. 

    Table 1 shows the calculated export price (Figure 1; Calculated Export Price) minus the USDA NASS national estimated cash farm price (Figure 1; NASS Price).  From 2017 to 2020, the difference between the calculated export price and the NASS price ranged from a low of $0.80 to a high of $1.21 per bushel. In 2021 and 2022, the range of the price difference was $1.02 to $1.81 per bushel, $0.41 per bushel greater than the four prior year’s average. The price difference can be interpreted as a rough approximation of the costs associated with moving corn from the farm gate to the export terminal. 

    What is the reason for this increase in the price difference? The most likely factor is increased transportation costs. This is due to supply chain disruptions coming out of the pandemic, elevated fuel costs, and higher wage rates. While the price difference has increased the past two years, the NASS estimated price has accounted for a greater portion of the calculated export price: 80.5% in 2021 and 2022 compared to 77.5% from 2017-2020. So, even with a wider differential between cash farm prices and export prices, the farmer is receiving a greater proportion of the export value. Whether the increased price difference between calculated export price and NASS price, or the proportion allocation holds into the future is highly uncertain.  

    Table 1. Calculated monthly corn export price minus USDA NASS price ($/bu), 2017-2022

     JanFebMarAprMayJunJulAugSepOctNovDec
    20171.021.000.951.030.941.000.921.090.991.061.091.12
    20181.050.940.940.930.961.111.151.201.101.101.141.07
    20191.051.031.011.100.960.860.830.900.960.800.990.96
    20200.890.921.061.121.111.121.001.080.960.991.121.21
    20211.661.611.551.401.151.421.491.031.641.811.591.62
    20221.441.331.191.241.561.341.321.281.021.70  
    5-Year Average1.231.241.261.251.201.201.130.940.951.201.291.31

    References and Resources:

    U.S. Department of Agriculture – Foreign Agricultural Service (USDA-FAS). Global Agricultural Trade System (GATS). Available on-line at: https://apps.fas.usda.gov/GATS/Default.aspx

    U.S. Department of Agriculture – National Agricultural Statistics Service (USDA-NASS). November. Available on-line at: https://quickstats.nass.usda.gov/  

    U.S. Department of Agriculture – World Agricultural Supply and Demand Estimates (USDA-WASDE). November. Available on-line at: https://www.usda.gov/oce/commodity/wasde

    Author: Aaron Smith

    Associate Professor and Crop Marketing Specialist

    aaron.smith@utk.edu

    Smith, Aaron. “Corn Exports: Quality, Value, and Prices.” Southern Ag Today 2(51.1). December 12, 2022. Permalink

  • Urban Development and Farm Labor Scarcity: Are Workers Leaving Agriculture for Construction?

    Urban Development and Farm Labor Scarcity: Are Workers Leaving Agriculture for Construction?

    The United States has faced a shortage of farmworkers for several decades. In areas of the country that grow labor intensive crops, the lack of a reliable supply of agricultural workers is one of the main concerns among farmers. The reduction in the availability of workers in the fields is attributed to multiple factors, including a reduction in the number of undocumented immigrants engaging in agricultural work, increased border enforcement, and the reticence of native-born individuals to take physically demanding jobs even in periods of high unemployment (Gutierrez-Li, 2022). 

    While the decline in the number of farmworkers may be explained in part by fewer people interested in taking agricultural jobs, the exodus to other sectors is also increasing over time. One of the main industries to which agricultural workers are moving is the field of construction. This sector requires a similar skillset to agricultural work, which facilitates workers’ mobility out of the farm sector (Barham et al., 2020). One incentive that motivates farmworkers to leave farm work to find jobs in construction is relatively higher wages. According to the U.S. Bureau of Labor Statistics, the mean hourly wage of a construction worker in 2021 was $21.22, compared to $14.27 in the agricultural sector. 

    In addition to offering better wages, the construction sector has been luring farmworkers as metropolitan areas in the nation are experiencing rapid growth, thereby requiring additional labor to complete real estate developments. As seen in Figure 1, some of the fastest growing cities are in the Southeast. These include areas–Charlotte/Raleigh-Durham in North Carolina, Nashville in Tennessee, Atlanta in Georgia, Jacksonville/ Miami in Florida, and multiple cities (Austin, Dallas, Houston, San Antonio, Fort Worth) in Texas—have also experienced a sizable increase in population. The rise in urbanization in southern states has been driven by their relatively larger percentages of gross domestic product (GDP) growth as shown in Figure 2. If urban development continues to accelerate in states where the agricultural industry is heavily dependent on a human workforce, it is expected that farm labor shortages there may continue to worsen, and the demand for H-2A foreign agricultural workers will continue to rise. 

    Figure 1. Population size and growth rates in the 50 largest U.S. cities

    Source: Brookings Institution using information from the 2010 and 2020 decennial censuses.   

    Figure 2. Growth in Gross Domestic Product in 2022

    Source: Kenan Institute of Private Enterprise. The University of North Carolina.

    References

    Barham, B. L., Melo, A. P., & Hertz, T. (2020). Earnings, wages, and poverty outcomes of US farm and low‐skill workers. Applied Economic Perspectives and Policy, 42(2), 307-334.

    Frey, W. (2021). 2020 Census: big cities grew and became more diverse, especially among their youth. Report. Brookings Institution. Washington D.C.

    Gutierrez-Li, A. (2021). The H-2A visa program: addressing farm labor scarcity in North Carolina. NC State Economist. North Carolina State University.

    The American Growth Project. (2022). 2022’s Fastest-growing U.S. cities, ranked. October report. Kenan Institute of Private Enterprise. University of North Carolina, Chapel Hill.

    Author: Alejandro Gutierrez-Li

    Assistant Professor and Extension Economist

    alejandro-gil@ncsu.edu

    Gutierrez-Li, Alejandro. “Urban Development and Farm Labor Scarcity: Are Workers Leaving Agriculture for Construction?” Southern Ag Today 2(50.5). December 9, 2022. Permalink