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  • Local Vetrepreneurs Contribute to Rural Communities

    Local Vetrepreneurs Contribute to Rural Communities

    According to the U.S. Census Bureau’s American Community Survey (2019), military veterans are disproportionately likely to live in rural areas, where they comprise 8.8% of the population compared to only 6.4% in urban areas. These veterans are disproportionately likely to be entrepreneurs. While 6.9% of the general population identifies as a military veteran, over 10% of entrepreneurs identify as military veterans. According to the Annual Business Survey (2019), veteran-owned firms make up about 5.9% of all businesses with 3.9 million employees and $177.7 billion in annual payroll. Of these 331,151 veteran-owned firms, 8.96% (29,671) are in retail trade.

    How does shopping at small, veteran-owned retail trade firms benefit the local economy?  First, in the last Community Development article, Dr. Rebekka Dudensing highlighted the value of shopping local, with every $1 spent at a small business generating $1.17 in the local economy. Second, research shows that locally oriented (rural) retail establishments are associated with other pieces of a vibrant local economy, such as small manufacturing establishments, civic associations, places to gather (“third places”), social capital, and civic engagement.

    Nationally, we find from the 2020 Annual Business Survey that 81% of veteran-owned retail trade firms employ between 1 and 19 employees. These veteran-owned firms also have a higher per-employee income, putting your dollars back into local households.

    Carpenter, Craig, and Michael Lotspeich-Yadao. “Local Vetrepreneurs Contribute to Rural Communities.” Southern Ag Today 2(4.5). January 21, 2022. Permalink

     

  • ARC-IC Considerations for 2022 Farm Program Elections

    ARC-IC Considerations for 2022 Farm Program Elections

    The farm program election deadline for 2022 is March 15th, and producers have the option to enroll commodities in Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC).  PLC protects against declines in prices, and ARC protects against revenue losses at the county level (ARC-CO) or individual farm level (ARC-IC).  Among Southern producers, ARC-IC has not been popular in previous program elections, accounting for less than 1 percent of farm signups.  However, for the 2022 crop year, producers are making their farm program decisions at a time with relatively high commodity prices.  In this situation, it is unlikely that PLC will provide much support, and only alternatives that include yield losses will likely trigger support (ARC-CO and ARC-IC).  This begs the question of whether producers should consider ARC-IC for 2022.  ARC-IC differs from ARC-CO in the following ways: 

    1. The ARC-IC benchmark revenue is determined by a producer’s individual farm yields rather than county average yields. 
    2. ARC-IC election is made by Farm Service Number (FSN) rather than by commodity, i.e., if ARC-IC is selected for a FSN, then all commodities on that FSN are enrolled in ARC-IC.  If multiple FSNs are enrolled in ARC-IC, they will be treated as one “ARC-IC Farm.” 
    3. An ARC-IC payment is made on 65% of base acres rather than 85% for ARC-CO.
    4. Coverage applies to commodities with planted acres rather than base acres, i.e., if a producer has seed cotton base but plants corn in 2022, the ARC-IC benchmark revenue will be determined by corn prices and yields. 

    In addition to the ARC-CO/PLC decision tool, Texas A&M University offers a spreadsheet calculator for producers considering ARC-IC available at www.afpc.tamu.edu.  For the ARC-IC calculator, producers will need the information in Table 1.  Producers can utilize the calculator to compare potential ARC-IC payments with different combinations of FSNs and different price and yield expectations. 

    Table 1. ARC-IC Calculator Inputs

    Graff, Natalie, and Joe Outlaw. “ARC-IC Considerations for 2022 Farm Program Elections“. Southern Ag Today 2(4.4). January 20, 2022. Permalink

  • Hemp Review and Outlook

    Hemp Review and Outlook

    2021

    The hemp industry continues to struggle to find its balance in the agricultural economy. As the industry continues to work through hemp inventories produced in 2019, 2020, and 2021, which have continued to suppress farm gate prices, retail pricing remains sticky. For example, in Kentucky, 1,675 acres of hemp were harvested in 2021 representing a 63% decrease over 2020. Multiple states around the country are experiencing these types of declines. Hemp production destined for extraction continues to dominate the national market. Consumers of hemp products are loyal and purchase mostly online. However, there is market confusion within the industry as consumers need additional education on the differences between hemp and marijuana, according to our research.

    2022

    For the market to move forward in 2022 the industry needs to educate consumers on the differences between hemp and marijuana. Furthermore, uncertainties around regulations, THC content, pet and livestock feed approval, inconsistent smokable laws between states, and FDA approval continue to hinder growth in the hemp sector. Some processors continue to explore new marketing channels by focusing on cannabinoids other than CBD (i.e. CBG, CBN, etc.) or other THC attributes (i.e. delta 8,10).  However, significant increases in floral hemp production are not expected until current stocks are processed (or destroyed because of storage issues) or demand shifts. Conversely, the grain and fiber industries are starting to see an increase in demand as investment in these sectors continue to increase. Hemp continues to be a small sector of agriculture that needs stability before significant increases in acreages are realized.

    Figure 1: State and Region Hemp Biomass Price

    Source: PanXchange (https://panxchange.com/)

    Mark, Tyler. “Hemp Review and Outlook“. Southern Ag Today 2(4.3). January 19, 2022. Permalink

  • Poultry’s Perfect Storm in 2021-22

    Poultry’s Perfect Storm in 2021-22

    While poultry remains the least expensive animal protein, prices are at a sustained multi-year high. Prices normally fluctuate in somewhat of a seasonal fashion, as seen in the 3-year average line above. COVID caused an extreme disruption to the downward side in Q2 2020. Then 2021 changed everything again. Early spring brought the market back to somewhat normalcy as dining away from home regained popularity. Then the highly touted “chicken sandwich wars” heated up as restaurant chains pushed for ways to get customers back through the doors. These and other improving market conditions began to drive prices up in early Q2 ‘21. At the same time, company processing plants struggled with employee absenteeism. Combined with sustained transportation issues and other supply chain weaknesses from the last year, the supply of chicken was unable to keep up with the new soaring demand. The result is sustained high and rising 2021 prices (brown line in chart). 

    Monthly Composite Broiler Price, Weighted Average $/cwt

    Chart Source:  USDA-ERS National Broiler Market-at-a-Glance, 12/30/21 Vol. 68 No. 52

    What will 2022 bring? As poultry companies try to expand live operations to meet demand and keep plants operating at full capacity, they are meeting difficulties on both fronts. Despite increasing plant wages, many are still reporting sustained 20%+ absentee rates for many shifts. Then along came increasing prices for building materials and labor. Contract growers who raise the chickens are finding it almost impossible to afford to build the new housing integrators need to supply more birds to the market. To secure new housing, integrators are having to invest more into the farms, increasing live production costs. It is suspected that these factors along with continued supply chain struggles will ultimately influence prices to stay high in 2022, and possibly beyond. 

    Brothers, Dennis. “Poultry’s Perfect Storm in 2021-22“. Southern Ag Today 2(4.2). January 18, 2022. Permalink

  • The U.S. Dollar’s Influence on ICE Cotton Futures

    The U.S. Dollar’s Influence on ICE Cotton Futures

    It is commonly assumed that a stronger U.S. dollar is a bearish influence on export commodities like cotton.  While that is often true, it is not quite that simple.  Figure 1 compares the inverse pattern of “nearby” (i.e., soonest to expire) ICE cotton futures prices (in red) and an index (in blue) of the U.S. dollar relative to a basket of six currencies: the Euro, Japanese yen, British pound sterling, Canadian dollar, Swiss franc, and the Swedish krona. Those six countries and their currencies have little to do with international cotton exports or imports. However, to the extent that U.S. dollar strength (for whatever reason) against these currencies coincides with U.S. dollar strength versus cotton exporting countries (e.g., Brazil, Australia, Central Asia, and sometimes India), then this chart may reflect situations where a strengthening dollar is directly associated with lower U.S. export competitiveness. The lower U.S. export competitiveness could transform into lower U.S. domestic cotton prices.  As a result, we see an inverse pattern in Figure 1. However, there are periods of time reflected in Figure 1 where the inverse relationship breaks down, e.g., in the center of Figure 1 during 2013. That period coincided with a time when European sovereign debt was weakening the euro relative to the dollar, which represents a distortion to what this chart is trying to explain. 

    Figure1. U.S. Dollar Index versus Nearby ICE Cotton Futures Settlement Price

    A potentially cleaner comparison would be of the U.S. dollar versus the Brazilian real or the Australian dollar.  The more cotton-specific impact of the U.S. dollar value on U.S. exports can be inferred from USDA trade-weighted exchange rate indices.   Looking back at these kinds of indices will show time periods like, for example, in 2015 when the U.S. dollar got 6.4% stronger (year-over-year) compared to the currencies of the specific countries that we trade cotton with.  This means that U.S. cotton was roughly that much more expensive to foreign buyers compared to other cotton exporting countries.

    Lastly, to the extent that large financial institutions (investment banks, hedge funds) are moving money across asset classes, a rise in the dollar could reflect a risk off shift of investment out of stocks and commodities (driving down cotton futures, all other things being equal) and into U.S. treasuries. This would presumably be reflected in a rising U.S. dollar. Parts of Figure 1 may be explained by such movements, and they have little to do with cotton economics or export competitiveness.

    Robinson, John. “The U.S. Dollar’s Influence on ICE Cotton Futures“. Southern Ag Today 2(4.1). January 17, 2022. Permalink