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  • Placements Lower Than Expected in January Cattle-On-Feed Report

    Placements Lower Than Expected in January Cattle-On-Feed Report

    The January Cattle on Feed report was released on Friday afternoon. Total on-feed inventory to start the year was estimated at a little over 11.8 million head, which is down by just under 1% from January of 2024. Even though feeder cattle supplies have been lower, feedlot inventories ran above year-ago levels for eight of twelve months in 2024 as lower feed prices encouraged longer feeding times. While I don’t want to read too much into it, this was the largest year-over-year decline since May.

    Placements were once again the headliner of the report as they came in below, and outside the range of pre-report estimates. December 2024 placements were estimated at 1.64 million, which was 3.3% below December 2023. On the surface, this seemed logical as December represented a full month of not receiving live cattle imports from Mexico. This also marked the second month in a row with placement levels being more than 3% below year-ago.

    Friday’s report was also a quarterly cattle-on-feed report, which means it included an estimate of the steer/heifer breakdown. In the absence of a July cattle inventory report, this has been one of the main indicators economists have been tracking for evidence of heifer retention. Heifers accounted for 38.7% of the total on-feed inventory on January 1, 2025. While this doesn’t speak to retention, it is worth noting that this is about 1% lower than last January and 1% lower than October 2024. So, it does bear watching as we move further into 2025. Again, I think imports from Mexico had some impact here as heifers had represented a higher than usual share of imports prior to the ban in late November.

    Last week’s cattle on feed report will be overshadowed later this week as USDA-NASS will release their annual inventory estimates on the afternoon of January 31st. While beef cow slaughter was down sharply for 2024, most are still expecting continued decreases in beef cattle numbers at the national level. It will be interesting to see the state-by-state numbers and specifically to look at areas where heifer retention may have already begun. Given the favorable price outlook for calves, I think heifer retention is very possible in 2025 if weather is cooperative. But I also think this will be a relatively slow cow-herd expansion once retention does begin.

    Burdine, Kenny. “Placements Lower Than Expected in January Cattle-On-Feed Report.” Southern Ag Today 5(5.2). January 28, 2025. Permalink

  • Short-term Heating Fuel Decisions Facing Commercial Poultry Growers 

    Short-term Heating Fuel Decisions Facing Commercial Poultry Growers 

    It is the heart of the winter in the southeastern broiler belt. January and February are typically the coldest, but March often comes in like a lion, bringing plenty of cold with it, too. Commercial poultry growers have embraced the risk management strategy of pre-buying or contract “booking” propane ahead to secure the lowest prices possible each year. But by the end of the season, it is not unheard of for growers to run out of pre-purchased or contracted allotments and be left subject to late-season cash market price fluctuations or potentially purchasing additional contract allotments at increased prices. This can leave growers wondering which option is best to end the season. There are several things to consider.

    U.S. propane prices are certainly affected by local markets, but the wholesale component for those prices is still impacted by international supply and demand pressure on crude oil. It seems the current world economy is slowing, especially the Chinese economy, potentially signaling a decreased demand for oil. Less oil production usually means less propane production/supply, supporting a higher price. This could be somewhat offset by increased war demands on petroleum production. Locally, Gulf Coast propane supplies are hovering at the top of the five-year average (Fig. 1). However, wholesale prices are about 20% higher than at the same time last year (Fig 2). Gulf Coast propane production has been steady while overall demand for LP is down currently compared to last year (Fig 3), suggesting lower prices may be on the horizon. What does this mean for the commercial poultry grower reaching the end of his contract allotment? Local market dynamics will likely affect prices more than international supply and demand dynamics for the remainder of winter. If the weather forecast suggests a milder end to winter, it may be prudent to end the season on the cash market as needed, expecting local prices to decrease going into spring rather than signing a late-season contract. Then, wait for the summer booking to prepare for winter 2025-26. However, if a grower can contract additional LP booked for close to their previous contract price, it is usually a good risk management decision to do so. It’s up to the grower to decide when that difference warrants taking the risk. 

    Natural gas users are typically tied to the current cash price for gas as it is delivered at the meter. Local (U.S.) supply and demand are the primary drivers of NG prices for U.S. consumers, which is greatly affected by weather. Although the South Atlantic region has thus far experienced 59 fewer Heating Degree Days than normal, 26 fewer than last year,temperatures are beginning to fall, leading to local NG prices increasing across the region and nationally. Current US-EIA data shows a 4.7% increase in NG prices for the southern region, with the Henry Hub wholesale price (southeastern source for NG) rising $0.37/MMBtu the week of January 13, 2025 (Fig 4).  All of this seems to indicate a rising price for commercial natural gas users for the remainder of this winter season. 

    As always, it’s never too late to tighten up the leaks and shore up the insulation in the poultry houses. A little savings can go a long way in an increasing fuel price market. 

    Fig. 1 – Gulf Coast region LP supply is near the high 5-year average (U.S EIA). 

    Fig. 2 – Wholesale LP prices are approximately 20% higher than this time last year.

    Fig. 3 – LP demand is down slightly compared to last year, suggesting lower prices may be on the horizon. 

    Fig 4. – NG prices at the Henry Hub (southeastern source) are trending higher at the end of the season, mainly due to decreasing temperatures in the region. 

    Brothers, Dennis. “Short-term Heating Fuel Decisions Facing Commercial Poultry Growers.” Southern Ag Today 5(5.1). January 27, 2025. Permalink

  • Where Does My Food Come From? What Google Searchers Want to Know

    Where Does My Food Come From? What Google Searchers Want to Know

    A recently updated national study of Google Search terms highlights the importance of “Local Food.” Food supply chains are complicated and vary substantially across products and places. Still, several trends in people’s online searches are striking and may have important implications for farms and food businesses looking to position their products in the U.S. food market.

    While “Local Food” had been experiencing a steady upward trend before the COVID-19 pandemic, search interest spiked significantly during the past three years. Similarly, “Cottage Food” experienced an even more significant spike in search activity, reflecting high interest in artisanal and specialty foods. Cottage foods are specific types of foods made in an individual’s home kitchen. Because many of these foods must be sold in person directly from the producer to the end consumer, they are also often locally produced and sourced. Over the past two decades, “Local Food” and “Cottage Food” reached their peak popularity in 2024 (Figure 1).

    These trends may follow and motivate efforts undertaken by state departments of agriculture to promote local farm and food products in their respective retail settings.  While not identifying the values driving these search choices, they point to potential opportunities for local food merchandising strategies that convey an authentic local connection to consumers.  

    Searches for “Online Groceries” and “Home Gardening” saw an uptick in 2020 as consumers sought a better handle on how and where to get food. Interestingly, the search interest for these terms has not continued, as consumers return to in-person grocery shopping, and time, financial, and other constraints continue the trend away from home gardening.  

    The underlying drivers motivating these searches may be inflation-conscious consumers’ desires to get the most out of their food dollars. The positive trend and recent popularity of “Food Waste” searches also point to potential opportunities for farms and food businesses to continue or improve their messaging around efficient production, upcycling, gleaning and food bank donations, and other efforts to help people access high-quality and nutritious foods.

    Woods, Tim, and Alba J. Collart. “Where Does My Food Come From? What Google Searchers Want to Know.” Southern Ag Today 5(4.5). January 24, 2025. Permalink

  • Estimated Total Economic Impacts from Trade Policy Shifts-Worst-Case Scenario Revisited

    Estimated Total Economic Impacts from Trade Policy Shifts-Worst-Case Scenario Revisited

    The recent Southern Ag Today policy/trade article on December 12 by Goyal et al discussed the state-level economic consequences for potential trade policy shifts following the 2024 U.S. presidential election. In summary, their analyses investigated the worst-case scenario if the US where to impose a 60% tariff on Chinese goods, including a 10% tariff on imports from other countries. Such an action, as indicated by Goyal et al, could result in a 60% tariff on US agricultural exports and further tariffs from other trading partners. Their projected export losses under this scenario for 2025 by commodity and state are replicated in Table 1 below:

    Table 1. State Level Shocks by Commodity Grouping Based on Worst-Case Scenario*
    StatesCottonPoultrySoybeansBeefPorkFeedsDairyCornWheatOthersTotal
    TX-$847-$153-$11-$340-$32-$95-$184-$76-$81-$1,398-$3,217
    AR-$196-$237-$567-$17-$7-$39$0-$43-$9-$907-$2,022
    NC-$112-$258-$239-$9-$281-$36-$10-$42-$30-$779-$1,796
    GA-$345-$255-$20-$13-$4-$23-$25-$24-$7-$869-$1,585
    FL-$20-$13$0-$18$0-$5-$25-$3$0-$1,356-$1,440
    KY$0-$59-$350-$30-$17-$74-$10-$73-$37-$771-$1,421
    MS-$175-$143-$424-$8-$9-$29-$1-$32-$4-$452-$1,277
    TN-$104-$35-$276-$20-$13-$37-$5-$43-$28-$426-$987
    OK-$96-$47-$45-$120-$133-$17-$8-$13-$133-$279-$891
    LA-$52-$33-$203-$7$0-$22-$1-$27$0-$534-$879
    AL-$107-$213-$49-$15-$2-$15$0-$17-$11-$290-$719
    VA-$26-$58-$93-$14-$7-$20-$17-$18-$12-$351-$616
    SC-$59-$60-$50-$5-$4-$13-$2-$16-$7-$268-$484
    *60% tariff on US agricultural exports plus additional tariffs from other trading partnersSource: Southern Ag Today, December 12, 2024 (Goyal et al)

    Of interest would be the total economic impacts (including multiplier effects) based on this worst-case scenario. Using the direct impacts from Table 1 (excluding the category grouping “Other” because of uncertainty what that grouping entails), an input-output model (IMPLAN) can provide this information. IMPLAN model output includes descriptive metrics of the economy such as total industry output (a measure of economic activity) and total value added. Total industry output (TIO) is defined as the value of production by industry per year. Total value added or gross regional product is defined as all income to workers paid by employers; self-employed income; interests, rents, royalties, dividends, and profit payments; and excise and sales taxes collect by business from individuals. It is equivalent to a state’s Gross Regional Product, which is analogous to Gross Domestic Product for the entire U.S.

    Based on the IMPLAN state model runs using 2023 data and reporting the economic information in 2025$, the backward linked[1] results are displayed in Table 2. The direct impacts for economic activity, -$8.7 billion, are what was presented by Goyal et al. The indirect impacts, which account for the decrease in economic activity from input suppliers, total -$3.1 billion. Decreased household spending, or the induced impacts, totals -$2.0 billion. The total economic impacts are close to -$14.0, a -$5.2 billion difference from the direct impact of -$8.7. The decrease in Gross Regional Product totaled -$6.6 billion. Tax impacts as a result of Goyal et al’s worst-case scenario analysis totals -$992.0 million.

    Table 2. Estimated Economic Impacts from Worst-Case Scenario (2025$)*
     TIO (EconomicActivity)Gross Regional ProductTaxes
     (billion $)(million $)
    Direct1-$8.7-$3.7-$342.7
    Indirect2-$3.1-$1.6-$373.8
    Induced3-$2.0-$1.2-$275.5
    Total4-$13.9-$6.6-$992.0
    *60% tariff on US agricultural exports plus additional tariffs from other trading partners1Direct effects are those what was presented by Goyal et al.2Indirect effects are those attributable to the input supplying businesses (e.g., expenditures on raw materials, supplies, and other operating expenses).3Induced effects are created as the new income generated by the direct and indirect effects is spent and re-spent within the region.4Total is the sum of the direct, indirect, and induced effects.

    This short, quick analysis gives an example of how an initial change in direct spending has ripple effects throughout the economy. Not only are the commodities in question affected,  but input suppliers and household spending also feel the negative shock in this example. Consequently, tax receipts are affected as well.

    [1]Describes the interconnectedness of an industry with its supply chain and “looks backward” to its necessary intermediate inputs to produce its output. In input-output modeling, Type I multipliers measure these backward linkages, whereas the Type SAM multipliers expand on these linkages to include household spending (IMPLAN Glossary “Backward Linkage”, 2017). 

    References

    Goyal, R., S. Steinbach, Y. Yildirim, and C. Zurita. 2024. “State-Level Effects of Potential Trade Policy Shifts on Southern U.S. Agriculture.” Southern Ag Today. December 12.

    IMPLAN Group LLC, IMPLAN System (2023 data and Cloud Platform V. 24.6 Release), 16905 Northcross Dr., Suite 120, Huntersville, NC  28078. Available at implan.com.

    Menard, R. Jamey. “Estimated Total Economic Impacts from Trade Policy Shifts-Worst-Case Scenario Revisited.” Southern Ag Today 5(4.4). January 23, 2025. Permalink

  • Export Challenges Drive Down Sorghum Premiums

    Export Challenges Drive Down Sorghum Premiums

    Sorghum prices have traditionally tracked corn prices, adjusted by a premium or discount primarily dictated by export demand. However, recent trends reveal a decline in sorghum premiums, driven by reduced exports, particularly to China.

    In late 2024, sorghum premiums experienced a significant drop. Figure 1 shows U.S. Average Prices Received by Farmers for Sorghum Minus Corn (January 1989 – November 2024). In August, the premium stood at 70 cents over corn but fell to just 3 cents by November 2024. Projections suggest that December could witness a negative basis. This trend has been particularly pronounced in Texas, where January 2025 prices showed a discount of 59 cents per bushel compared to corn (Texas cash average price for the North, Central, and South Panhandle, USDA, AMS, Market News). 

    Figure 1. U.S. Average Prices Received by Farmers Sorghum Minus Corn January 1989-November 2024(Source: NASS/USDA/Ag Prices 12-31-24)

    During the 2023/24 season, the level of exports increased along with higher production and lower domestic consumption. Production in 2023/24 increased to 318 million bushels from the previous year of 188 million bushels, a result of significantly larger harvested acreage and better yields. The exports-over-domestic-consumption ratio also increased to 3.00 alongside better premiums over corn (Figure 2).

    Figure 2. Sorghum to Corn (Premium or Discount) and the ratio of sorghum exports to domestic use. Source (Dr. M. Welch, USDA February WASDE, USDA, NASS Agricultural Prices)

    Looking ahead, USDA’s January WASDE projections anticipate a 23-million-bushel increase in 2024/25 production, along with a rise in domestic use to 125 million bushels. WASDE increased area harvested and projected yield for the 2024/25 season compared to their latest report in December 2024. However, exports are projected to remain steady at 220 million bushels. This results in a reduced export-to-domestic-use ratio of 1.76, implying a likely premium of just 2 cents per bushel using Dr. Welch’s model to calculate sorghum-to-corn premium or discount as a function of the ratio of sorghum exports to domestic use (Figure 3). However, we are five months into the marketing year and this ratio may change as the marketing year progresses and USDA revises sorghum domestic use and export estimates.

    Figure 3. Sorghum-to-Corn Premium/Discount as Function of the Ratio of Sorghum Exports to Domestic Use. Source: Dr. Mark Welch, USDA February 2024 WASDE and 2024 Ag Outlook Conference.

    The slowdown in Chinese sorghum imports has exacerbated discounts. As of January 2025, U.S. sorghum export sales commitments represent only 20% of the USDA’s projected marketing year exports, far below the historical average of 75% by March (Figure 4). This shortfall has driven premiums downward and widened discounts across various regions. With only 20% of projected exports committed by January 2025, achieving the USDA’s 220-million-bushel forecast appears challenging. The direction of trade policies and tariffs will influence U.S. sorghum exports. Whether this is positive or negative for sorghum prices is yet to be determined.

    Figure 4. U.S. Grain Sorghum Export Sales Commitments, 2024/25 MY. (Source: USDA, FAS, January 16, 2025). 

    Abello, Pancho. “Export Challenges Drive Down Sorghum Premiums.” Southern Ag Today 5(4.3). January 22, 2025. Permalink