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  • Fed Cattle Pricing: Will Well-Intentioned Proposals Actually Reduce Cattle Prices?

    Fed Cattle Pricing: Will Well-Intentioned Proposals Actually Reduce Cattle Prices?

    While questions about market power in the meatpacking sector have been around for well over 100 years, the spike in retail beef prices following the fire at the Tyson facility in Holcomb, Kansas, in August 2019, and the COVID-19 outbreak in early 2020, brought about a renewed focus on the issue.  In response to concerns in the countryside, several legislators offered policy solutions, with the bulk focused primarily on enhancing transparency and increasing negotiated trade volumes in fed cattle markets. 

    With a number of legislative proposals floating around and with the Livestock Mandatory Reporting Act set to expire in September 2020, the bi-partisan leadership of the House Agriculture Committee asked the Agricultural & Food Policy Center (AFPC) at Texas A&M University to evaluate a number of issues in the cattle markets.  Given the sensitivity and regional nature of the topic, we chose to partner with several respected livestock economists from across the country.  That work ultimately culminated in the release of a book in October 2021 that cautioned against many of the proposed changes, warning that proposals to mandate a minimum amount of negotiated purchases could ultimately reduce prices to cattle producers.

    Following the release of that book, Senators Grassley (R-IA), Fischer (R-NE), Tester (D-MT), and Wyden (D-OR) released a compromise bill – the Cattle Price Discovery and Transparency Act of 2021 (S. 3229) – that would, among other things, require the U.S. Secretary of Agriculture to establish a regional mandatory minimum threshold for the percentage of cattle purchased under negotiated grid or negotiated pricing terms.  Senator John Boozman, Ranking Member, Senate Committee on Agriculture, Nutrition, and Forestry asked AFPC to evaluate the bill.  Our January 2022 report found that an additional 6 million head would have to be purchased via negotiation from 2022 to 2026, with the burden (and cost) falling largely on the Southern Plains.

    In April 2022, Senators Fischer (R-NE), Grassley (R-IA), Tester (D-MT), and Wyden (D-OR) released an updated version of their bill – the Cattle Price Discovery and Transparency Act of 2022 (S. 4030).  Senator Boozman again asked AFPC to weigh in on the updated bill.  Our latest report, released last Friday, found that the number of head impacted by the updated bill would likely be lower than in S. 3229, but we cautioned that the updated bill gives so much discretion to the Secretary that it was virtually impossible to assess the expected costs to the cattle industry.  When taking all of the uncertainty into account, we noted that it was conceivable that the estimated cost of the latest bill could far exceed earlier estimates. 

    Last week, a group of livestock economists – all of whom were involved in drafting the book noted above – independently released a report noting there is “no research evidence of any significant or persistent fed cattle price discovery problem at this time” and that proposed legislation would impose “many millions of dollars of additional cost, added risk, and lost value”  that would result in “lower feeder cattle prices and higher consumer beef prices.”  Over the course of the past two years, that is a consistent message we’ve heard from every economist we’ve consulted.

    Fischer, Bart. “Fed Cattle Pricing: Will Well-Intentioned Proposals Actually Reduce Cattle Prices?“. Southern Ag Today 2(18.4). April 28, 2022. Permalink

  • Extension Budgets and Budget Tools

    Extension Budgets and Budget Tools

    The Southern Ag Today team of editors and contributing authors are, for the most part, a group of Extension Agricultural Economics Faculty from the Southern Region Land-Grant University Systems.  Many of this same group are responsible for a decades-old tradition of publishing crop and livestock enterprise budgets in their respective states or regions.  Extension budgets are typically published early in the year before the growing season starts, and they serve a number of purposes.  The first is to simply provide examples of common practices used in region-specific enterprises, as well as to illustrate a possible set of revenue/costs expectations for the coming year.  Ag lenders sometimes rely on these budgets as benchmarks to compare loan applications and borrowers’ production plans.  Various state and federal agencies and other agricultural industry researchers may use these budgets to compare practices, costs, or expected yields across regions and over time.  However, most of us that contribute to creating Extension budgets would consider those as secondary benefits.  

    Extension budgets are best used as a planning tool, and even better if you make them your own with the published budget serving as a guide.  To that end, many of our budget projects also offer downloadable spreadsheets and other tools to create your own budgets.  The pre-season budget planning process offers a number of management benefits, including the ability to:

    • compare potential profits of various enterprises or production plans and choose appropriate crop mixes.
    • assess cost of production and break-even prices/yields; which help develop marketing plans and select appropriate levels of insurance.
    • conduct sensitivity analyses on specific items.  For example, determining the impact of recent fertilizer price increases on expected net returns and evaluating potential production plan adjustments.  

    Another benefit to a formal spreadsheet budget is the ability to do what I call active or continuous budgeting.  The idea being that the budget and the budgeting process does not end when the growing season starts.  As you progress through the production season, planned expenses become actual expenses while yield and price expectations are constantly changing.  Incorporating these in-season changes into your budgets as you go will keep you mindful of cashflow needs and will assist with ongoing production and marketing decisions.  The process will also sharpen your management skills and improve your pre-season production plans in future seasons.  

    To find budget publications and resources in your area, click below for your state’s Land-Grant University Extension program.  

    Alabama             https://www.aces.edu/blog/tag/profiles-and-budgets/?c=farm-management&orderby=title

    Arkansas            https://www.uaex.uada.edu/farm-ranch/economics-marketing/farm-planning/budgets/crop-budgets.aspx

    Florida  https://fred.ifas.ufl.edu/extension/commodityenterprise-budgets/

    Georgia              https://agecon.uga.edu/extension/budgets.html

    Kentucky            https://agecon.ca.uky.edu/budgets

    Louisiana         https://www.lsuagcenter.com/portals/our_offices/departments/ag-economics-agribusiness/extension_outreach/budgets

    Mississippi          https://www.agecon.msstate.edu/whatwedo/budgets.php

    North Carolina   https://cals.ncsu.edu/are-extension/business-planning-and-operations/enterprise-budgets/

    Oklahoma          http://www.agecon.okstate.edu/budgets/

    South Carolina   https://www.clemson.edu/extension/agribusiness/enterprise-budget/index.html

    Texas                  https://agecoext.tamu.edu/resources/crop-livestock-budgets/

    Tennessee          https://arec.tennessee.edu/extension/budgets/

    Klose, Steven. “Extension Budgets and Budget Tools“. Southern Ag Today 2(18.3). April 27, 2022. Permalink

  • Index of Weekly Google Searches for ” How to Cook Lamb”, 2004-2022

    Index of Weekly Google Searches for ” How to Cook Lamb”, 2004-2022

    Lamb prices have reached record highs over the past 18 months.  One reason is growing lamb demand.  Today’s figure is Google searches for phrases including or similar to “How to Cook Lamb.”  Internet traffic on this topic has steadily increased since 2004. But, in general, searches for instructions on how to cook lamb have risen steadily, with sharp growth occurring since the pandemic.

    Why the growth post-pandemic? Lamb was already growing in popularity, as evidenced by the search history in the chart above. Generational changes in tastes and preferences, as well as diversifying demographics led to sustained, though small growth in lamb consumption through the mid-2010s. Restaurants like Zoe’s Kitchen that offer Mediterranean cuisine and other restaurants like Arby’s began to increase lamb offerings on menus. But the real jump in consumption came during the pandemic, when the price of other protein products skyrocketed and those products became harder to find due to supply chain issues. Though lamb remains a relatively expensive protein product, the increase in the price of beef, pork, and chicken meant that lamb became relatively more accessible. Combined with more time at home, many consumers seemed willing to try cooking new meals – including lamb.

    Finally, today’s chart illustrates the significance of holidays to the lamb market. The left-hand red line represents search traffic for how to cook lamb around Christmas in 2019, and the right-hand red line represents search traffic for how to cook lamb around Easter in 2020.  Search traffic spikes each year around Christmas and a set of spring holidays which include Easter, Passover, and Ramadan. The spring period is an incredibly important season for lamb demand, which is why we focus on it around this time each year. Fun fact, the top searched phrase for how to cook lamb over the last two years was, “How to cook lamb in an instant pot?”. 

    Benavidez, Justin. “Index of Weekly Google Searches for “How to Cook Lamb”, 2004 – 2022“. Southern Ag Today 2(18.2). April 26, 2022. Permalink

  • Projected Decrease in Peanut Acreage Could Have Greater Impacts on Overall Production

    Projected Decrease in Peanut Acreage Could Have Greater Impacts on Overall Production

    Peanut acres in the U.S. decreased 5% in 2021, but with strong yields, total production ended almost 9% higher than in 2020.  The 2022 crop year is shaping up to start with a similar story on acreage. However, early indications point to the potential for a different result at the end of the year.  The prospective plantings report by the USDA was released on March 31, 2022, which showed U.S. peanut farmers intend to plant 3.4% fewer acres in 2022 compared to a year prior.  This decrease in intentions has been driven largely by high prices for other row crop alternatives and thus favorable marketing opportunities for other crops.  This competition for acres has been recognized by shellers who have offered higher contracts over the past few months than had been offered in recent years.

    While a decline in acres of less than 4% does not seem to be very much, especially after a year of high yields, the distribution of that decline has the potential to have a much larger impact on production.  In 2021, the top three states in planted acreage were Georgia, Alabama, and Florida (see Table 1).  These three states accounted for about 71% of the total U.S. peanut acreage last year and are forecast to plant 95,000 less acres this year, a decline of 8.2%. Offsetting some of those lost acres are increases in South Carolina and Texas, with 20,000 additional acres planned in each state.  The challenge here is going to be the weather.

    The West Texas area where peanuts are produced is currently facing extreme drought (U.S. Drought Monitor as of April 14, 2022).  The National Oceanic and Atmospheric Administration (NOAA) expects this drought to continue or expand throughout the spring.  This may make planting extremely difficult in that region.  Even if that intended acreage is achieved, it will be important to watch how yields develop, given the expected continuation of dry weather. Texas is also not the only part of the peanut belt with dry weather.    Abnormally dry and moderate drought continues across the peanut belt in Alabama, the Florida Panhandle, Georgia, South Carolina, and North Carolina (U.S. Drought Monitor as of April 14, 2022).  Beyond spring planting, the southeast expects neutral conditions where tropical moisture will determine if drought conditions persist (Knox 2022).  

    So, on the surface, a small decline in acreage after a large crop may help balance ending stocks for the 2022-23 marketing year.  This would take the current 2021-22 forecasted ending stocks of 2.3 million pounds and significantly tighten market supply.  However, the location of increased acres, current drought and dry conditions, and the potential for persistent drought throughout the summer could significantly impact the fall crop and the peanut market.  The risk of lower yields and less harvested acreage could potentially drop ending stocks significantly to 2016-17 levels of around 1.5 million pounds.

    Table 1. Peanut Acreage in 2021 and 2022 Prospective Plantings 
    State20212022Acreage
    Change    		Percent
    Change
    ALABAMA190,000175,000-15,000-7.9%
    ARKANSAS45,00035,000-10,000-22.2%
    FLORIDA180,000160,000-20,000-11.1%
    GEORGIA790,000730,000-60,000-7.6%
    MISSISSIPPI25,00020,000-5,000-20.0%
    NEW MEXICO6,50011,0004,50069.2%
    NORTH CAROLINA110,000120,00010,0009.1%
    OKLAHOMA17,00013,000-4,000-23.5%
    SOUTH CAROLINA65,00085,00020,00030.8%
    TEXAS170,000190,00020,00011.8%
    VIRGINIA27,00032,0005,00018.5%
    Total U.S.1,625,5001,571,000-54,500-3.4%
         
    Source: USDA NASS Prospective Plantings, March 31, 2022

    Sources:

    NOAA. U.S. Spring Outlook 2022: Drought to expand amid warmer conditions, March 17, 2022. https://www.climate.gov/news-features/understanding-climate/us-spring-outlook-2022-drought-expand-amid-warmer-conditions

    Knox, Pam. April and summer 2022 outlook for Georgia and beyond, April 7, 2022.  https://site.extension.uga.edu/climate/2022/04/april-and-summer-2022-outlook-for-georgia-and-beyond/

    Rabinowitz, Adam. “Projected Decrease in Peanut Acreage Could Have Greater Impacts on Overall Production“. Southern Ag Today 2(18.1). April 25, 2022. Permalink

  • Federal Judge Strikes Down Texas Drone Law as Unconstitutional

    Federal Judge Strikes Down Texas Drone Law as Unconstitutional

    A judge on the United States District Court for the Western District of Texas has held that the “Use of Unmanned Aircraft” statute violates the First Amendment.  View Order here. The lawsuit, National Press Photographers Association v. McCraw, was filed by two media organizations and an individual journalist who claimed that provisions in this 2013 Texas statute violate their First Amendment rights.  In particular, the plaintiffs challenged two statutory concepts.  The first prohibits a drone from capturing an image of an individual or privately owned real property with the intent to conduct surveillance.  Numerous exceptions exist for a variety of uses including real estate agents, aerial mapping, and professional or scholarly research.  Second, they challenge a provision essentially prohibiting operating a drone over a correctional facility, detention facility, critical infrastructure facility, or sports venue.  Again, there are exceptions to the statute, allowing drones to fly over these facilities for “commercial purposes.”  Neither provision contains a newsgathering exception.  

    Judge Pitman found the statute to violate the First Amendment as it is not narrowly tailored to serve a compelling state interest and is also unconstitutionally vague. To read more about this decision, click here.

    Several other states have drone statutes as well, including several Southern states.  To view a compilation of those state laws from the National Agricultural Law Center, click here.

    Lashmet, Tiffany. “Federal Judge Strikes Down Texas Drone Law as Unconstitutional“. Southern Ag Today 2(17.5). April 22, 2022. Permalink