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  • Much Needed Producer Assistance in the House Reconciliation Bill

    Much Needed Producer Assistance in the House Reconciliation Bill

    While far from over, the House version of the President’s reconciliation package—referred to by the President as the “One Big, Beautiful Bill”—contains significant improvements to the farm safety net.  We have previously discussed in Southern Ag Today the dire need for an improved farm safety net for this crop year, either from a farm bill or through this process.  As we write this, House leadership is still working to secure votes for passage.  Once that happens, the Senate will need to pass their version of the bill.  Assuming the House and Senate pass different bills, the differences would need to be reconciled and the conferenced bill would need to again be passed by both the House and the Senate before going to the President to be signed into law.  This sounds daunting, but one of the key elements of reconciliation (and why it has been used by both parties) is that the Senate only needs a simple majority (51) to pass the bill, whereas a normal bill would require 60 votes. 

    The House reconciliation bill includes quite a few changes to the current 2018 Farm Bill that has been extended through September 30, 2025.  In terms of the farm safety net, the two primary commodity programs—Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC)—are extended through the 2031 crop year.  Most importantly, reference prices are increased 10% to 20% depending upon the commodity.  Reference prices would also increase 0.5% annually beginning in 2031, recognizing the need to keep up with inflation in the future.

    The ARC coverage guarantee would be increased from 86% of the benchmark to 90%, and the payment band would increase from 10% to 12.5%.  The first change would make payments trigger sooner, and the second change would increase the amount of the payments.  Loan rates for most commodities would also be increased.

    Combined payment limits for ARC and PLC would be increased from $125,000 to $155,000 and would be adjusted annually for inflation. The bill would also eliminate the LLC penalty (i.e., eliminate the payment limit on pass-through entities while maintaining the payment limit on owners of the entity) as previously highlightedin Southern Ag Today.

    Premium assistance for crop insurance would see increases for individual yield or revenue coverage across all coverage levels.  The Supplemental Coverage Option (SCO) would also see an increase in premium subsidy from 65% to 80%.

    The House bill also contains language to allocate a maximum of 30 million additional base acres to producers who have been planting more acres than they have base acres on farms. 

    The bill has many other agriculture related provisions, but those listed above—if enacted—would strengthen the producer safety net beginning with the 2025 crop.

    Outlaw, Joe, and Bart L. Fischer. “Much Needed Producer Assistance in the House Reconciliation Bill.” Southern Ag Today 5(21.4). May 22, 2025. Permalink

  • Scope of Chinese Retaliatory Tariffs on U.S. Cotton Exports

    Scope of Chinese Retaliatory Tariffs on U.S. Cotton Exports

    The 2025 trade war between the U.S. and China has been an evolving phenomenon.  The U.S. implemented tariffs on Chinese imports effective February 4, which were then increased March 4.  China responded with a variety of tariffs, including 15% additional tariffs on U.S. raw cotton, effective March 10.  

    The above situation continued to change, with the U.S. and China effectively embargoing their mutual trade in April with extreme tariff levels and then adjusting these extreme levels lower in May.  As of May 12, and for 90 days, the Chinese tariff rate on U.S. cotton is 10%.

    With all the policy variation, the direct impact on U.S. cotton has probably been lower in the current 24/25 marketing year than it would have been in previous years.  The reason is that 2024/25 has seen an historically low level of U.S. export commitments to China of upland cotton (Figure 1). Thus, there is relatively little volume of U.S. cotton to be directly impacted by the initial, extreme, or current levels of Chinese tariffs.

    The remaining tariff risk to cotton demand is more likely an indirect influence.  To the extent that tariffs imposed by the U.S. and its trading partners depress GDP, it follows that demand for semi-durable discretionary textile products could be reduced.  This possibility is suggested in Figure 2, where the percentage change in world GDP appears to move directly with annual per capita cotton consumption.

    Robinson, John. “Scope of Chinese Retaliatory Tariffs on U.S. Cotton Exports.” Southern Ag Today 5(21.3). May 21, 2025. Permalink

  • Working Less on Friday!

    Working Less on Friday!

    Friday, May 23rd, brings us the next USDA Cattle on Feed report.  Most analysts anticipate April’s feedlot marketings to be more than 3 percent smaller than last year, with the same number of working days in April 2025 compared to April 2024.  Fed steer and heifer slaughter has declined dramatically, more than 5 percent from year-ago levels, over the last six weeks.  

    Saturday slaughter is often used as a measure of capacity utilization.  Fewer animals processed on Saturdays indicates declining capacity utilization or over capacity.  Declining cattle numbers mean that fewer may be processed on other days of the week.  Daily slaughter should suggest some thoughts about the ability of current packing plants to remain open in future months as cattle numbers contract.

    Over the last 6 weeks, steer and heifer slaughter has averaged 58,671 head on Fridays, down from 85,958 head during the first quarter of the year.  Other days of the week have remained relatively close to the average during the first quarter of the year and compared to all of 2024.  It appears that overall, packers are dealing with fewer cattle numbers by maintaining capacity on Monday through Thursday, even increasing head per day in the middle of the week, while sharply cutting back on Friday.  

    The decline in fed steer and heifer slaughter, even combined with historically heavy dressed weights, has certainly supported fed cattle prices to new record highs in recent weeks.  Grilling season beef demand has pulled the market even higher.  Feeder cattle and calf prices have gone along for the ride.  The cattle on feed report will provide another indication of how tight fed cattle supplies will be in the next few months.  Fewer cattle on feed will continue the trend of reduced Friday slaughter and may lead to reductions on other days, as well.  

    Anderson, David. “Working Less on Friday!” Southern Ag Today 5(21.2). May 20, 2025. Permalink

  • Analyzing the Upside and Downside Risk in PRF Policy Selection: Timing Mismatch

    Analyzing the Upside and Downside Risk in PRF Policy Selection: Timing Mismatch

    Pasture, Rangeland, and Forage (PRF) insurance has become a key risk management tool for ranchers and forage producers looking to protect themselves against the unpredictability of rainfall. However, like all insurance products, PRF comes with its own set of risks. In this article, we explore the risk associated with producer interval selection and its potential downsides and upsides.

    A unique risk with PRF insurance is that rainfall during a particular two-month interval does not necessarily lead to forage growth during that interval. Rainfall is obviously crucial for forage production, but the impact of precipitation on forage is not instantaneous. Often, rain that occurs during one interval may contribute to forage growth in the following months more than the month in which the rain occurred.  Therefore, choosing a PRF interval that aligns directly with your critical forage production interval could potentially be a mismatch.

    A downside of this timing mismatch is that a producer may not receive an indemnity payment when needed. For instance, if the insured interval experiences average rainfall but the interval prior had low precipitation or the rain came towards the end of an interval, the forage growth may still be insufficient. Unfortunately, since the payment is based strictly on the rainfall during the insured interval, producers might not receive any payout despite facing significant challenges. The chance of this outcome occurring is considered a False Negative Probability (FNP). False in the sense that the signal (rainfall) did not correspond with the underlying production need (forage production), and negative in that the outcome provided no protection when you needed it. 

    On the flip side, this same mismatch can work in favor of producers. Suppose the insured interval experiences low rainfall, but the previous interval had good precipitation. In that case, sufficient forage growth can occur in the insured interval, and the insured can still receive an indemnity payment. The likelihood of the PRF policy providing a payment even when forage conditions are favorable is the False Positive Probability (FPP).

    Figure 1 below illustrates this potential downside risk through the prevalence of FNPs in grids in Arkansas. These values were calculated by creating a forage/vegetation index to match the Rainfall Index used by the PRF program. Using Normalized Difference Vegetation Index (NDVI) values, we found the FNP percentages for each grid and each interval. Figure 1 highlights the June-July interval, telling us the percent chance that the forage/vegetation index would indicate a need for an indemnity based on the coverage level when the policy using the rainfall index has not been triggered (Keller & Saitone, 2022). This shows the prevalence of this issue and that producers in certain regions should be more wary of this type of risk. 

    A unique risk with PRF insurance is tha

    Figure 1: False Negative Probability Percentages in Arkansas Grids for the June-July Interval (1981-2023)

    Note: These values were calculated using an assumed 90% coverage level

    Inversely, Figure 2 presents the frequency of FPPs showing the upside risk. Reversing the methodology, these were calculated as the percent chance that the rainfall index indicates an indemnity should be issued based on the coverage level when the forage/vegetation index says an indemnity should not be issued. This scenario tends to be more prevalent, which is good for the policyholder. Certain grids exhibiting high FPPs also tend to show high FNPs, indicating they might frequently receive unwarranted payments while simultaneously facing situations where they do not receive payments when needed. This raises an issue with the producer, causing them to change how they manage their finances to protect themselves instead of the program doing so properly. 

    Figure 2: False Positive Probability Percentages in Arkansas Grids for the June-July Interval (1981-2023)

    Note: These values were calculated using an assumed 90% coverage level.

    While these figures only highlight the prevalence of FNP and FPP in Arkansas, these risks are inherent in PRF and are just as likely in the other southern states. To counter this risk, producers should consider not only the months when forage is most needed, but also the months when moisture and precipitation are most important. Using this information, they can choose their PRF intervals appropriately and reduce the risks involved in the program.

    References

    Keller, James B., and Tina L. Saitone. 2022. “Basis Risk in the Pasture, Rangeland, and Forage Insurance Program: Evidence from California.” American Journal of Agricultural Economics 104 (4): 1203–23. 

    Davis, Walker B., Lawson Connor, and Hunter Biram. “Analyzing the Upside and Downside Risk in PRF Policy Selection: Timing Mismatch.” Southern Ag Today 5(21.1). May 19, 2025. Permalink

  • What is Crop Protection Legislation

    What is Crop Protection Legislation

    If you have been following the national agricultural news lately, beyond discussions on policy, there has been a focus on states’ legislatures considering “Crop Protection” legislation. This liability protection would extend to companies producing federally approved pesticides. 

    We have all seen the news of large settlements from users of federally approved pesticides claiming linkages between their use and cancer. The biggest of these lawsuits is the Roundup litigation. To date, Bayer has paid roughly $10 billion to settle claims that Roundup has caused cancer.  At the same time, class actions have been filed against Syngenta, the manufacturer of Paraquat, for claims that the product causes Parkinson’s Disease.  Finally, AMVAC Chemical Corporation has been sued due to claims that Dacthal (DCPA) has caused birth defects.  

    The debate on Crop Protection legislation concerns this type of litigation. Under the legislation being proposed in several states, as long as the federally approved pesticide includes a label with the most recent human health assessment required under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) or a label containing consistent with the Environmental Protection Agency’s (EPA) carcinogenicity classification for the pesticide required under FIFRA this would be a sufficient warning label.  Under the legislation, this label would be enough to meet the duty to warn under state law.  This would severely limit the ability for users to sue later for alleged health issues (such as cancer or Parkinson’s Disease).  

    This legislation has been signed into law in North Dakota, and as of the writing of this article, it has passed the Georgia legislature and has not been signed by the Governor.  Similar legislation is currently before the legislatures in Florida, Iowa, Missouri, Oklahoma, and Tennessee. 

    Georinger, Paul. “What is Crop Protection Legislation.” Southern Ag Today 5(20.5). May 16, 2025. Permalink