Southern Ag Today

Blog

  • Is the Current CSA Model Sustainable? A Lesson from Korea

    Is the Current CSA Model Sustainable? A Lesson from Korea

    The popularity of Community-Supported Agriculture (CSA) has been on a downward trend for over 20 years. As such, the continuous decline of CSAs raises the question of whether their traditional business model can compete with other local food sources. Since the first CSA program was introduced in 1986, CSAs have not changed their core model; farmers and consumers maintain a direct relationship, ensuring financial support for the farmers while providing members with locally grown food. Typically, CSA members pay a seasonal up-front fee ranging from $400 to $800 in exchange for predesignated boxes of raw ingredients, which can be picked up or delivered. Though many CSAs have partially modified their model with up-front pricing policies and CSA box options, their core model has yet to change since its inception. Meanwhile, CSAs became the least favorable option for local food customers (Seo & Hudson, 2023). Many larger retailers provide local food with greater accessibility, diverse selections, and entertainment options like live music. Similarly, farmers’ markets offer fresh local food with a strong emphasis on community engagement & support, and various entertainment, which CSAs typically lack. Thus, the continuous diminishing of CSAs suggests that they need to reconsider their outdated business model to remain competitive and sustainable among other local food sources.

    However, the local food model in South Korea sheds some light on how CSA farmers could better position themselves among local food sources. In Korea, numerous small local food shops run by small cooperatives effectively bridge the gap between micro farmers and customers in rural communities. The common thread among these local food shops is their utilization of the Wanju Local Food Cooperative‘s local food model. This model won awards at the Milan Urban Food Policy Pact (MUFP) in Governance for “Local Food No. 1 Project” in 2018 and in Social and Economic Equity for “Equal Healthy Food for All: Wanju Type Food Plan” in 2022. It was also praised by the Food and Agriculture Organization (FAO) as a successful regional food localization strategy (FAO, 2017). As such, the Wanju Local Food Cooperative is an excellent example of how CSAs can revive themselves and become popular once again.

    When the Wanju Local Food Cooperative initially started, they used the traditional American CSA box delivery model. Though they still offer CSA boxes to customers, their success began with their first offline local food shop in 2012, right around the same time that the number of CSAs in the United States started to decrease. To launch their first offline shop, the cooperative created contracts with 1,011 local farmers and developed detailed crop production plans to offer customers a small but diverse selection of produce. Since then, the shop has functioned as an open market for micro farmers who have completed training courses and submitted production plans to sell their produce freely. To ensure the highest quality products, the Wanju Local Food Cooperative maintains a strict list of policies, including: 

    • Fresh produce must have been harvested the same morning that it is brought to the market for sale

    • Farmers independently pack, display, and price their own produce

    • Unsold produce is either discarded or returned to the original farmer

    • Farmers pay a 10% commission fee to the cooperative 

    Furthermore, the cooperative managing the local food shop extends its services to restaurants within the shop, provides online shopping options, offers food processing facilities to farmers, and even enhances community engagement through agrotourism initiatives such as farm tours and cultural events. As a result, it is common to see residents and tourists flock to the shop early in the morning to buy the freshest locally grown produce and enjoy the restaurants serving local food. This successful local food model spread nationally and became a popular community support model throughout Korea. Because the local food shops offer a variety of the freshest produce, good accessibility in residential areas, competitive prices from competition between farmers, entertainment events, and no exclusive membership or up-front fee policy, these local food shops have established their unique place among local supermarkets and farmers’ markets.

    The success of the Wanju Local Food Cooperative underscores two pivotal elements for an effective local food model: minimizing market entry barriers for small farmers and offering a diverse range of produce to customers under one roof. Many small farmers struggle to access markets due to quantity constraints, which deter both existing farmers and potential newcomers. The Wanju Local Food Cooperative has overcome this challenge through its open-market approach.Additionally, while local food consumers do seek shopping experiences that support local farmers and foster community engagement, their primary desire is a convenient location to purchase their weekly groceries. In contrast, the traditional CSA model often receives criticism for its limited selection. However, the Wanju Local Food Cooperative addressed this by coordinating farmers’ production plans to offer a broader array of produce, prioritizing variety over quantity to fulfill the objective of convenient grocery shopping. Therefore, if CSAs in the United States seek to remain competitive with other local food sources and genuinely support community farmers to be more than just a produce box delivery service, they should reconsider their traditional approach to running their organizations. 

    References

    Food and Agriculture Organization of the United Nations. (2017). Wanju: Supporting Local Agriculture 

    through Direct Food Marketing, Milan Urban Food Policy Pact Category: Governance, Food and Agriculture Organization of the United Nations (FAO). https://openknowledge.fao.org/handle/20.500.14283/ca0491en

    Seo, F., & Hudson, D. (2023). Attributes that Influence Consumers’ Preferences for 

    Choosing Locally Grown Food Sources During and After the COVID-19 Pandemic. Journal of Agricultural and Applied Economics. 2023;55(4):626-650. doi:10.1017/aae.2023.27

    Seo, Frank. “Is the Current CSA Model Sustainable? A Lesson from Korea.” Southern Ag Today 4(27.5). July 5, 2024. Permalink

  • Estate Transition Planning

    Estate Transition Planning

    The University of Tennessee Institute of Agriculture hosted the 2024 Beef Improvement Federation Conference two weeks ago. One session that spurred on great conversations was estate transition planning and what that entails. Table 1 displays the Southern Ag Today states and the age break downs of total producers. Kentucky has the highest percentage of producers that are under the age of 35 (10%). For the age range of 35 years to 64 years, all states have over 50% of their producers in this category. But, six states (TX, VA, MS, GA, SC, and FL) have 40% of their producers in the 65 years of age and older category, with Mississippi having the highest percentage at 42%. Farm management is often thought about only from a financial performance (income statement, balance sheet, cash flow statement) standpoint, but sound farm management also includes planning for the future, including estate and management transitions. 

    A large number of producers in the Southern region are potentially nearing retirement or are over the age of 65 years. This would suggest that estate transition planning should start becoming a priority. If the goal of the farm is to stay a farm, then at some point in the future, the farm will change hands. Transition planning can become a huge task if no plan has ever been thought about or developed. Often, producers indicate that they don’t know where to start. That is understandable. Thus, a good starting point could be, “What is adequate retirement income?” Building upon this question could solve questions like: “What are my lifestyle costs? Will costs change in retirement (life care)? How much income will come from social security, pensions, savings, investments, and the farm?” Each farm is different and has diverse challenges like trusts, multiple families/individuals in the operation, debt amounts, urban encroachment, and many more. 

    However, starting the conversation is the most important step for everyone involved in the process. The key to this falls on the shoulders of the parent(s). Not only is it awkward for the child, or children, to start this conversation, but if there are multiple children and one takes the lead, it can have unintended consequences. But just initiating the conversation is the start. Throughout the process, there are many tools that can be utilized: a will, power of attorney, advanced healthcare plan, healthcare agent, trusts, insurance, letter of last instruction, and easements. While the previous sentence has a lot of moving parts, having a team of professionals could aid in the process and make it easier. The team could include an attorney, accountant, financial planner, lender, extension educator, business consultant, and communication specialist.

    The topic of estate transition is diverse, and it looks different for every operation, but starting the process is never the wrong step. This article only scratches the surface, but below are resources available to you to start. 

    University of Tennessee: Farmland Legacy- https://farmlandlegacy.tennessee.edu

    University of Minnesota- https://agtransitions.umn.edu

    Iowa State University- https://www.extension.iastate.edu/bfc

    Table 1. Age Group Break Down of Total Producers for Southern Ag Today States

    Percent of Producers in Age Group
    StateTotal Producers<3535-6465 and Older
    TX402,8766%52%41%
    OK124,7439%53%37%
    AR67,4259%54%36%
    LA42,5518%54%38%
    KY119,13210%55%35%
    VA67,7988%52%41%
    TN107,8177%53%39%
    NC72,4799%54%38%
    MS52,0257%51%42%
    AL62,7778%53%39%
    GA67,0827%53%40%
    SC38,0978%51%41%
    FL79,2537%53%40%
    (Source: 2022 Ag Census)

    Martinez, Charley, and Kevin Ferguson. “Estate Transition Planning.” Southern Ag Today 4(27.3). July 3, 2024. Permalink

  • New Record High Cattle Prices

    New Record High Cattle Prices

    The fed cattle market hit some new record highs last week with fed steers pushing $200 per cwt in Northern Plains markets.  The weekly average fed steer price for the week ending June 30th was $198.09 per cwt.  This price represented a negotiated, live, weighted average price across quality grades.  The comparable price in the Texas-Oklahoma market last week was lower at $190.19 per cwt.  

    Beyond the record high fed cattle price, the widening price difference between the Southern and Northern fed cattle markets is very interesting.  Last week’s Northern-Southern price spread was $7.90 per cwt.  It was $10.11 per cwt two weeks ago, the largest difference of the year.  This large price spread has really developed over the last couple of years.  The price difference has a large seasonal component with the price difference peaking in the May-July time period.  Prior to 2022, a price difference greater than $4 per cwt was rare.  The average price difference from 2015 through 2021 was $0.20 per cwt.  That average has grown to $0.96 during 2022-2024.  The range of price differences has grown from about $6 per cwt to over $12 per cwt.

    Several factors likely contribute to larger swings in regional price differences.  One may be simply varying relative supplies versus packer needs in each region.  Another contributor is the mathematical calculation of the average price across grades.  The Southern Plains average price includes head in lots 35-65 percent Choice compared to no lots with cattle in that category for the Nebraska prices which pulls down the Texas-Oklahoma average price.  So, there may be a USDA quality grade component to the price difference.  

    Record high fed cattle prices are supporting calf and feeder prices across the South.  As fed cattle supplies further tighten, new record high prices will be recorded.  The widening price difference regionally in fed cattle may have some implications for Southern feeder cattle and calf markets.  Many of our cattle in the mid-South go to feedlots in Nebraska while feeders from the deep South often head to Texas or Oklahoma yards.  Regional calf and feeder prices may begin to be affected by changing premiums in the regional fed market.

    Anderson, David. “New Record High Cattle Prices.” Southern Ag Today 4(27.2). July 2, 2024. Permalink

  • Changes to Planted Acreage for Southern Crops in the June Acreage Report

    Changes to Planted Acreage for Southern Crops in the June Acreage Report

    On Friday June 28th the USDA released its annual Acreage report. The report estimates planted acreage of principal crops based on producer surveys conducted in the first two weeks of June. Nationally, principal acres planted were estimated at 315.177 million acres, up 1.866 million acres compared to the March Prospective Plantings report and 4.424 million acres lower than last year (Table 1). Southern states accounted for 22.8% of principal crop acreage. The largest negative and positive percent change (highlighted in Red and Black in the tables below) in principal crop acreage compared to the March Prospective Plantings report, in the southern states, were Oklahoma -5% and South Carolina +8%. Tables 2-7 show acreage changes, by state, compared to last year and the March Prospective Plantings report for corn, wheat, rice, soybean, peanuts, and cotton. 

    Corn acres planted were estimated at 91.475 million acres nationally, with the southern states accounting for 10.1% of planted acres. National corn acres were higher than most pre-report predictions and 1.4 million acres greater than the March Prospective Plantings report. Corn futures prices declined 13 to 16 ½ cents for the day. In the southern states, South Carolina had the largest increase, compared to the March report, adding 80,000 acres (+27%), while Louisiana and Tennessee had 9% decreases in planted acres. Nationally, the report indicated that corn left to be planted was 3.36 million acres.

    All wheat planted acres were estimated at 47.24 million, down 258,000 acres compared to the March estimate. Revisions in acres were made for Alabama (-15,000 acres), Arkansas (+5,000), Georgia (-25,000 acres), South Carolina (-5,000 acres), Texas (-200,000 acres), and Virginia (-5,000 acres). Chicago wheat futures were down 4 ½ to 6 ¼ cents for the day, and Hard Red Wheat futures were down 4 ½ to 10 ½ cents.

    Southern states account for 75% of rice production nationally, with Arkansas the largest producer. Rice acres planted were unchanged in Texas and Mississippi, declined 30,000 acres in Arkansas and increased 30,000 acres in Louisiana.  

    Soybean acres were estimated at 86.1 million, down 410,000 acres compared to the March estimate – slightly lower than pre-report estimates. Soybean futures closed down ¾ to 2 ¾ cents for the day. In the southern states, planted acreage was reduced 10,000 acres compared to March, with reductions for Arkansas, North Carolina, and Oklahoma and increases for Alabama, Kentucky, Louisiana, South Carolina, and Tennessee. The report indicated that soybeans left to be planted were 12.8 million acres.

    Peanut acreage increased 7% (106,000 acres) compared to the March report. Increased planted acres in Texas, North Carolina, Georgia, and Mississippi were only partially offset by a small reduction in Alabama.

    Upland cotton acres were estimated at 11.488 million, nearly 1 million acres higher than the March estimate and pre-report forecasts. Cotton futures closed 1.63 to 2.21 cents per pound lower for the day. Texas planted acreage increased 890,000 acres compared to the March report, contributing by far the most to the change in national acreage. Arkansas had the largest percentage increase at +24%.

    Overall, the report provided bearish news for several markets that had already experienced substantial price declines this growing season. Moving forward, prices will continue to react to weather and revisions to planted/harvested acreage estimates.

    References and Resources

    Barchart.com. Daily futures prices. Accessed at: https://www.barchart.com/futures/grains?viewName=main

    USDA National Agricultural Statistics Service (NASS). June 28, 2024. Acreage Report. Accessed at https://usda.library.cornell.edu/concern/publications/j098zb09z

    USDA National Agricultural Statistics Service (NASS). March 28, 2024. Prospective Plantings Report. Accessed at https://usda.library.cornell.edu/concern/publications/x633f100h

  • Transitioning to Organic in the South

    Transitioning to Organic in the South

    Some people say that growing organically requires a different mindset. Receiving a price premium particularly when demand is high guarantees increased earnings, but many producers shifting to organic put environmental stewardship and personal values at the top of the list. Between 2017 and 2022, the US experienced a notable surge in the organic agriculture sector, with the Census of Agriculture showing increases (about 32%) in organic product sales. However, the number of organic operations dropped from 18,166 to 17,321 (about 5%). 

    Growing organic in the South has its own challenges; high pest pressure, high humidity and a region prone to extreme temperatures. As such, organic operations in the South tend to be smaller but are still important contributors to the sector. A closer look at the Census of Agriculture reveals some important changes in organic production for row crops and specialty crops. Arkansas, Georgia, North Carolina and Kentucky about doubled sales, Texas and Florida went up by 50%, and states like Louisiana where organic agriculture does not have a big economic footprint still reported a 12% growth. South Carolina and Texas were the only Southern states reporting a growing number of organic operations.

    Another challenge that organic producers face is the USDA certification process. Transitioning to organic requires familiarizing yourself with the certification process and regulations of the USDA National Organic Program (NOP). The recent Census of Agriculture revealed a decrease in the farms with acres transitioning to NOP. Though the numbers may be discouraging, it is worth considering the level of responses the Census received which was low particularly in some states.

    Figure 1: Number of farms with acreage transitioning into USDA NOP

    It will be interesting to see how producers will respond to the changing production landscape in the near future. As USDA works in amending organic production standards and with the demand for differentiated products continuing to grow will USDA provide more support to organic production? As of now we have seen increased funding in organic production through grants, funding towards development of organic markets under the Organic Market Development Grant program and this is the fourth year that USDA provides cost share assistance for organic certification. Certified organic producers and handlers who have paid certification fees during the 2024 program years may apply for reimbursement of the incurred costs up to 75%. The application deadline is October 31, 2024. For more information see link below: https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/organic-certification-cost-share-program/pdf/2024/fsa_occsp_fact_sheet.pdf

    Bampasidou, Maria, and Juna Dylce. “Transitioning to Organic in the South.” Southern Ag Today 4(26.5). June 28, 2024. Permalink