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  • U.S. Fresh Fruit and Vegetable Supply

    U.S. Fresh Fruit and Vegetable Supply

    In recent years, fresh fruit and vegetable production in the United States has been on the decline, U.S. production has decreased by 10 and 23.1 percent respectively since 2000. With declining domestic production, imports of fresh fruits and vegetables have grown substantially with some products only being available in the United States due to imports. Since 2020, a larger share of the total supply of fresh fruit in the United States was imported than grown domestically and has increased from 36.6 percent in 2000 to 54.8 percent in 2022 (Figure 1). Vegetable imports in 2022 were 29.3 percent of the total supply up from 9.5% in 2000. The value of imported fresh fruits and vegetables for 2022 was $18.23 billion. After including exports, the total volume of fresh fruits and vegetables available in the United States was 94.65 billion pounds, or 283.63 pounds per capita.

    The United States has gone from being a net exporter of fresh produce in 1980 with 3.25 billion pounds to a net importer starting in 1998 with 1.88 billion pounds (Figure 2). Net trade of fresh produce, excluding bananas, for the United States during 2022 totaled 24.4 billion pounds of trade deficit and has been over 10 billion pounds since 2013. The United States was a net exporter of fresh fruits, excluding bananas, from 1980 to 2002, since then the United States net imports have grown considerably. During 1980 the United States trade surplus of fresh fruits, excluding bananas, totaled 3.11 billion pounds of exports. In 2022, the trade deficit of fresh fruits, excluding bananas, totals 10.4 billion pounds of imports. As for fresh vegetables, the United States has not had exports exceed imports since 1992. During 2022, imports of fresh vegetables were 13.9 billion pounds higher than exports and continue to grow. 


    Young, Landyn, Luis Ribera. “U.S. Fresh Fruit and Vegetable Supply.Southern Ag Today 4(22.4). May 30, 2024. Permalink

  • Understand the Implications of a Price Slide When Buying and Selling Cattle

    Understand the Implications of a Price Slide When Buying and Selling Cattle

    Everyone who buys or sells feeder cattle regularly understands that in most markets, the price per pound decreases as cattle get heavier. This can create a challenge for pricing cattle in situations where weight is not known with certainty. Final weight is uncertain in forward contracts, internet sales, and when cattle are sold off the farm but hauled to another location to determine pay weight. In these situations, cattle are often sold with a base weight, and the price is adjusted downward as the weight of the cattle exceeds that base weight. As an illustration, let’s consider a backgrounder that sold cattle via an internet auction with an advertised base weight of 800 lbs. and a price slide of $8 per cwt. Let’s further assume that the cattle sell for $240 per cwt in the auction and will be hauled to a weigh station the following week to determine the pay weight.

    If those steers were to weigh exactly 800 lbs, no price adjustment is needed. The pay weight is 800 lbs. and the price is $240 per cwt for a total of $1,920 per head. However, if the cattle weighed 850 lbs., the price is adjusted downward because they are 50 lbs. above the base weight. With an $8 per cwt slide, the price would be adjusted downward by $4 per cwt (50 lbs. is half of a cwt). With a pay weight of 850 lbs. and an adjusted price of $236 per cwt, the per head total is $2,006. Price slides can get much more complicated than this, but this simple illustration captures the process well enough for this discussion. As long as the price slide is not so large as to actually result in a lower value per head, the seller is typically happy to have more lbs. to sell. In the previous example, the cattle sold for $86 more than they would have had they weighed right at the base weight.

    Now, I want to focus this discussion on the difference between the artificial price slide used to adjust the price for cattle weighing above the base weight and the actual market price discount as cattle get heavier. The table below illustrates this point in relatively simple terms. Suppose the market price for an 800 lb. steer is $240 per cwt and the market price for an 850 lb. steer of the same type and quality was $235 per cwt. This would imply that the actual price discount in the feeder cattle market was $10 per cwt and the market value of those 850 steers would be $1,997.50 per head (850 lbs. x $235 per cwt). If a seller advertised that group of steers with a base weight of 800 lbs. and a $10 per cwt price slide, the price slide and the market discount for weight would match perfectly. The final price would be the same even though the pay weight exceeded the base weight. This scenario is shown in the middle row of the table below, but this will not be the case when differences exist between the market discount for weight and the price slide.

    If the artificial price slide is less severe than the market discount as cattle get heavier, then the seller is actually better off if the pay weight exceeds base weight because the lower artificial price slide would result in a smaller price discount due to the additional lbs. This is illustrated below with the $8 per cwt price slide and note that the final price is higher for these steers. Previous research has found evidence that sellers tend to underestimate weights in these situations (Brorsen et al., 2001). Conversely, if the market discount is greater than the price slide, the seller would actually receive a lower final price than had they advertised the cattle with the higher base weight to begin with. Note that the $12 per cwt price slide below, which exceeds the market discount, results in a lower final price. In situations such as this, sellers have no incentive to overestimate weight (Burdine et al., 2014).

    In theory, price slides used for selling cattle with weight uncertainties should evolve with the market. But my experience has been that they are often slow to adjust, whereas market conditions change very quickly. The key point from this discussion is that a price slide is most efficient when it is roughly equal to the market discount as cattle get heavier. In those situations, there is no incentive for sellers to underestimate weight when selling cattle on a slide and there is little true penalty if they do. Buyers and sellers both need to understand the implications when prices slide and market weight discounts diverge, as this can have an impact on both parties.


    Base weight

    Sale Price

    Pay Weight

    Price Slide
    Final Price
    per cwt
    Final Value
    per head
    800$240850$8 per cwt$236$2,006.00
    800$240850$10 per cwt$235$1,997.50
    800$240850$12 per cwt$234$1,989.00

    References:

    Brorsen, B. W., N. Coulibaly, F. G. C. Richter, and D. Bailey. 2001. “Feeder Cattle Price Slides”. Journal of Agricultural and Resource Economics. 26: 291-308.

    Burdine, K.H., L. J. Maynard, G.S. Halich, and J. Lehmkuler. 2014. “Changing Market Dynamics and Value-added Premiums in Southeastern Feeder Cattle Markets”. The Professional Animal Scientist. 30:354-361.


    Burdine, Kenny. “Understand the Implications of a Price Slide When Buying and Selling Cattle.Southern Ag Today 4(21.3). May 22, 2024. Permalink

  • Fewer Cattle on Feed, Higher Prices

    Fewer Cattle on Feed, Higher Prices

    USDA released their May cattle on feed report on Friday, May 24th.  For the first time in 8 months the total number of cattle on feed declined below last year’s level.  The 11.5 million cattle on feed were the fewest since September 2023.  The number of cattle in feedlots has been pumped up by placing more heifers, some pulling of feeder cattle ahead, and a few more cattle from Mexico compared to the year before.

    Due to when holidays fell this Spring and weekends there were 2 fewer slaughter days in March compared to last year and 2 extra days in April.  This large swing in days has not happened since the mid-1990s.  The 2 extra days in April meant that feedyard marketings were more than 10 percent larger than April last year.  Placements were almost 6 percent fewer than last year and were the smallest since 2020.  

    The combination of large marketings and light placement numbers pulled down cattle on feed below a year ago.  There are still more cattle on feed for more than 90 days and 120 days than a year ago so that should keep dressed weights high.  

    The wholesale beef market, as measured by the Choice beef cutout, has jumped more than $16 per cwt in the last 2 weeks.  Remember that the cattle on feed report is a little bit backward looking.  It contains marketings and placements in April and the number of cattle on feed on May 1.  In the ensuing couple of weeks prices have jumped higher.  Whether that increase reflects some packer cut back in processing to try to boost prices, some Memorial Day summer bump in buying, or fewer cattle on feed, or a combination of all three (most likely) the end result is higher wholesale beef prices.  Fed cattle prices are increasing also.  Fewer cattle on feed promises to cut beef supplies that have actually been larger than last year over the last 8 weeks.  Tighter supplies will work to boost prices for calves, feeders, and feds.

    Anderson, David . “Fewer Cattle on Feed, Higher Prices.” Southern Ag Today 4(22.2). May 28, 2024. Permalink

  • Battlelines Are Being Drawn: Comparing Current Farm Policy Proposals

    Battlelines Are Being Drawn: Comparing Current Farm Policy Proposals

    On May 1, 2024, Rep. G.T. Thompson, Chairman of the House Committee on Agriculture, and Sen. Debbie Stabenow (D-MI), Chairwoman of the Senate Committee on Agriculture, Nutrition, and Forestry, released summaries of their respective farm bill proposals (see here and here).  

    On May 17, 2024, Chairman Thompson released text of his bill.  Very early this morning, the House Committee on Agriculture finished marking up its version of the 2024 Farm Bill – the Farm, Food, and National Security Act of 2024 – and passed it out of Committee on a bipartisan vote of 33 to 21. 

    While there will be a lot of chatter about the path forward in the full House, attention is now turning to the Senate. To help set the stage, we have compiled a side-by-side comparison of the major farm safety net features of the House Ag Committee-passed bill and the Senate majority proposal – the Rural Prosperity and Food Security Act of 2024.  Importantly, no bill text has been released for the Senate proposal, so the comparison is compiled from the summary materials linked above. Further, while Table 1 compares the proposals currently on the table, we leave it to the reader to draw their own conclusions about which approach they prefer. It is also important to note that Sen. John Boozman (R-AR), Ranking Member of the Senate Committee on Agriculture, Nutrition, and Forestry, announced earlier this morning that he will weigh in with his own framework “in the coming weeks” but highlighted that the House Ag Committee-passed bill “mirrors much of what Senate Republicans are seeking to accomplish with our framework.”

    Key FeaturesHouse Ag Committee-Passed BillSenate Majority Proposal
    Title 1 Provisions
    Statutory Reference Prices (SRPs)Increases ranging from 10-20%… 

     Corn: $3.70/bu to $4.10/bu
    Sorghum: $3.95/bu to $4.40/bu
    Barley: $4.95/bu to $5.45/bu
    Oats: $2.40/bu to $2.65/bu
    Soybeans: $8.40/bu to $10.00/bu
    Wheat: $5.50/bu to $6.35/bu
    Seed Cotton: $0.367/lb to $0.42/lb
    Rice: $14.00/cwt to $16.90/cwt
    Peanuts: $535/ton to $630/ton
    Other Oilseeds: $20.15/cwt to $23.75/cwt
    Dry Peas: $11.00/cwt to $13.10/cwt
    Lentils: $19.97/cwt to $23.75/cwt
    Small Chickpeas: $19.04/cwt to $22.65/cwt
    Large Chickpeas: $21.54/cwt to $25.65/cwt 
    5% increase “for commodities such as seed cotton, rice, and peanuts”… 
    Corn: unchanged at $3.70/bu 
    Sorghum: unchanged at $3.95/bu 
    Barley: unchanged at $4.95/bu 
    Oats: unchanged at $2.40/bu
    Soybeans: unchanged at $8.40/bu
    Wheat: unchanged at $5.50/bu 
    Seed Cotton: from $0.367/lb to $0.385/lb
    Rice: $14.00/cwt to $14.70/cwt
    Peanuts: $535/ton to $562/ton
    Other Oilseeds: unchanged at $20.15/cwt
    Dry Peas: unchanged at $11.00/cwt 
    Lentils: unchanged at $19.97/cwt 
    Small Chickpeas: unchanged at $19.04/cwt
    Large Chickpeas: unchanged at $21.54/cwt
    Effective Reference Prices (ERPs) No change from current law.“Changes the definition” of ERPs by “updating the formula…”  Details TBD.
    Maximum PLC Payment  NOTE: these estimates illustrate the maximum possible PLC payment (assuming the ERP is at 115% of the SRP).Except for seed cotton and corn, the maximum possible PLC payment is the difference between the Effective Reference Price and the Loan Rate:
    Corn:  $1.42/bu
    Sorghum:  $2.64/bu
    Barley:  $3.52/bu
    Oats:  $0.85/bu
    Soybeans:  $4.68/bu
    Wheat:  $3.58/bu
    Seed Cotton:  $0.183/lb
    Rice:  $11.74/cwt
    Peanuts:  $335/ton
    Other Oilseeds:  $16.21/cwt
    Dry Peas:  $8.20/cwt
    Lentils:  $13.01/cwt
    Small Chickpeas:  $15.05/cwt
    Large Chickpeas:  $14.10/cwt 
    The maximum possible PLC payment is equal to 20% of the Effective Reference Price.
     —Corn:  $0.85/bu
    Sorghum:  $0.91/bu
    Barley:  $1.14/bu
    Oats:  $0.55/bu
    Soybeans:  $1.93/bu
    Wheat:  $1.27/bu
    Seed Cotton:  $0.089/lb
    Rice:  $3.38/cwt
    Peanuts:  $129/ton
    Other Oilseeds:  $4.63/cwt
    Dry Peas:  $2.53/cwt
    Lentils:  $4.59/cwt
    Small Chickpeas:  $4.38/cwt
    Large Chickpeas:  $4.95/cwt
    Loan RatesCotton:  0.45-$0.52/lb to $0.55/lb
    Dry Peas:  $6.15/cwt to $6.87/cwt
    ELS Cotton:  $0.95/lb to $1.00/lb
    Graded Wool:  $1.15/lb to $1.60/lb
    Non-Graded Wool:  $0.40/lb to $0.55/lb
    Mohair:  $4.20/lb to $5.00/lb
    Honey:  $0.69/lb to $1.50/lb
    Corn:  $2.20/bu to $2.42/bu
    Sorghum:  $2.20/bu to $2.42/bu
    Barley:  $2.50/bu to $2.75/bu
    Oats:  $2.00/bu to $2.20/bu
    Soybeans:  $6.20/bu to $6.82/bu
    Wheat:  $3.38/bu to $3.72/bu
    Rice:  $7.00/cwt to $7.70/cwt
    Peanuts:  $355/ton to $390/ton
    Other Oilseeds:  $10.09/cwt to $11.10/cwt
    Lentils:  $13.00/cwt to $14.30/cwt
    Small Chickpeas: $10/cwt to $11/cwt
    Large Chickpeas: $14/cwt to $15.40/cwt
    Sugar (Raw):  $0.1975/lb to $0.24/lb 
    No change to statutory Loan Rates from current law but potential to increase (up to 10%) if estimated cost of production in a given year (from 2025 to 2029) is higher than the 5-year average cost of production from USDA’s Economic Research Service. For sugar producers, “increases sugar loan rates and adjusts the relationship between raw sugar and refined sugar to reflect more recent production and transportation costs.”
    ARC Guarantee Increase from 86% to 90%.Increase from 86% to 88%.
    Maximum ARC PaymentIncrease from 10% to 12.5%, raising the maximum possible payment by 25%. No change from current law of 10%.
    Base AcresAdds up to an additional 30 million acres for farms where planted acres exceed base acres on the farm. “Limited opportunity” to update base for “underserved producers” only.
    Payment Limit AmountsIncrease from $125,000 to $155,000 for producers with >75% of income from farming/ranching/silviculture. No change from current law.
    Payment Limit IndexingFor producers with >75% of income from farming/ranching/silviculture, payment limits indexed for inflation (CPI-U) going forward. No comparable provision.
    Legal EntitiesEliminates the LLC penalty. Pass-thru LLCs would join General Partnerships and Joint Ventures in having the number of payment limits parallel the number of stakeholders in the entity. No comparable provision.
    Means TestingNo change from current law of $900,000, except that means testing would not apply to disaster programs in Title 1 and the Noninsured Crop Disaster Assistance Program (NAP) for producers with >75% of income from farming/ranching/silviculture.  NOTE: this is consistent with the original means testing requirements from the 2002 Farm BillReduces AGI threshold from $900,000 to $700,000 for row-crop producers and makes tenants ineligible if landowners do not meet AGI threshold. Increases allowable AGI from $900,000 to $1,500,000 for specialty crop and “high-value” crop producers.
    Title 11 Provisions
    Supplemental Coverage Option (SCO) Trigger Increase from 86% to 90%Increase from 86% to 88%
    SCO Premium Support Increase from 65% to 80%Increase from 65% to 80%
  • If You are Following the Conversation about Reference Prices… Here are a Few Facts 

    If You are Following the Conversation about Reference Prices… Here are a Few Facts 

    There was a time when agricultural economists who focus on farm policy didn’t take a position on a farm bill proposal.  At least the authors of this article were taught by our mentors…just describe what’s in a policy proposal and don’t take a position…that’s not your job.  Good and bad was for others to decide…primarily elected officials since it is, in fact, their job.  Those days are over.  In the last two weeks since the House Agriculture Committee majority released details of their bill, there has been a steady stream of articles talking about the proposal’s reference price increases as being tilted to the South and Southern crops. 

     We thought we would instead try to provide facts and information that you can use to help decide whether any proposed bill—House or Senate—is providing a safety net for all U.S. farmers.

    Fact #1 

    During the development of every farm bill, there are people who say unequivocally that one or more commodities are advantaged relative to others.  In the current environment – with ARC and PLC as the Title I safety net programs – since they are both countercyclical, producing a map that shows payments are higher in one area really means very little.  It very likely means that prices for those crops are lower and triggering payments, not that the farm bill was titled toward producers of those crops.

    Fact #2 

    While farm bills encompass a broad range of topics, producers rely on the programs in Title I and Title XI to provide a minimal safety net so they can endure economic downturns like we are currently in.  Without meaningfully bolstering the safety net provided in Title I and Title XI, the producers we encounter all over the country see little benefit in passing a new farm bill.    

    Fact #3

    Statutory reference prices were established in the 2014 Farm Bill and have not kept up with increases in the cost of production.  Using USDA cost of production data, the average increase in costs from 2014 to 2023 (the most current) for corn, cotton, grain sorghum, peanuts, rice, soybeans, and wheat was 31 percent.

    Fact #4 

    The effective reference price (ERP) provisions included in the 2018 Farm Bill allow individual crop reference prices to increase based on the 5-year Olympic average of market prices (lagged one year) multiplied by 85%.  ERPs are capped at 115% of statutory reference prices.  Of the 23 covered commodities with reference prices, only 10 (corn, oats, soybeans, grain sorghum, large chickpeas, small chickpeas, mustard seed, crambe, sesame seed and temperate japonica rice) had market prices increase enough to result in a 2024 ERP greater than the statutory reference prices in the 2018 Farm Bill.   Of these 10, only corn, soybeans and grain sorghum represent significant base acreages.  Based on realized market prices and CBO projections, corn and soybean ERPs are expected to increase each year and hit the 115% cap in each year through 2027.  Based on hearing testimony in both the House and Senate, commodities not in that position were seeking reference price increases in the next farm bill.

    Fact #5

    Statutory reference prices are set by Congress.  In past farm bills, at least since the 1970s, reference prices and their predecessor (i.e., target prices) have been established with the commodity’s cost of production in mind.  Looking at major crop cost of production for 2023 indicates that current reference prices are not covering much of major commodity costs (Table 1).   This happens for two reasons: (1) costs are higher than reference prices and (2) the payment calculations use an 85% payment factor to reduce payments.  Based on USDA data, wheat and grain sorghum appear to have the strongest case for significant reference price increases, but USDA data is just one resource the Committees use in establishing support levels.

    Table 1.  Major Crop Cost of Production, Effective Reference Prices and Percent of Costs Covered by the Effective Reference Price.

    1The 85% payment factor is included in this calculation.  2The majority of rice acres are planted to medium or long grain.  The reference price for these rice types was included in the table.

    Outlaw, Joe, Nathan Smith, and Bart L. Fischer. “If You are Following the Conversation about Reference Prices… Here are a Few Facts.Southern Ag Today 4(21.4). May 23, 2024. Permalink