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  • Texas Farmers Sue USDA for Alleged Discrimination

    Texas Farmers Sue USDA for Alleged Discrimination

    A group of Texas farmers recently filed suit against the United States Department of Agriculture claiming that the USDA improperly discriminated against them in administering various disaster and pandemic relief programs. Plaintiffs in Strickland v. USDA challenge the USDA’s disparate treatment for certain producers based upon race and sex. The Plaintiffs assert that the USDA violated both the Equal Protection Clause of the US Constitution and the Administrative Procedures Act.

    Background

    The Plaintiffs note that over the past four years, Congress appropriated $13.7 billion to USDA to implement crop and livestock disaster assistance and nearly $11.2 billion to implement disaster assistance programs for coronavirus-related relief.  The USDA took these appropriated funds and implemented a number of programs to aid farmers and ranchers who lost income, crops, or livestock due to natural disasters or the pandemic.

    Complaint

    The Plaintiffs begin their Complaint with the following sentence summarizing their arguments:  “Natural disasters do not discriminate, and neither should the USDA.”  The Plaintiffs claim that the USDA based the amount of financial assistance provided by programs on race and sex despite a lack of Congressional authorization to do so. Plaintiffs note that the appropriations bills passed by Congress never mention race or sex.  The USDA, Plaintiffs claim, factored it in anyway.

    Plaintiffs assert that USDA used two different methods for calculating the amount and type of financial assistance for farmers and ranchers.  One method was used for producers falling within the following four categories:  (1) veteran farmers, distinguished by having served in the armed forces; (2) beginning farmers, distinguished by being new to the profession; (3) limited-resource farmers, distinguished by having low incomes, and (4) socially disadvantaged farmers, distinguished by being of a particular race or sex.  “Socially disadvantaged” farmers include American Indians or Alaskan Natives Asians or Asian-Americans, blacks or African-Americans, Hispanics or Hispanic-Americans, Native Hawaiians or other Pacific Islanders, and women.  The Plaintiffs claim producers falling within these categories were paid “significant additional benefits” such as refunds of insurance premiums, refunds of fees, automatic enrollment in certain programs to cover non-insured crops, or additional financial assistance.  For other farmers, the Plaintiffs claim, a second method of payment calculation was utilized.

    These actions, the Plaintiffs allege, are unlawful and unconstitutional.  The lawsuit claims that the USDA violated the Administrative Procedure Act by acting beyond the scope of authority granted by Congress.  Additionally, the USDA allegedly violated the Equal Protection Clause of the United States Constitution by discriminating and treating similarly situated farmers differently based on race and by discriminating and treating similarly situated farmers differently based on sex. Finally, the Plaintiffs claim the USDA violated the Administrative Procedure Act by shifting its policy on processing insurance refunds to a “progressive factoring” system.  By doing so, Plaintiffs claim, the USDA stopped providing refunds of federal crop insurance and NAP insurance premiums and fees to all farmers, without offering a reasoned explanation for this action as required by the APA. The Plaintiffs ask the court to hold these programs unlawful and to enter various declaratory judgments and injunctions preventing the USDA from implementing programs based on race or sex absent clear Congressional authorization. 

    Motion for Preliminary Injunction 

    A week after the Complaint was filed, the Plaintiffs filed a Motion for Preliminary Injunction seeking an injunction or stay against USDA to prevent the USDA from relying on discriminatory criteria as it issues disaster relief.  

  • Will Interest Rates Decrease in 2024?

    Will Interest Rates Decrease in 2024?

    In March 2022, the Federal Reserve began raising interest rates at an aggressive pace to fight rising inflation.  Now, two years later and with inflation near the Federal Reserve’s target rate, the question on most of our minds is, will the Federal Reserve begin to bring interest rates down this year?

    The Federal Reserve enacts monetary policy in the United States with the dual mandate of 1) keeping inflation low and stable and 2) maintaining full employment in the economy.  To achieve these goals, the Federal Reserve’s main policy tool is to adjust the federal funds rate or the rate at which banks in the Federal Reserve System lend to one another overnight.  This rate is set by the Federal Open Market Committee (FOMC), which meets eight times each year (roughly every six weeks) to determine if any change in the federal funds rate is warranted.

    Figure 1 below shows how the federal funds rate has changed in comparison to the inflation rate, measured using the Personal Consumption Expenditure index (PCE), and the unemployment rate.  From March 2022 until August 2023, the FOMC increased the federal funds rate every time they met.  Since then, they have held interest rates steady between 5.25% and 5.50%.

    Figure 2 below shows how increases in the federal funds rate have impacted the cost of borrowing.  Since March 2022, the bank prime rate has increased from 3.25% to 8.50%.  Rates for variable rate agricultural loans, as reported by the Federal Reserve Bank of Dallas Agricultural Survey, have followed a similar trend.  Interest rates reported in the survey for the first quarter of 2024 were roughly 9.50% for operating loans, 9.27% for intermediate loans, and 8.88% for long-term farm real estate loans.  

    Whether or not the FOMC begins to ease interest rates this year will depend largely on whether the inflation rate continues to decline.  As shown in Figure 1, the rate of overall inflation in February 2024 was 2.5%.  The core inflation rate, which excludes food and energy expenditures, was slightly higher at 2.8%.  The Federal Reserve’s target rate for inflation is 2.0%.  

    It seems clear from the figure that the FOMC’s aggressive rate increases have been successful in taming inflation; however, inflation remains above the Federal Reserve’s target rate.  Perhaps more concerning, at least from the perspective of the FOMC, is that the rate at which inflation is decreasing has slowed over the past year.  In fact, the inflation rate essentially remained unchanged from December 2023 through February 2024.

    It is unlikely that the FOMC will bring interest rates down if inflation remains above the Federal Reserve’s target rate.  However, FOMC members have given no indication that they intend to raise interest rates above their current levels to achieve that goal either.  In the short term, the safe bet seems to be to expect interest rates to hold steady at or near where they are now.  Two caveats to this prediction are unexpected changes in either the inflation rate or the level of employment in the U.S. economy.  Should the inflation rate begin to move upward, the FOMC may decide they have no choice but to resume interest rate increases.  Alternatively, signs that indicate the U.S. economy is entering a recession would pressure the FOMC to begin lowering interest rates despite greater-than-desired inflation.  

    According to the Federal Reserve’s description of its monetary policy goals, the Fed does not specify a numerical goal for employment like it does for inflation; therefore, it is difficult to predict what specific economic conditions would encourage the FOMC to ease interest rates prematurely.  One employment indicator that the FOMC will pay attention to as it makes interest rate decisions is the unemployment rate.  An unexpected increase in the unemployment rate could indicate that the economy is entering a recession.

    The most recent estimate from the Bureau of Labor Statistics places the unemployment rate at 3.8%, which is below the 30-year average and in line with the long-term projections made by FOMC members.  Furthermore, the unemployment rate has held steady at or near pre-pandemic levels even as interest rates have increased (Figure 1).  Based on this data, it appears that high interest rates have had little impact on employment, at least up to this point.  Should this continue, the chance that the FOMC will vote to decrease interest rates before they reach their inflation target is small.       

    Figure 1.  Changes in the Inflation rate, the Federal Funds Rate, and the Unemployment Rate, January 2018-February 2024 

    Figure 2. Changes in the Federal Funds Rate, Bank Prime Rate, and Selected Agricultural Loan Rates, Q1 2018-Q1 2024

    References

    U.S. Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE, April 5, 2024.

    Board of Governors of the Federal Reserve System (US), Bank Prime Loan Rate Changes: Historical Dates of Changes and Rates [PRIME], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PRIME, March 27, 2024.

    Board of Governors of the Federal Reserve System (US), Federal Funds Effective Rate [FEDFUNDS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/FEDFUNDS, April 1, 2024.

    Board of Governors of the Federal Reserve System (US), Median Personal Consumption Expenditures Inflation, retrieved from the Federal Reserve Bank of Cleveland; https://www.clevelandfed.org/indicators-and-data/median-pce-inflation.

    Board of Governors of the Federal Reserve System (US), Agricultural Survey, retrieved from the Federal Reserve Bank of Dallas; https://www.dallasfed.org/research/surveys/agsurvey/2024/ag2401#tab-report.

    Board of Governors of the Federal Reserve System (US), Monetary Policy Principles and Practice, Monetary Policy: What Are Its Goals?  How Does It Work.  Retrieved from: https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm

    Board of Governors of the Federal Reserve System (US), March 20, 2024: FOMC Projections Materials, Accessible Version.  Retrieved from: https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20240320.htm

  • Milk Cows in the Southeast 

    Milk Cows in the Southeast 

    Included in the biannual Cattle report is the number of milk cows that have calved in the U.S. and by most individual states. The number milk cows that have calved are holding steady at the national level but individual states in the Southeast show variations in inventory (Table 1). Florida is the only state that shows an increase in milk cows that have calved, while Arkansas, Louisiana, and South Carolina had double digit percentage losses. The thirteen Southeastern states account for 11.33 percent of the milk cows that have calved in the U.S. Texas has the largest number of milk cows in the Southeast and has the fourth highest milk cow inventory in the U.S.

    Table 1. 2023 2024Percent of
    (1,000 head)(1,000 head)previous year
    Texas65063598
    Florida9298107
    Georgia929199
    Virginia676699
    Kentucky454396
    North Carolina393897
    Oklahoma393897
    Tennessee262596
    South Carolina9889
    Louisiana8788
    Mississippi66100
    Arkansas4375
    Alabama22100
    U.S. 9,397.509,356.80100
    Source: https://usda.library.cornell.edu/concern/publications/h702q636h

    In addition to inventories, milk production per cow is a crucial factor for the dairy industry. Using the 2023 annual production estimates from USDA Quick Stats database, Texas is the only Southeastern state that has a per cow milk production average that is higher than the U. S. average of 24,117 pounds of milk per head, as seen in table 2.

    Table 2.
    Annual Milk Production
    Pounds/Head
    TEXAS25,802
    NORTH CAROLINA23,526
    GEORGIA22,275
    VIRGINIA20,882
    KENTUCKY20,333
    FLORIDA20,313
    TENNESSEE18,680
    SOUTH CAROLINA18,500
    OKLAHOMA17,692
    ALABAMA14,000
    LOUISIANA12,625
    MISSISSIPPI12,333
    ARKANSAS11,000
    U.S. Average24,117
    Source:  https://quickstats.nass.usda.gov/

    Milk production in the U.S. is increasing over the long term but, it’s coming from regions other than the Southeast. For more than a year, dairy producers have suffered from disastrously low milk prices and low returns.  The result of low milk prices has been declining dairy cow numbers, milk production per cow falling below year before levels, and reduced total milk production in some months reversing the long term trend of increasing milk production.  

    Runge, Max . “Milk Cows in the Southeast.” Southern Ag Today 4(17.2). April 23, 2024. Permalink

  • An Early Look at 2024 Production Expectations for U.S. Wheat and Sorghum

    An Early Look at 2024 Production Expectations for U.S. Wheat and Sorghum

    A key component of any market outlook for agricultural commodities is the production forecast for the upcoming year. Estimates of crop area and yield are important market drivers. The 2024 March Prospective Plantings report (survey of producers’ acreage intentions for the upcoming season taken in late-February to early March) showed a decline in both wheat and sorghum acres compared to 2023. However, several other factors may come into play in 2024 that significantly impact the final production numbers.

    First, final planted acreage numbers can deviate substantially from planting intentions (Table 1). Even in wheat, where the planted acreage number for winter wheat is pretty well known by early March, spring wheat acres account for about a quarter of the U.S. all-wheat planted area. Over the last 10 years, the final planted number for wheat compared to the prospective plantings survey has ranged from +1 million acres (2014) to -1.6 million acres (2022), and sorghum has ranged from +1.2 million (2023) to -500,000 (2016).  

    Another factor impacting the production estimate is the percentage of crop planted that is harvested for grain. This is especially important in wheat and sorghum where major production regions are in the Southern Plains, areas prone to significant drought and weather impacts.  Over the last two years of drought, the harvested percentages of wheat and sorghum have been well below average. A return to average harvested percentage levels could result in planted acres being lower but harvested area increasing.

    Related to the harvested area question is the yield potential of the upcoming crop. So far in 2024, national winter wheat crop condition ratings are well above last year and well above average(USDA, Crop Progress) . Better crop condition ratings bode well for an increase in harvested percentage as well as overall yield. This is notably the case in Kansas, the top wheat producing state.  The last time we saw wheat ratings this good in Kansas was 2016. That year set a record high wheat yield for Kansas (57 bushels) and the U.S. wheat crop (52.7 bushels).  The harvested percentage of acres planted that year was 88%.    

    The 2016 crop season was under the influence of the El Nino weather phenomenon, as is 2024 (Figure 1).  The current El Nino is the second strongest event since the winter of 2015/16.  With current favorable crop condition ratings, wheat production in 2024 could be up significantly compared to 2023 despite a lower planted acres number.  

    Interestingly, 2016 was also a record setting year for U.S. grain sorghum (Kansas is the number one producing state). The final yield that year was 77.9 bushels per acre on a harvested percentage of 93%.  

    Using the planted acreage number from the Prospective Plantings report, average percent harvested over the last 10 years, and trend line yields, we project production increases for U.S. wheat and sorghum in 2024 despite a decrease in planted area (Table 2).  For wheat, production is projected to be up 120 million bushels (+7%) and sorghum up 75 million bushels (+24%) compared to 2023.

    The decline in planted acres was a major headline in media and market reports following the release of the Prospective Plantings report. The final production impact of that number is far from settled. 

    Table 1. Acreage (millions) and yield (bushels/acre) for U.S. wheat and sorghum, 2014-2023

     2014201520162017201820192020202120222023
    WHEAT          
    Prospective Plantings55.855.449.646.147.345.844.746.447.449.9
    Final Acreage56.855.050.146.047.845.544.546.745.849.6
    Difference1.0(0.4)0.5(0.1)0.5(0.3)(0.3)0.3(1.6)(0.3)
    Harvested 46.447.343.937.539.637.436.837.135.537.3
    Percent Harvested82%86%88%82%83%82%83%79%78%75%
    Average Yield43.743.652.746.347.651.749.744.346.548.6
               
    SORGHUM          
    Prospective Plantings6.77.97.25.85.95.15.86.96.26.0
    Final Acreage7.18.56.75.65.75.35.97.36.37.2
    Difference0.40.6(0.5)(0.2)(0.2)0.20.10.40.11.2
    Harvested 6.47.96.25.05.14.75.16.54.66.1
    Percent Harvested90%93%93%89%89%89%86%89%73%85%
    Average Yield67.676.077.972.172.173.073.269.041.152.0
    Data Source: USDA, NASS, Prospective Plantings and Quickstats and Office of the Chief Economist, WASDE April 2024

    Table 2. U.S. wheat and sorghum production (millions of bushels) in 2023 and a projection for 2024

     Wheat Sorghum
     20232024PPChange 20232024PPChange
    Planted49.647.5(2.1) 7.26.4(0.8)
    Harvested37.339.01.7 6.15.6(0.5)
    Percent Harvested75%82%7% 85%88%3%
    Yield48.649.61.0 52.069.817.8
    Production 1,8121,932120 31839375
    Data Sources: USDA, NASS, Prospective Plantings and author projections April 2024

    Figure 1. El Nino winters since 2000

    Source: El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, April 15, 2024, http://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/

    Resources

    NOAA, Climate Prediction Center, ENSO: Recent Evolution, Current Status, and Predictions, April 15, 2024

    USDA, NASS Office of the Chief Economist, WASDE April 2024

    USDA, NASS, Prospective Plantings, March 28, 2024

    USDA, NASS, Quickstats, April 17, 2024

  • Chasing the Benefits of Agrivoltaics

    Chasing the Benefits of Agrivoltaics

    The emerging conflict between utility-scale solar development and farmland loss has generated growing interest in proving the economic viability of continued agricultural production on landscapes leased for solar use, introducing the neologism agrivoltaics. Rural community resistance to solar development is expressed at the focal point of county zoning approval, with citizen testimony raising concerns over negative environmental and property value impacts on the surrounding community. Though such protestations without supporting research often fail to rebut a case for rezoning (depending on state law standards), the friction with agricultural producers remains of greater economic concern due to perceived loss of output and farmland “loss.” The reduced costs of solar development on working farmland – no tree removal, existing drainage infrastructure, road access – are well understood, and the numerous efforts by state and local governments to deter such development vary in success. 

    The body of research on the projected aggregate agricultural economic impact of state renewable energy targets is in its infancy. However, the immediate impact to individual producers losing leased fields to solar development is easily measured in lost production acres, and such individuals often retain significant voice and goodwill in the community. The growing body of policy work on decommissioning of solar facilities – i.e. the promise that one day the land may be farmed – fails to address short term concerns.

    One principal area of addressing such friction is the exploration of a compromise in farmland loss and resulting economic impact. Given the present economic limitations between prevalent low-to-ground technology and panel spacing, continued agricultural production options – and ag economic output – remain limited. According to the National Renewable Energy Laboratory’s OpenEI Agrivoltaics Map, there are 517 dual-use solar facilities covering 61,477 acres and generating 9844 megawatts of electricity. (The author is aware of dual use facilities not appearing on the map.) The vast majority of these sites are devoted to pollinator habitat production – with its tenuous economic impact – with the next predominant agricultural use of sheep grazing. Some sites support active research, including blueberry production (Maine). Limited U.S. markets for sheep meat and wool may serve as a bottleneck to wider implementation of agrivoltaic grazing regimes. Site opportunities for grazing contracts may be misaligned with available grazing services, local producers and processing. The national leader in solar grazing efforts – American Solar Grazing Association – maintains its own map of agrivoltaic grazing sites.

    The US Department of Energy has stepped up research funding into this area, and there are numerous active research projects underway across the country. One recent agrivoltaic grazing research grant application by NC State University illustrates possible research approaches: 1) incorporating diversified livestock grazing into vegetation management regimes – that would otherwise rely on equipment and chemical applications – to measure the impact of grazing on soil health, water quality and carbon sequestration; 2) an enhanced understanding of resource and site design requirements (e.g. panel spacing, height); and 3) exploration of socio-economic impacts in the local community to better understand long-term acceptance of agrivoltaic systems, economic viability to producer, landowner and producer, and scalability of such systems. 

    The exploration of the third item may have a direct impact on reducing zoning hearing friction. At least one study[1] finds that “81.8% of respondents [to a survey] would more likely support solar development in their community if it integrated agricultural production” and other social responses are revealed on the figure below.  As noted, academic research into statewide and community agricultural economic impacts is needed, and as are the likely economic compromises and policy incentives required for scalable and high-value agricultural output to address concerns over farmland loss. 

    Image reproduced from article Pascaris, A.S. et al, Do agrivoltaics improve public support for solar? A survey on perceptions, preferences, and priorities, Department of Social Sciences, Michigan Technological University, 1400 Townsend Drive, Houghton, MI 49931, USA

    [1]  Pascaris, A.S., Schelly, C., Rouleau, M. et al. Do agrivoltaics improve public support for solar? A survey on perceptions, preferences, and priorities. GRN TECH RES SUSTAIN 2, 8 (2022)