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  • What’s the Lay of the Land in U.S. Organics Trade?

    What’s the Lay of the Land in U.S. Organics Trade?

    Introduction

    Increased attention among consumers to the healthfulness and environmental footprint of their diet has expanded opportunities for organic products both in the U.S. and abroad. These developments have major implications for international trade. In just a little over a decade, the total value of imported organic products has nearly tripled from $667 million in 2011 to about $2 billion 2023 (Figure 1). Over this same time period, U.S. exports have increased from $412 million to $582 million. 

    Figure 1. The US Organic Trade from 2011 to 2023

    Source: USITC Trade Dataweb

    What are the most highly traded products? 

    On the export side (Figure 2.a), the majority of organic trade is in fruits and vegetables. These products accounted for about 60% and 30% of exports in 2023, respectively. Things have evolved differently on the import side (Figure 2.b). In 2011, U.S. organic imports were dominated by coffee and tea. These products accounted for about 84% of imports at that time. Today, coffee and tea represent only 34% of U.S. organic imports. This is not to say that these imports have disappeared. In fact, the value of coffee and tea imports has increased from $563 to $673 million over the time period. So, the decline in the import share of coffee and tea is actually due to the rapid expansion in the import of other organic products—namely fruit, which accounted for about 50% of organic imports in 2023. 

    Figure 2. Product Composition of U.S. Organic Trade

    (a) U.S. Organic Exports

    Source: USITC Trade Dataweb

    (b) U.S. Organic Imports

    Source: USITC Trade Dataweb

    Who do we trade with? 

    Canada is the largest market for U.S. organic products (annually importing $7 million), followed by Mexico ($4 million), Japan ($0.9 million), Taiwan ($0.7 million), and South Korea ($0.4 million). In terms of organic imports, Mexico is our largest trade partner (sending $11 million worth of organic products to the U.S. per year). Peru, Colombia, and Honduras are the second, third, and fourth largest players, annually sending about $9 million, $7 million, and $7 million worth of organic products to the U.S. per year, respectively. 

    One major driver of organic trade is the negotiation and implementation of Organic Equivalency Agreements (OEAs) with many of our trade partners. These OEAs are essentially “two-for-the-price-of-one” agreements from the perspective of organic producers. OEAs allow producers who are certified to produce organic products in their home country to label their products as organic in the U.S. (or vice versa) without going through the extra hassle and cost of the additional certification process. As of March 2024, the U.S. has OEAs with Canada, European Union, Japan, South Korea, Switzerland, Taiwan, United Kingdom, New Zealand, and Israel.

    Choi, Jungman and K. Aleks Schaefer. “What’s the Lay of the Land in U.S. Organics Trade?” Southern Ag Today 4(12.4). March 21, 2024. Permalink

  • Planting Date: The Need for Speed

    Planting Date: The Need for Speed

    Planting date is one of the most crucial aspects of crop production. The ability to get a crop in the ground in a timely manner can be the difference between making a profit or a loss. As shown in Figure 1, the optimal planting date for soybeans grown in Mississippi would be around April 20th (Julian Day 110). Every day before April 20th reduces yield by 0.51bu/ac, and for every day after, yield decreases by 0.39bu/ac. The goal should be to plant as many acres around this date as possible. One way to do that is by increasing planting speed. To illustrate the impact that planting speed can have on yield, costs, and net returns we can compare a traditional mechanical planter planting at 5 mph to a precision planter planting at 9 mph. 

    First, for simplicity’s sake, we will assume a 2,000-acre soybean farm. Using the standard machine cost calculation formulas, a 12-row 38-in row-spacing mechanical planter is going to plant 15 acres per hour (planting at 5 mph), and the same size precision planter is going to plant 26.9 acres per hour (planting at 9 mph). This means a mechanical planter would take 133.6 hours to plant 2,000 acres and a precision planter would only take 74.2 hours. We could just use those numbers to determine when to start planting but that doesn’t consider the fact that weather can prevent farmers from actually getting in the field. The USDA NASS collects data on how many days in a given week are suitable for fieldwork. For this example, we use the average days suitable for fieldwork from 2019-2023 in Mississippi. Table 1 shows the yield, planter speed, and days suitable for fieldwork by week. 

    One drawback to the precision planter is that it is going to cost more to purchase. A mechanical planter costs around $106,000, and the same size precision planter will be about $150,000. However, because of increased planting speed which results in fuel efficiency and labor savings, the operating cost per acre is actually less for the precision planter at $15.81/acre compared to $19.20/ac for the mechanical planter. For more information on machine cost calculations, see: http://extension.msstate.edu/publications/farm-machinery-cost-calculations

    Putting all this together and some back-of-the-napkin math, the optimal start date for the mechanical planter would be April 9th (Julian 99) and April 14th (Julian 104) for the precision planter (Table 2). A precision planter would reduce the days of planting from start to finish from 23 days to 13 days and thus increase yield by 1.2 bu/ac. Assuming a soybean price of $12.00/bu, this would increase revenue by $14.07/ac. Costs would be decreased by $3.38/ac leading to an increase in net returns of $17.45/ac. Effectively, the additional cost of the precision planter would pay for itself in 2 years for a 2,000-acre farm.

    Now, this analysis is pretty basic and makes some broad assumptions. It is important to look at your state’s planting date yield data to determine when is optimal for you to plant. Larger farms are going to benefit from higher planting speeds more than smaller farms. It also assumes that there is no yield loss when planting faster. Preliminary data at Mississippi State shows there isn’t a yield hit, but this could vary depending on your situation. Nevertheless, the basic idea is that by planting faster a producer could capture higher yields. So be a maverick and bump that cruise speed up.

    Figure 1. Effect of Planting Date on Soybean Yield in Mississippi from Batemen et al. (2020)

    Table 1. Weekly comparison between mechanical and precision planter for Mississippi
    PeriodAverage of Soybean Yield bu/acDays Suitable for Fieldwork 2019-2023Hours per Day Suitable for FarmingaMechanical Planter Acres Per DayPrecision Planter Acres Per Day
    Week 1259.12.94.974.1132.8
    Week 1362.63.45.886.9155.9
    Week 1466.23.15.480.7144.8
    Week 1569.82.84.871.5128.2
    Week 1671.53.56.191.0163.2
    Week 1768.73.96.7100.8180.8
    Week 1865.94.67.8117.3210.3
    Week 1963.24.06.8101.8182.6
    Week 2060.55.49.2137.8247.2
    Week 2157.75.79.7145.5261.0
    Week 2255.05.69.5143.0256.4

    References

    Bateman, N.R., Catchot, A.L., Gore, J., Cook, D.R., Musser, F.R., & Irby, J.T. (2020). Effects of Planting Date for Soybean Growth, Development, and Yield in the Southern USA. Agronomy. https://doi.org/10.3390/agronomy10040596

    Johnson, J., & Mills, B.E. (2023). Farm Machinery Cost Calculations. Mississippi State University Extension P3543. Available at: http://extension.msstate.edu/publications/farm-machinery-cost-calculations

    USDA NASS. (2024). Days Suitable for Fieldwork. Available at: https://quickstats.nass.usda.gov/

    Mills, Brian, Mike Mulvaney, Wes Lowe, and Oluwaseyi Olomitutu. “Planting Date: The Need for Speed.“ Southern Ag Today 4(12.3). March 20, 2024. Permalink

  • Cow and Cow-Beef Prices Booming

    Cow and Cow-Beef Prices Booming

    Amid the run to record high calf prices in recent weeks, the cow market is higher too.  Cow prices are higher on tighter supplies of cows and beef as we get closer to grilling season (it’s always grilling season for most of us down here).  

    Since the beginning of the year, total cow slaughter is about 9.4 percent lower than last year.  Beef cow and dairy cow slaughter are lower than a year ago.  Dairy cow slaughter tends to be its highest early in the year before declining in Summer.  Beef cow slaughter is pretty close to the 5-year average.  You’ll notice in the attached charts that beef cow slaughter tends to pick up mid-year before hitting its peak in Fall.  

    Cull cow prices tend to increase seasonally into late Spring and early Summer.  Auction prices have shown a lot of volatility bouncing between $85 and $105 per cwt over the last 4 weeks.  National average direct cutter quality cows have continued higher hitting $104.53 per cwt last week.  The boxed cow beef cutout has increased from $205 in January to $246 last week.

    More impressive than the increase in cull cow prices is the increase in lean beef prices for ground beef.  The 90 percent lean boneless beef wholesale price has increased from $255 to $317 per cwt so far this year.  A real contrast has developed between the 90 percent lean and the 50 percent lean price.  Fifty percent lean prices are about 20 percent, about $26 per cwt, lower than last year.  The contrast really highlights the tight supply situation in the cow and cow-beef market and the fed cattle market.  Heavier weights are likely contributing to some relatively higher supplies of 50 percent lean beef.  We seem to have plenty of fat to go with not enough lean.  

    What to Watch For

    Cull cow prices should continue to increase seasonally over the next couple of months.  Cull cow prices will look attractive compared to future calf prices from her offspring.  Once grilling season gets a little closer, watch for increasing middle meat (steak) prices.  High lean beef wholesale prices and tight supplies will continue to boost beef imports.  We’ll begin to hear more about cow plants struggling to find supplies and going further and further out to buy cows and boosting bids more.  Even more stress will be put on fast food restaurant chains selling hamburgers and pressure on ground beef prices at grocery stores.   

    A Note on This Friday’s Cattle on Feed Report

    USDA will release its latest cattle on feed report on Friday afternoon.  Watch for placements higher than a year ago.  We are likely to see a rare event where February placements are larger than January’s placements.  Higher placements will continue to leave more cattle on feed compared to a year ago.

  • Prospects for Sorghum Premiums in the Upcoming Season: A Forecast Analysis

    Prospects for Sorghum Premiums in the Upcoming Season: A Forecast Analysis

    Sorghum prices generally follow corn prices.  Since 2006/07, the biofuel era, the largest discount of sorghum to corn was -$0.74 per bushel; the largest sorghum premium to corn was +$0.79; and the average price relationship was -$0.11.   (Figure 1).

    Figure 1. Monthly Average Sorghum and Corn Prices Paid to Farmers by Marketing Year

    The level of sorghum premium or discount is largely contingent upon demand, predominantly influenced by exports. Figure 2 shows the relationship between the sorghum exports-to-domestic-use ratio and the premium or discount received by U.S. farmers.

    During the 2020/21 season, we witnessed a significant increase in sorghum premiums due to increased export demand. These premiums occurred because of the US-China Phase One Trade Agreement (U.S. sorghum exports are not subject to tariff-rate quotas like corn), the recovery of the Chinese swine sector, and high corn prices that supported high exports of U.S. sorghum to China. The export ratio over domestic consumption during 2020/21 increased to 2.68 (Figure 2). Exports during this season totaled 279 million bushels, while domestic consumption totaled 104 million bushels. After 2020/21, the ratio of exports over domestic consumption decreased due to lower yields, drought, and fewer exports, reaching a low level of 1.08 in the 2022/23 season and a discount in the price of sorghum to corn of -$0.16 per bushel.

    Figure 2: Sorghum to Corn (Premium or Discount) and the Ratio of Sorghum Exports to Domestic Use

    Source (Dr. M. Welch, USDA February WASDE, USDA, NASS Agricultural Prices)

    During the 2023/24 season, the level of exports increased along with higher production and lower domestic consumption. Production in 2023/24 increased to 318 million bushels from the previous year of 188 million bushels, a result of significantly larger harvested acreage and better yields. The exports-over-domestic-consumption ratio also increased to 3.00 alongside better premiums over corn.

    Looking forward to next season, production for 2024/25 is expected to increase again, given USDA’s February WASDE projections and projections from the Ag Outlook Conference on February 15, 2024. Planted acres are expected to decrease by 2.8% from the previous season, but the area harvested projection is unchanged with a return to more normal growing conditions. The projected yield in 2024 of 69.2 bushels per acre is much better than the drought impacted yields of the last two years, up 33% compared to 2023. 

    Domestic use and exports are expected to increase next season. Domestic use is projected to be 115 million bushels (+35 million bushels), while exports are expected to be around 295 million bushels (+55 million bushels). This level of exports and domestic consumption results in a ratio of sorghum exports to domestic use of 2.57. The sorghum premium over corn price at this ratio would be around $0.26/bu using Dr. Welch’s model to calculate sorghum-to-corn premium or discount as a function of the ratio of sorghum exports to domestic use (Figure 3).  While this price relationship is not exact, the ratio of sorghum exports to domestic use in the 2024/25 marketing year is projected to be the 4th highest of the biofuel era, suggesting a better-than-average sorghum price relationship to corn. 

    Figure 3: Sorghum-to-Corn Premium/Discount as Function of the Ratio of Sorghum Exports to Domestic Use

    Source: Dr. Mark Welch, USDA February 2024 WASDE and 2024 Ag Outlook Conference.

    Abello, Francisco Pancho. “Prospects for Sorghum Premiums in the Upcoming Season: A Forecast Analysis.” Southern Ag Today 4(12.1). March 18, 2024. Permalink

  • EPA Made 2023 Commitment To CAFO Permitting Reform But No Action Evident to Date 

    EPA Made 2023 Commitment To CAFO Permitting Reform But No Action Evident to Date 

    In August 2023, the United States Environmental Protection Agency (EPA) publicly disclosed an ambitious and extensive internal plan to conduct a potentially transformative reform process of NPDES permitting confined animal feeding operations (“CAFO”) under the Clean Water Act. The commencement of this process can best be described as a “soft launch” in that it was first revealed in a relatively obscure agency decision denying an administrative petition pending since 2017.  National attention to this undertaking will certainly grow as it progresses due to its potential, at least on paper, to be the seeds of significant changes to the CAFO permitting and regulatory scheme which has become an integral part of the national agricultural lexicon. 

    On March 8, 2017, a group of environmental groups led by Food & Water Watch filed a petition with EPA seeking a complete re-write of the Clean Water Act CAFO permitting system embodied in federal regulations. Petitions seeking changes to federal executive agency regulations are quite common. While very rarely producing the requested relief, they create an agency decision-making process the results of which can be appealed to federal court. This serves to place a particular objective of the petitioners in play with an agency and, most importantly, provides a chance to appeal the results to a federal court which may be more sympathetic than the agency to some portion of the petitioners’ arguments. Generally, those arguments are that a regulation, on its face or as applied, fails to comply with the authorizing legislation’s text. Such was the case in this instance. 

    The 2017 Food and Water Watch petition’s first paragraph summarized its contents as follows: “[T]he agricultural sector, including CAFOs, remains largely unregulated and is now the nation’s leading source of water quality impairments. The Agency’s current CAFO regulations are plainly not up to the task of protecting our waterways from industrial livestock operations.” On August 15, 2023, after six years pending and a subsequent October 2022 petition seeking similar relief, the EPA denied both the 2017 and 2022 petitions.   

    Within the agency denials, the EPA announced it reform undertaking, which its website currently describes as “a comprehensive evaluation of the CAFO program” which will include “a detailed study of the CAFO effluent limitations guidelines [ELGs] as well as establishing a Federal Advisory Committee, the [Animal Agriculture and Water Quality Subcommittee (AAWQ)], . . . through which a diverse array of stakeholders will help inform EPA’s efforts to improve its CAFO program.” 

    Noteworthy text within the EPA decisions included the following:

    • “EPA also shares your concern that CAFOs can be a significant source of pollutants into waters of the United States. The Agency recognizes that there may be opportunities to do more to address these pollutants.”
    • “Federal and state agency staff, have experienced challenges effectively implementing and assuring compliance with the current CWA CAFO regulatory requirements.”

    The EPA’s statements do not read like an agency entirely confident that all is well with the status quo of its enforcement efforts of the Clean Water Act concerning CAFOs. 

    Following the August 2023 decisions, the EPA published a Federal Register Notice on November 16, 2023, soliciting nominations to the AAWQ subcommittee by a deadline of January 24, 2024.  Thus far, there has been no further word on appointments.  EPA’s “detailed study” of the CAFO ELGs was in fact previously announced in January 2023.  However, there has been no public evidence of that undertaking being conducted over one year later.   

    Meanwhile, the federal courts are now also involved. On September 8, 2023, the EPA’s denials were appealed through the filing of a petition for review with the U.S. Court of Appeals for the Ninth Circuit, docketed at Food & Water Watch, et al. v. EPA, No. 23-2146. American Farm Bureau Federation, National Pork Producers’ Council, U.S. Poultry & Egg Association and United Egg Producers have become intervening parties to that case. Presently, briefing by the parties is slated to conclude by June 1, 2024. A decision could take anywhere from a few months to a few years, and the outcome at the Ninth Circuit (perceived as potentially more sympathetic to the petitioners than the other eleven Circuit Courts of Appeals) remains uncertain. The same could be said about the prospects of any attempt by a dissatisfied party to appeal an adverse outcome to the U.S. Supreme Court (perceived as not sympathetic to the petitioners).  

    The coming months or years will tell us how diligently EPA pursues unilateral changes of its own accord in its Clean Water Act enforcement regarding CAFOs, either as presently defined or under a new regulatory design. Over that time, we will also learn whether decisions about the future of EPA’s CAFO regulatory and permitting scheme will be dictated by the federal courts. This effort could alter not only the federal definition of a CAFO itself and how potential surface water discharges of animal production operations are regulated and permitted, but also may include new tools like monitoring or drastically overhauled effluent standards. Any changes at the federal level will assuredly impact each states’ undertakings, where applicable, of NPDES and non-NDPES water quality programs and, most importantly, state budgeting for the same.  

    Duer, Brook, and Paul Goeringer. “EPA Made 2023 Commitment To CAFO Permitting Reform But No Action Evident to Date.” Southern Ag Today 4(10.5). March 8, 2024. Permalink