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  • Farm Bill Fault Lines: Why is the Farm Bill Debate Stuck in Neutral?

    Farm Bill Fault Lines: Why is the Farm Bill Debate Stuck in Neutral?

    As the saying goes: a picture is worth a thousand words.  We present to you Figure 1.

    Figure 1: Farm Safety Net and SNAP Spending, 1962 to 2026F

    Source:  OMB Table 11.3 – Outlays for Payments for Individuals by Category and Major Program: 1940 – 2028 and Table 3.2 – Outlays by Function and Subfunction: 1962 – 2028.
    Note:  spending for budget subfunction 351 (farm income stabilization) is used as a proxy for farm safety net spending.

    Any serious student of farm policy is taught very early on that nutrition policy and farm policy go hand in hand…and that you can’t get a farm bill done that doesn’t include both.  Why?  The argument goes like this: there are not enough rural votes to pass a farm bill, and including nutrition brings along urban votes that otherwise would not vote for a farm bill. Figure 1 paints an interesting picture of how this relationship has changed over time. Following are our observations:

    • For 40 years, spending on the Supplemental Nutrition Assistance Program (SNAP) and the farm safety net were roughly equivalent.[1] Remarkably, over the 40-year period from 1962 to 2001, SNAP spending edged out farm safety net spending by just 2/10ths of 1 percent ($439.28 billion versus $438.39 billion). Interestingly, the House was controlled by Democrats for 33 of those 40 years.
    • In contrast, over the past 20 years (2002-2021), SNAP spending has outpaced spending on the farm safety net by 242% ($1,231.87 billion versus $360.14 billion).  While part of this increase is certainly attributable to the Great Recession and COVID, it was also the subject of considerable scrutiny during both the 2014 and 2018 Farm Bills. Interestingly, the significant increase in SNAP spending occurred despite the fact that Republicans controlled the House in 14 of the last 20 years.
    • In spite of the politically-charged concerns over SNAP spending levels in each of the last two farm bills, in 2021 the Biden Administration revised the Thrifty Food Plan market basket which was estimated to further increase spending on SNAP by $254 billion from 2022 to 2031.[2] As a result, according to the last estimates from the Office of Management and Budget (OMB), over the next 6 years, SNAP spending is projected to outpace farm safety net spending by 508% ($787.44 billion versus $129.49 billion). Notably, that provision was estimated to be budget neutral in the 2018 Farm Bill.
    • With respect to the farm safety net, spending over the last 20 years has been flat. In inflation-adjusted terms, spending is actually declining.

    While we are simply making observations, the purpose in doing so is to help paint a picture for why it has become so painfully difficult to get a farm bill done. In our judgement, this latest administrative action – against the backdrop of what had already been a considerable amount of angst over SNAP spending levels – is putting a significant amount of strain on that historic coalition.  At the same time, grower comments at listening sessions across the country over the last two years have repeatedly highlighted what is self-evident in the chart below: the farm safety net is lagging behind. 

    [1] For purposes of this article, we are equating farm income stabilization (budget subfunction 351) and the farm safety net.

    [2] https://www.whitehouse.gov/wp-content/uploads/2021/08/msr_fy22.pdf

    Fischer, Bart L. and Joe Outlaw. “Farm Bill Fault Lines: Why is the Farm Bill Debate Stuck in Neutral?” Southern Ag Today 4(7.4). February 15, 2024. Permalink

  • What is the TN Visa Program?

    What is the TN Visa Program?

    Labor shortages have affected the agricultural sector for many decades. In regions of the country like the South, the reduction in the farm labor supply is a major problem as many labor-intensive commodities are produced across several states. The decline in the availability of workers is in part due to the lack of interest by American-born laborers to engage in field work that is very physically demanding. For this and other reasons, foreign workers have historically been overrepresented in the agricultural sector. In recent years, the H-2A program, which allows U.S. farmers to hire foreign farmworkers legally, has experienced rapid growth (Gutierrez-Li, 2021). The undocumented and H-2A agricultural workers fill the need for manual labor. These employees perform a variety of tasks like planting, weeding, sorting, packing, applying pesticides, and, most importantly, harvesting. While most of the hired labor on farms engages in manual work, highly specialized workers are also needed to perform tasks that demand more training and often college education. In recent years, agricultural employers have also started facing difficulties recruiting highly educated workers, in the context of tight labor markets and new opportunities for college graduates in sectors like data science and engineering.

    When American farmers cannot hire the number of workers they need from the domestic workforce, they turn to foreign workers. In the case of manual labor, they rely on the H-2A program. The option to hire highly skilled foreign workers in agriculture is the TN visa program.  The TN visa system was created in 1994 as chapter 16 of the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico. In 2020, the program was grandfathered into the USMCA, the replacement of NAFTA. This visa avenue allows citizens of Mexico and Canada to work temporarily in the United States. The program focuses on highly skilled professionals whose area of expertise covers around 60 occupations. 

    The benefits of the TN visa system are many. Like the H-2A visa program, there is no cap on the number of TN visas that can be issued every year. Visas can be renewed indefinitely, but holders cannot apply for permanent residency. Canadian citizens only need to show a job offer at a port of entry to obtain a TN visa, while Mexican citizens must apply first at a U.S. consulate. Unlike other visas, the TN visa does not require a labor certification (LC). LC is a lengthy process in which employers must show that they were unable to find qualified U.S. workers to fill the position they are requesting. Moreover, the TN visa allows farmers to file for premium processing, an option that guarantees their petition will be resolved by USCIS (an immigration authority) in 15 days or less for an additional fee. Lastly, TN visas are less likely to be denied than other visas like H-2B or H-2A and allow holders to bring their dependents (spouse and children under the age of 21) through TD visas (TN dependent). On the other hand, some limitations of the TN visa program are that it does not cover all occupations that farmers may want to hire and that it is limited to Canada and Mexico, leaving out specialized talent from other countries.

    The TN visa program was not designed specifically for the agricultural sector. However, among the list of occupations that qualify for workers, there are several professions that directly relate to agriculture (Table 1). Some include veterinarians, animal scientists, animal breeders, agriculturists (including agronomists and food scientists), apiculturists, dairy scientists, entomologists, biologists, soil scientists, zoologists, plant breeders, horticulturists, and poultry scientists. In addition, some bigger farm operators hire economists, engineers, silviculturists, lawyers, and other technicians who can also be brought under TN visas. The main requirement is for individuals to have at least a bachelor’s degree in their field. For example, dairy farmers in the U.S. hire veterinarians with TN visas that help support American veterinarians on tasks like preparing animal health reports, examining herds, vaccinations, artificial inseminations, and birthing. Moreover, TN visa holders from Mexico can interact with H-2A workers (in Spanish), facilitating communication between all workers. 

    In summary, while most of the news on labor shortages in agriculture relate to field workers and the expansion of the H-2A visa program, the reality is that finding workers across the spectrum of skills is proving more difficult for American farmers. Highly specialized workers are becoming harder to recruit as lucrative careers in other sectors are luring college graduates away from agriculture. In this context, the TN visa appears as a viable (albeit less-known) option for U.S. agricultural employers to obtain dependable workers and continue to expand their operations.

    Table 1. Occupations Allowed Under the TN Visa System

    General ProfessionalsMedical/Allied ProfessionalsScientist Professionals
    AccountantNutritionistAnimal breeder
    ArchitectOccupational therapistAnimal scientist
    Computer Systems AnalystMedical laboratory technologistAstronomer
    LawyerPharmacistAgriculturist
    LibrarianRecreational therapistApiculturist
    MathematicianPhysicianBiochemist
    Industrial designerDietitianBiologist
    Landscape ArchitectDentistChemist
    Hotel managerPhysiotherapist/ physical therapist Dairy scientist
    ForesterRegistered nurseEntomologist
    Disaster relief insurance claims adjusterPsychologistEpidemiologist
    EconomistVeterinarianGeologist
    EngineerGeochemist
    Graphic designerGeneticist
    Research assistantGeophysicist
    Interior designerHorticulturist
    Land surveyorMeteorologist
    Range manager/ Range conservationistPhysicist
    Social workerPharmacologist
    Teacher / College or UniversityPoultry scientist
    SilviculturistPlant Breeder
    Technical publications writerSoil scientist
    Scientific technician/ technologistZoologist
    Teacher / Seminary
    Urban planner
    Vocational counselor  

    References

    Gutierrez-Li, A. (2021). The H-2A visa program: addressing farm labor scarcity in North

    Carolina. NC State Economist. North Carolina State University.

    Payan, T. & Rodriguez-Sanchez, J. (2023). Revamping the TN Visa to get workers where the US needs them. Center for the U.S. and Mexico. Research paper.

    Gutierrez-Li, Alejandro. “What is the TN Visa Program?” Southern Ag Today 4(7.3). February 14, 2024. Permalink

  • Where are the Girls?

    Where are the Girls?

    One article on cattle inventory just will not suffice given the extremely low inventory. This article will try to address the same question a bunch of college guys have at a party with no females. Where are all the girls? When will they get here? The values can be dissected in a number of ways, but being elementary may be the best route.

    Total beef cow inventory was estimated to be down 716,000 head compared to the previous year with most of that decline coming from the Great Plains and the Southeast United States. This decline was largely drought influenced as widespread drought reduced late summer and fall forage production and resulted in many producers being forced to feed hay earlier than is typical. Thus, it is fairly easy to know where all the young girls are. One simply has to look at the quantity of heifers on feed. Clearly, the feedlot is where most of these young females reside. As it relates to more mature females, beef cow slaughter in 2023 tells most of the story for the beef cow herd. The industry has harvested a large quantity of beef cows.

    Figure 1 contains information concerning the quantity of beef heifers retained for replacement. Heifers held as beef cow replacements have been extremely low for two consecutive years, which means it will be difficult to grow the beef cow herd much in 2024. In reality, most heifer replacement decisions will not be made by spring calving producers until the second half of the year and it will be two years before any of those retained females have a calf old enough to enter the feedlot.

    The final thoughts here are that most females have been on a dinner plate, are on a dinner plate, or destined for a dinner plate. Cattle producers will begin to make heifer retention decisions. One would suspect there will be some aggressive decisions to retain females in the coming years, but significant retention will be slower than many may think.

    Figure 1. Beef Heifers Held for Replacement

    Griffith, Andrew. “Where are the Girls?” Southern Ag Today 4(7.2). February 13, 2024. Permalink

  • The Coordinated Decision of PLC and Federal Crop Insurance in Managing Price Risk in Rice

    The Coordinated Decision of PLC and Federal Crop Insurance in Managing Price Risk in Rice

    Two of the most prominent risks faced by all agricultural producers are production risk (i.e., yield) and marketing risk (i.e., price). Rice is somewhat unique in that its relative yield risk is lower than that of its competing crops (Biram and Mills, 2023). According to the article, corn, cotton, and soybean production risk in southern states can be anywhere from 2 to nearly 11 times higher than that of rice production risk. This is primarily driven by the fact that most all rice production is flood irrigated which provides risk protection against weeds, drought, and wind. With such a low relative production risk, this begs the question of how rice producers should protect themselves against price risk.

    Historically, most rice producers in the U.S. have utilized target price programs authorized by the farm bill. The latest target price program is the Price Loss Coverage (PLC) coverage program which triggers a payment rate based on the difference between the national Marketing Year Average Price (MYAP) and the Effective Reference Price (ERP), whenever the MYAP is below the ERP. While some crops are expected to see an increase in the ERP driven by a higher Olympic Average MYAP (e.g., corn and soybeans), the ERP for rice is expected to remain at the Statutory Reference Price of $14.00/cwt. The 2024/2025 MYAP price will likely not fall below $15.00/cwt based on the average of the November 2024, January 2025, and March 2025 Rough Rice futures contracts, suggesting the PLC program will likely not trigger a payment for rice in the 2024/2025 marketing year.

    However, there is an opportunity to lock in higher price guarantees through area crop insurance administered by the Federal Crop Insurance Program. In a previous Southern Ag Today article, Fischer and Outlaw (2024) suggest leveraging area crop insurance products such as the Supplemental Coverage Option (SCO) and Enhanced Coverage Option (ECO) with PLC for winter wheat. One price risk management strategy for rice producers would be to leverage a Revenue Protection plan of insurance with SCO, ECO, and PLC. Assuming RMA County yields for rice remain the same or fall compared to their historical average, SCO can provide additional price protection from your individual coverage level up to 86% and ECO can cover from 86% up to 95%. It is worth noting that SCO and ECO will come at a premium cost additional to any underlying Yield Protection or Revenue Protection premium cost.

    In Figure 1 below, I provide a visual example of the downside price risk protection SCO and ECO insurance products can provide with an RP policy at the 80% coverage level using an RMA Projected Price of $15.50/cwt. While a rice producer can opt to only choose PLC and forego the crop insurance coverage, PLC faces a maximum payment rate of $7.00/cwt, it provides no farm-level yield risk protection (which is a key feature of all RP crop insurance policies), and it is unlikely to trigger in the 2024/2025 marketing year, as noted above.

    Figure 1. Using RP with SCO and ECO crop insurance products to provide a price guarantee for rice. 

    References

    Biram, Hunter, and Brian E. Mills. “Analyzing the Relative Riskiness of Rice Yields.” Southern Ag Today 3(19.4). May 11, 2023. Permalink

    Fischer, Bart L., and Joe Outlaw. “Making the ARC/PLC Election for 2024.” Southern Ag Today 4(3.4). January 18, 2024. Permalink

    Biram, Hunter. “The Coordinated Decision of PLC and Federal Crop Insurance in Managing Price Risk in Rice.” Southern Ag Today 4(7.1). February 12, 2024. Permalink

  • United States Supreme Court to Hear Oral Arguments in Texas v. New Mexico Water Dispute

    United States Supreme Court to Hear Oral Arguments in Texas v. New Mexico Water Dispute

    In November 2022, Texas, New Mexico, and Colorado reached an agreement to resolve the long-standing dispute between the states over whether New Mexico delivers appropriate amounts of water to Texas under the Rio Grande Compact. However, the United States objects to the agreement and asserts that the federal government must agree before any agreement is implemented. The Special Master recommended that the United States Supreme Court approve the agreement over the objections of the federal government. The Court recently agreed to hear oral arguments on the issue on March 20. The decision raises important questions about the role of the federal government in water allocation agreements between states, which have traditionally held absolute authority with respect to water rights. 

    The decision will be important to agriculture since agricultural water withdrawals generally constitute the leading use of water. Agricultural withdrawals also form the focus of many interstate water disputes. Several producer groups and agricultural irrigation organizations have filed friend-of-court briefs supporting approval of the agreement.

    Texas filed a complaint in 2013, alleging that New Mexico was not delivering the amount of water to Texas required under the Rio Grande Compact. In 2014, the Court allowed the federal government to intervene in the case, and the federal government filed its own complaint, noting that the United States has an obligation to deliver water from the Rio Grande to Mexico under a treaty between the nations, and the federal government manages a large water project on the river. In 2018 the Court denied New Mexico’s motion to dismiss both complaints. 

    After years of negotiation, the states reached an agreement that bases water allocations on a hydrologic formula and provides penalties against New Mexico for annual or cumulative departures from that allocation that exceed certain amounts. The penalties are in the form of allocated water transfers from New Mexico to Texas.

    The agreement is unique and may provide a model for future agreements. A decision by the Court that allows the federal government to exert control over agreements between the states on water allocation would interject even more uncertainty. The federal government could conceivably regulate the use of surface water and groundwater for agricultural production within the states, a role that states jealously guard. Twenty-three states have filed a friend-of-court brief urging the Court to approve the agreement.

    Richards, Jesse, and Tiffany Lashmet. “United States Supreme Court to Hear Oral Arguments in Texas v. New Mexico Water Dispute.” Southern Ag Today 4(6.5). February 9, 2024. Permalink