FARE Blog

Food, Agriculture, and Resource Economics

Information on Disaster Assistance Programs

By Adam N. Rabinowitz

Click here for a PDF version of this post.

Last week Hurricane Michael ripped through the heart of Georgia agriculture, devastating the southwest region and destroying a significant amount of our farmers’ hard work.  While government programs can never fully replace the loss, there are a number of resources that are available to help farmers recover from disasters.  Some general tips and good practices include:

  • Collect documentation! Prior to starting any cleanup activity, make sure to take pictures of damage and losses that have occurred.
  • If you have crop insurance, contact your crop insurance agent to report losses or damages. It is important to do this before starting any cleanup activities so that everything can be documented properly.   Furthermore, farmers need to notify their crop insurance agent within 72 hours of discovery of a loss.  Beyond that, farmers should make sure that a signed written notice is provided within 15 days of the loss.
  • If you have noninsured crop disaster assistance or are eligible for other disaster assistance programs, contact the local FSA office. It is important to do this before starting any cleanup activities so that everything can be documented properly and a waiver can be issued prior to cleanup.

Important Disaster Resources

The USDA has a disaster website for Hurricane Michael that can be accessed at: https://www.usda.gov/topics/disaster/storms.  At that link there is information on FEMA and other disaster programs.  There is also a more direct resource related to agriculture that can be accessed at: https://www.farmers.gov/recover.  Some of the disaster assistance programs potentially applicable to hurricane losses include:

More information about each of these programs can be found at the above websites.  In addition, there have been some specific disaster related questions which are answered below.

  • What is the next step(s) after receiving crop damage? (reporting claims, documentation, etc.)

Depending on the program, contact either your crop insurance agent or local FSA office.  Make sure to take pictures of the damage and do not burn any debris.  An adjuster or FSA representative will need to survey the damage, thus it is important to wait before starting any cleanup until this has happened or permission to cleanup has been granted.

Keep in mind certain crop insurance deadlines.  Notice to your crop insurance agent must occur before abandoning a crop within 72 hours of a loss.  A written notice needs to be signed within 15 days of loss.

In addition to documenting the damage and loss, keep track of expenses related to cleanup.  It is advisable to keep records of all activities related to the disaster.

  • Do farmers have to pick the crop (in certain situations)? (requesting an appraisal, pros/cons of picking vs. taking the appraisal)

This is a difficult question that depends on individual circumstances.  Some issues that need to be considered is whether there is any salvage value of the crop and the quality of anything that can still be harvested.  If it is a good crop then it should be harvested.  The farmers crop insurance agent can help make a determination of how to proceed.

  • If you don’t pick the crop, how bad will it hurt the established yield?

If there is crop available to pick and you choose not to then it will count against the loss.

  • What if a farmer has an FSA loan on a structure that was damaged?

Contact the local FSA office immediately to report this damage.

  • What additional disaster relief may become available and when?

After many natural disasters that result in widespread damage there are often additional programs that become available to aid with agricultural losses.  This, however, is not guaranteed and it does take time before they are available as they require a special appropriation from the U.S. Congress and signature of the President.  One such example is the 2017 Wildfires and Hurricanes Indemnity Program (WHIP) that covered losses from Hurricane Irma that caused widespread damage in September 2017.  Allocation for that program was not made until February 9, 2018 as part of the Bipartisan Budget Act of 2018.  Sign up for that program did not begin until July 16, 2018.

While a special allocation may not be immediately available, it is important to document losses and to communicate to your legislators in a way that illustrates the impact that Hurricane Michael has had on your farming operation.  This information will help drive policy decisions and additional allocations that may become available.

 

Disclaimer

The information provided in this document is not a specific recommendation.  Producers should make disaster assistance decisions in consultation with their crop insurance agent local Farm Service Agency or other government entity responsible for program administration.

 

Hurricane Michael Hit Georgia Pecans Industry

By Esendugue Greg Fonsah, Doug Collins, Lenny Wells and Will Hudson

Hurricane Michael arrived the heart of Georgia pecans producing areas in the early morning of Wednesday October 10, 2018 and left a devastating blow to the entire industry.  Speaking with County Agents and Specialists, Mitchell, Lee, and Dougherty Counties that contribute to a third of total Georgia pecans suffered close or more than 50%.  The hurricane came at the most vulnerable time imagine.  Pecans crops that were close to harvest were destroyed.  Several pecan trees and nuts were knocked down.   Other producing areas such as Peach, Crisp, Leesburg and Bainbridge were affected with varying losses ranging from 20- 40% according to initial reports.  There were also structural damage.  Although initial loss is valued at about $200 million, this might change quickly after a comprehensive assessment is carried out.

Courtesy of Dr. Lenny Wells.

Hurricane Michael Hit Georgia Vegetable Industry

By Esendugue Greg Fonsah, Andre Da Silva, Bhabesh Dutta, Timothy Coolong and Scott Carlson

Hurricane Michael touched down Wednesday morning, October 10th, 2018 leaving behind a devastating blow to the South Georgia population, the community and the fruit and vegetable growers industry.  Farmlands and crops were blown off, trees blown down and electricity shut down in most areas.  Our major fall crops such as bell peppers, tomatoes, cucumbers, eggplants, squash, zucchini, sweet corn and snap beans were all affected.  The magnitude of the damage varied from crop to crop and from location to location but a rough initial estimate puts the damage around 40-60%, equivalent to about $250-$300 million.  The UGA Vegetable Team is currently conducting a full damage assessment and prepare a comprehensive report to determine the actual loss value to the Georgia Fruit and Vegetable Industry.

Courtesy of Dr. Andre Da Silver

Market Facilitation Program: What is available to cover my marketing losses from trade tariffs?

By Yangxuan Liu

Download the PDF version of this article. 

U.S. Department of Agriculture releases details about the spending plans for $12 billion in trade aid package for farmers. The main component of the aid package is the Market Facilitation Program (MFP). MFP is authorized under the Commodity Credit Corporation (CCC) and administered by Farm Service Agency (FSA). MFP provides a direct payment to help producers who have been negatively impacted by foreign governments imposing tariffs on U.S. agricultural products.

MFP payment rates will consist of two announced payment rates. The first rate is announced on September 4, 2018 for the first payment rate and applies to 50% of the producer’s 2018 actual harvest production. On or near December 3, 2018, if applicable, the second payment rate will be announced and will apply to the remaining 50% of the producer’s 2018 production. For each commodity covered, USDA has set the first payment rates for the 50% of the producer’s 2018 actual harvested production as follows:

  • Cotton – $.06 per pound, estimate total payments of $277 million
  • Corn – $.01 per bushel, estimated total payments of $96 million
  • Soybeans – $1.65 per bushel, estimated total payments of $3.6 billion
  • Sorghum – $.86 per bushel, estimated total payments of $157 million
  • Wheat – $.14 per bushel, estimated payments of $119 million
  • Hogs – $8 a head, estimated payments of $290 million
  • Milk – $.12 a hundredweight, estimated payments of $127 million

The signup started on Tuesday, September 4, 2018 until Tuesday, January 15, 2019. For cotton producers, you can sign up with FSA now and update later to FSA with your production record, e.g. ginning records.

MFP payments are capped per person or legal entity at a combined $125,000 for corn, cotton, sorghum, soybeans and wheat, and another $125,000 for dairy and hogs. This payment cap applies to MFP only. The $125,000 payment cap for Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) payments is a separate cap. Eligible applicants must have an ownership interest in the commodity, be actively engaged in farming and have an average adjusted gross income (AGI) for tax years 2014, 2015 and 2016 of less than $900,000. Producers will have the option to submit CCC-910’s and report production in person, by mail, or electronically to FSA.

Economic Productivity and Profitability Analysis for Whiteflies and Tomato Yellow Leaf Curl Virus (TYLCV) Management Options

By Esendugue Greg Fonsah, Chen, Yu, Stan Diffie, Rajagopalbabu Srinivansan and David Riley

Introduction: (Complete version of journal article is attached here).

In 2015, the United States was the second largest producer of tomatoes in the world.   The U.S. produces tomato for fresh and processed markets respectively, and both markets contribute over $2 billion in annual farm cash receipts. In the state of Georgia, tomato is one of the most important commercial crops and ranks amongst the top ten vegetables in terms of farm gate value.  For instance, from 2009 to 2014, tomato contributed over $265 million to the state economy. Tomato yellow leaf curl virus (TYLCV), transmitted by whiteflies, are a major threat to tomato production around the world.  The spread of the virus in the field and in glass houses is directly correlated to increase in whitefly population. The virus was first seen in Israel in 1950.  Almost 50 years later, the virus was seen in Florida, Georgia, the Carolinas, Texas and California.  Infected plants show symptoms of stunting, flower abortion, curling of leaflet margins, yellowing of young leaves, inferior overall cosmetic appearance of fruits quality and decreased yields.  It is common to experience yield losses of up to 100% in affected fields.  Also there is no official estimate of losses caused by this virus but it is assumed to be in the tens of millions of dollars.

Although several studies discussed the economic evaluation for preventing tomato with respect to pesticide use, exclusion screen, intercrop and cultivars, there are limited studies that provide economic analyses of TYLCV prevention and management options. As a result, the objective of this study was to develop an economic productivity and profitability analysis aimed at determining the financial and economic viability, if any, of managing TYLCV.

Methods

This experiment was conducted at the Horticulture Farm, Coastal Plains Research Station, University of Georgia, Tifton, during the summers of 2013-2015.  We specifically evaluated the use of TYLCV-resistant cultivars, metallic silver mulch, and the use of the insecticides relative to white mulch, a TYLCV-susceptible tomato, and a no insecticide check, respectively.  The experimental response variables measured were whitefly adult, immature and egg incidence, TYLCV symptom severity, and marketable yield.  Tomato cultivars used included Shanty, Security, Tygress and the susceptible cultivar FL-47.  The types of mulch used were reflective and a standard non-reflective white mulch.  Insecticides used were cyantraniliprole, applied at 13.5 fl. oz. per acre, imidacloprid at 10.5 fl. oz. per acre and water as a control.   Each treatment was replicated 4 times.

Results

The inputs used in the economic analysis of insecticides for the management of whitefly- transmitted TYLCV in tomato production were slightly different from the conventional tomato production practices.  For instance, the planting materials were TYLCV-resistant lines plants, which cost $466/ac.  Silver mulch was $513/ac while insecticide used to control white flies was $159/ac.  The combined fertilizer cost was $692/ac.  Fumigation, fungicides and labor costs were $570, $189 and $550/ac respectively.  Total pre-harvest variable cost (P-H VC) was $4,200/ac.

A sensitivity analysis based on total cost of production showed that an expected net return of producing tomatoes in the presence of TYLCV was $1,958/ac and obtainable 50% of the time.  The result further showed that $-887 may be obtained 7% of the time in a worst case scenario while a rare net return of $4,802 is also realizable 7% of the time.  These results reconfirm the importance of good agricultural practices and adherence to management recommendations from research and extension scientists in successfully managing whitefly-transmitted TYLCV (Table 1).

Table 1:  Sensitivity Net Return of producing tomatoes in the presence of whitefly-transmitted tomato yellow leaf curl virus (TYLCV) in the Southeast USA, 2017.

Net return levels (TOP ROW);
The chances of obtaining this level or more (MIDDLE ROW); and
The chances of obtaining this level or less (BOTTOM ROW).
Best Optimistic Expected Pessimistic Worst
Returns ($) 4,802 3,854 2,906 1,958 1,010 62 -887
Chances (%) 7% 16% 31% 50%
Chances (%) 50% 31% 16% 7%
Chances for Profit 85% Net Revenue $1,958

Acknowledgment: We acknowledge the technical help rendered by Mr. Simmy Meckeown, and numerous student workers at the vector biology laboratory, UGA, Tifton, during the course of this study.  This project was partially funded by USDA AFRI Grant 2012-67007-19870 for which the authors are grateful.

Cotton Outlook

By Yangxuan Liu and Don Shurley

Download the PDF version of this article.

In 2018, Georgia’s farmers planted 1.43 million acres of cotton, up 150,000 acres from 2017. The average cotton yield is forecast at 946 pounds per acre. Production is forecast at 2.8 million bales, which would be the second highest on record. There are two major contributing factors to the increase in cotton acres in Georgia. First, the relatively high cotton price in 2018, especially during planting season, makes cotton more competitive with other row crops. Second, the Bipartisan Budget Act of 2018 authorized seed cotton as a covered commodity and eliminated generic base and thus the eligibility for payments when planting other covered commodities on farms with generic base.

U.S. cotton planted acreage is 14.04 million, up 1.43 million from 2017, which is the highest planted acres since in 2011. The 2018 U.S. upland cotton is forecasted at 18.9 million bales, down 1.31 million bales from 2017. The reduction in production is largely due to the severe drought conditions in Texas. Even though Texas planting acres increased by 12 percent, the production level reduced by 30 percent from 2017. The forecasted production number might be further negatively impacted by Hurricane Florence on North and South Carolina.

World cotton use or demand has improved significantly in recent years and currently forecast at a record level. Even though U.S. cotton faces an additional 25 percent increase in tariffs on cotton exports to China due to the on-going trade dispute between U.S. and China, U.S. cotton exports are doing very well and are expected to continue to be strong for the 2018-2019 crop year. Exports are currently forecasted to be 15.7 million bales for the 2018 – 2019 crop year, which would be the second highest on record.

The U.S. ending stocks for the 2018 – 2019 crop year are expected to increase to 4.7 million bales. The U.S. cotton industry has benefited from the growth in mill use in other countries. If U.S. sales of cotton into China decline as a result of a Chinese tariff, it is possible that sales to mills in other countries could increase to offset part of the decline in China. A Chinese tariff on U.S. raw cotton could continue to stimulate Chinese imports of duty-free yarn from Vietnam, Indonesia, and the Indian subcontinent. The demand for higher-quality U.S. cotton in those markets could continue to expand. Thus, the impact of a bilateral Chinese tariff on U.S. cotton may lead to a reshuffling or rerouting of, rather than a reduction in, U.S. cotton exports.

China is the world’s largest user of cotton but now the world’s third-largest cotton importer behind Bangladesh and Vietnam. Starting in 2011, the Chinese price support policy had resulted in buildup of ending stocks. In 2014, the Chinese cotton policy shifted from price supports and building government reserves to paying growers with direct cash payments in order to reduce the government cotton reserve. China’s ending stocks for the 2018 – 2019 will continue to decrease and are forecasted to total 29.9 million bales. For 2018, China has approved 800,000 tonnes of additional cotton import quota, which is in addition to the annual 894,000 tonnes of low tariff rate quota that China issues as part of its commitments to the World Trade Organization. This is the first time that China has issued any additional quota since 2013.

Futures prices (Dec 18) for the 2018 crop are currently at or around 82 cents per pound. We have been seeing favorable cotton prices this year, the cash prices for the current calendar year of 2018 ranges from low of 74.60 to high of 94.21 cents per pound. USDA is forecasting the marketing year average price for the 2018 – 2019 crop year to range from 70 to 80 cents per pound, compared to the 2017 – 2018 crop year average of 68 cents per pound.

The Impact of China’s Potential Cotton Tariffs on U.S. Cotton Exports

By Yangxuan Liu, John R. C. Robinson, and Don Shurley

On April 4th, 2018, China announced a potential 25 percent increase in import tariffs on major U.S. origin agricultural commodities in retaliation to a series of tariffs proposed by the United States. United States upland cotton is one of the commodities affected by this proposed increase in import tariffs. The export market is an important source of demand for the U.S. cotton industry. The United States is the largest cotton exporting country with around 71.3% of cotton produced in the U.S. exported last year. China is the second largest trading partner with the U.S. for cotton in 2017 and buys 16.7% of the U.S. cotton exports. The total value of cotton exported to China was worth approximately $976 million last year, which is the second highest value among all the other row crops after soybean.

If Chinese tariffs are imposed on U.S. cotton, global cotton suppliers like India, Australia, and Brazil may experience a near-term opportunity to supply more cotton to China. In the short run, the market disruption could be a shock to the U.S. cotton futures market, particularly if hedge fund speculators sell off their long positions. However, the longer-term situation could see more U.S. exports rerouted to other cotton importing countries. This recent history of the change in China’s internal cotton policy suggests a similar reshuffling effect from a bilateral Chinese tariff on imported U.S. cotton. Chinese raw cotton import tariffs would continue to stimulate imports of duty-free yarn from Vietnam, Indonesia, and the Indian subcontinent.

Click here to download the full publication.

China’s Tariff Impact on Georgia Pecan Industry

By Dr. Esendugue Greg Fonsah

The U.S. and Chinese Trade War will have a negative impact on the Georgia pecan industry if not resolved.  The United States produces 80% of the world’s pecans and Georgia remains the number one producer of pecans with a record 50-70% exported to China for almost a decade (Hargreaves, 2013). The high demand for pecans has also triggered a market distortion from the traditional distribution channel (grower-processor-consumer) to direct marketing and sales.  An additional 15% tariff on nuts and fruits will create a major impact to the Georgia pecan industry as it will increase the cost of pecans, thus reducing the quantity exported to China. That would in turn increase domestic quantities since the bulk of Georgia pecans that were destined to China will be floating in the domestic market.  So far, China remains the main market for U.S. pecans although a small quantity goes to India, South Korea, Turkey and Vietnam (Andrew, 2017).   Although the U.S. might successfully look for alternative markets, it will be difficult for these new/emerging markets to absorb the large volume of stock created by the possible reduction in export to China.  With the large pecan production and acreage expansion currently going on, the domestic market might be flooded and eventually dampen prices.

Click here to download the full publication.

The Impacts of Chinese Tariff on Georgia Agriculture

By Yangxuan Liu, Esendugue Greg Fonsah, Levi Russell, Adam N. Rabinowitz, and Don Shurley

The uncertainty in trade policy between China and the U.S. creates concerns among the agricultural community. We recently released an extension publication, named The Impacts of China and United States Trade and Tariff Actions on Georgia Agriculture: the Perspectives of UGA Agricultural Economists. Georgia agriculture produces many of the items targeted by Chinese tariffs, including nuts, fruits, soybean, corn, wheat, sorghum, cotton, pork, beef, and tobacco. The Chinese retaliatory trade tariff on products of U.S. origin would have a negative impact on Georgia’s agriculture and economy. However, the magnitude of the impact of these new tariffs on Georgia’s agricultural industry is unclear.  In this extension publication, we discussed in detail about the Chinese tariff and its potential impact on pecan, cotton, soybean, corn, wheat, sorghum, and livestock industry.

Click here to download the full publication.

 

Changes to the Dairy Program from the House-Passed Farm Bill

by Levi Russell

H.R. 2 of the 115th Congress, the Agriculture and Nutrition Act of 2018 passed by a 2-vote margin in the house on June 21, 2018. On June 25th it passed a motion to proceed in the Senate and is now being debated. There are some key differences between this bill and the current Senate version I wrote about here. At this time it is not clear which version of the Farm Bill will become law or if other changes will be made. In this post I will go through the changes the House bill makes to what is currently known as the Dairy Margin Protection Program. I will continue to post updates to http://fareblog.uga.edu as the process continues.

There are several changes made to the Dairy Margin Protection Program in the House bill. Some of them address concerns the industry has voiced while others make the program cheaper and more flexible for small and medium size dairies. Below are a list of these changes.

  • The program is renamed the Dairy Risk Management Program and is authorized through 2023
  • Calculation of the Actual Margin remains the same as well as most of the changes made back in February, such as the monthly calculation of the margin and payments
  • Coverage levels of $8.50 and $9.00 are added for Tier I only
  • Producers can buy coverage ranging from 5% to 90% instead of the previous 25% to 90% limits. Coverage can be purchased in 5% increments
  • The table below details the new premiums for Tier I. Tier II premiums are the same as in the 2014 Farm Bill. In general, Tier I premiums are about 1/5 of premiums in the 2014 Farm Bill.
  • The House directs the Secretary of Agriculture to address a few issues with the feed cost component of the margin:
    • The Secretary is to conduct a review of feed cost calculation and to determine whether it reflects actual costs paid by dairy producers
    • A report is to be made on the use of corn silage as a feed ingredient including a report on the cost difference between the use of corn silage and corn
    • NASS will revise monthly alfalfa price survey reports to include high-quality alfalfa prices in the top-five dairy producing states as measured by the volume of milk produced in the previous month
  • The House bill allows producers to use both LGM and Dairy Risk Management, but not on the same production. For example, half of a producers’ production could be covered by LGM while the other half could be covered by the Dairy Risk Management Program
  • Production history updates for the purpose of payment calculations end as of 2018
  • Payments to a dairy are prohibited if the Secretary of Agriculture determines that the dairy business was reorganized expressly for the purpose of qualifying as a new operation
  • Producers have 90 days after the passage of the bill to elect a margin coverage level for the duration of the program

In general these changes make the program less costly for producers to cover 5 million pounds of milk or less. The combination of allowing producers to cover as little as 5% of their production and the significantly lower Tier I premiums accomplish this. In addition, the flexibility to use LGM and the Dairy Risk Management Program is likely to be helpful in managing risk across the entire operation. Time will tell whether the House or Senate versions or some compromise between the two make it into law. Subscribe to the blog in the upper-left corner if you’d like to receive updates in your email!