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.

 

The Impacts of China Trade Tariff on Georgia Livestock Industry

By Levi Russell

China implemented a 25 percent increase in import tariffs on United States pork and is expected to increase import tariffs on United States beef products by 25 percent. However, unlike many row crops and other agricultural products, China is not a primary destination for United States meat products. Beef exports to China only resumed recently and there is not yet a significant amount of beef being produced in the United States that is exported to China. In 2017, the United States was the second largest pork producer after China, and the largest pork exporting country (USDA FAS, 2018b). Twenty-two percent of pork produced in the United States enters the export market (USDA FAS, 2018b). From January 2013 to January 2018, the USDA ERS reports that mainland China made up 7.5% of total United States pork exports, coming behind Mexico (29.3%), Japan (25.1%), Canada (10.4%), and South Korea (8.1%). Pork production is mainly concentrated in the Midwest and North Carolina, and Georgia is not in the major pork producing regions. The impact of the tariffs on pork will be minimal on Georgia’s agricultural industry. However, the reductions in pork prices could hurt some of the pork producers in Georgia. For beef and pork (and other meats), the NAFTA trade discussions are a far bigger concern than Chinese tariffs.

Short-term market fluctuations this year in both cattle and hog markets will almost certainly depend much more on rising supplies, domestic consumption, and exports to other countries than on Chinese tariffs. A recent report by the USDA FAS indicates that the reductions in exports to China will mostly be offset by the increases in shipments to Japan, Mexico, and the Philippines. Exports of both pork and beef from the United States are expected to rise this year, in part due to relatively low United States prices (USDA FAS, 2018a).

In the long term, however, these increased tariffs on pork and beef products constitute a missed opportunity, as China is the number one pork-consuming nation in the world. New sources of demand for United States producers are hard to come by and higher tariffs on beef and pork will likely result in increased production in other countries to fulfill China’s growing demand. This will put the United States at a competitive disadvantage in the long term if the tariff increases are put in place on United States beef and pork products.

 

References

USDA FAS. (2018a). Livestock and poultry: world markets and trade. Washington, D.C. Retrieved from https://apps.fas.usda.gov/psdonline/circulars/livestock_poultry.pdf.

USDA FAS. (2018b). Production, Supply and Distribution Database.  Retrieved April 25, 2018 https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery

Publication: Surviving the Farm Economy Downturn

by Levi Russell

A new publication entitled “Surviving the Farm Economy Downturn” is now available online free of charge. The publication provides a general farm economy outlook as well as discussions of topics such as risk reduction, cost control, alternative crops, livestock sales during drought, crop insurance, ARC and PLC payment forecasts, stress and suicide, and other issues. Please follow the link below to check out essays on these and other topics:

https://afpc.tamu.edu/extension/resources/downturn-book/

Information on Livestock Emissions Reporting

A recent court case striking down the agricultural exemption for reporting under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) means that many producers will have to start reporting complicated emissions information in May of this year. Currently, a federal Senate bill is being considered that will make the exemption legal, but congress must act swiftly.

In the event that action by congress fails or is delayed, producers should be aware of the rules and how they will impact their operations. Extension agricultural lawyer Paul Goeringer has a pair of short podcast episodes available that explain the rule. Click below to listen!

Part 1

Part 2

Reports: Beef Demand and Cattle Inventory

by Levi A. Russell

A couple of recently-released reports provide some interesting observations about the state of the beef industry and some good news for the long run as well.

Beef Demand

First, a few of my colleagues at Kansas State and Purdue Universities have written an extensive report on many drivers of beef demand. Below I reproduce the Executive Summary, but the rest of the report is also informative:

Several key findings are of elevated importance:

1. Over the past decade, the quantity of beef consumers purchase has become less sensitive tochanges in beef prices yet more sensitive to consumer incomes. This could be a result of record high retail beef prices in recent years that resulted in loyal beef consumers, who are less price sensitive, having the strongest presence in the market. As consumer incomes have grown, more consumers who might have been priced out of the beef market, have allocated some of that income growth to purchase beef again thus increasing beef demand response to growing income.

2. The relative impact of pork and chicken prices on beef demand is economically small relative to other factors. This does not imply individual beef, pork, and chicken products are not substitutes, rather the substitutability in aggregate is just not as strong as traditionally thought.

3. Print media and medical journal coverage of topics around beef changes notably over time in areas of focus and volume of coverage. Certain types of media coverage are found to affect meat demand, and an emerging area of negative impact focuses on climate change. Having an impactful presence in the media is immensely important as it shapes perceptions.

4. Some demographic trends are favorable for beef demand including anticipated growth of Hispanic and African-American populations within the U.S.

Cattle Inventory

On January 31, the 2018 cattle inventory report was published by the USDA. This report compares inventory levels on January 1, 2018 to those of January 1, 2017. This report is a great opportunity to see what is happening on the national scale for cow-calf producers and in the feedlots.

This year’s report tells a familiar story: slow herd expansion. Nationwide, the herd has been expanding since hitting a bottom in 2014. The previous several years saw a decline due in part to serious drought in the western U.S. Expansion in the herd overall was only 1%, significantly slower than the previous few years. This was expected, as we’ve seen slaughter rates for beef heifers and cows pick up significantly in the last couple of years. This year’s report showed a 4% reduction in the number of heifers currently held as beef cow replacements, indicating that during 2018 we will likely see very little to almost no growth in the herd. Finally, the calf crop increased 2% relative to last year and the number of cattle on feed increased 7%. This pre-report commentary provides additional context to the report.

As we continued to see slower herd growth and some bright spots for beef demand, I’m cautiously optimistic that we will be able to maintain profitable calf prices and stocker margins through 2018. If you have questions, please don’t hesitate to contact me at lrussell@uga.edu.

Beef Herd Expansion Possibilities

by Levi A. Russell

Board prices for feeders and fats have been quite strong in the past few months and Georgia producers have seen similarly strong prices in our cash markets, relative to seasonal expectations. The typical seasonal downward slide into October and November has not appeared and prices have been more or less flat since the summer. One of the threats to strong prices in coming years is a continuation of herd expansion.

David Widmar, an ag economics consultant with Agricultural Economic Insights, did a great job recently of digging into the state-level inventory numbers to see if we will see continued expansion through 2018. Ad Widmar notes, Texas cattle numbers made up a large percentage of the recent inventory decline and have also made up a large percentage of the recent increase in inventory. However, Texas has not fully recovered its previous inventory level, so there is still some growing room out there, indicating that we will likely see more herd expansion. You can read Widmar’s full analysis by clicking here.

This year, strong demand and low feed costs have helped buoy prices despite continued herd expansion. Time will tell if continued demand strength will absorb the price-reducing effect of larger beef supplies.

Southern Outlook Conference Presentations Available

by Levi Russell

Last week in Atlanta Extension economists, lenders, and ag media met in Atlanta to discuss the market and policy outlook for agricultural commodities in the Southeast in the coming year. UGA economists presented the outlook for peanuts, timber, turfgrass, the green industry, cotton, poultry, and hogs. All presentations are available here. Feel free to contact us with questions about the presentations.

Feedlot Conditions and Beef Prices

by Levi Russell

Any time I discuss economic conditions in the industry, I try to be as faithful as I can to forecasts and current conditions and avoid undue pessimism or optimism. The beef cattle industry from pastures to processors has had a pretty good year so far in terms of prices, international trade, and consumer demand. That said, one of the clearest threats to cow-calf producers in coming months is the potential for a slowdown in feedlot placements. Feedlot profitability (not considering any price risk management) has moved into the red recently, which will likely push feeder prices down. However, there is a more long-term issue to deal with: beef prices.

Lower Beef Prices

Based on forecasts of beef, pork, and poultry production for the next 18 months, we could see some downward pressure in beef prices. Indeed, we’ve already seen some weakness in wholesale beef prices in the last couple of months. If these trends continue, price reductions will eventually make their way to fat steers, then to feeders and, finally, calves. For cow-calf producers, the feedlot sector in particular is of concern. Feedlot placements have been significantly higher for much of this year compared with the same months in 2016. Feedlot marketings have kept pace with placements such that the number of feeders lingering in feedlots longer than 90 days has stayed relatively low. Though this is expected as beef cattle inventories have recovered over the past few years, this accelerated placement pace will not be sustainable if we start to see price weakness for fat steers.

In 2017, U.S. beef production will be at its highest level since 2010. It remains to be seen just how much beef consumers are willing to purchase, but we will find out over the next 18 months.

Tool for Valuing Replacements

One important financial aspect of cow-calf production is evaluating replacement decisions. Whether you always hold back your own replacements or look for opportunities to expand when the price is right, it’s crucial to take an objective look at the profitability and feasibility of your investment.

To help producers with this task, we’ve developed a decision aid (available here) that will allow you to examine a range of replacement female scenarios. I recommend looking through the red triangles in the upper right corner of the key cells to get an idea of how the spreadsheet works.