Cover crops are plants typically grown by farmers to improve soil health, help with carbon sequestration, weed suppression, and reduce erosion. Unlike cash crops, cover crops are not intended to be sold for a profit, but rather, to serve as a natural complement to the production of cash crops (typically corn and soybeans). As such, cover crops are normally planted between the growing seasons of the cash crops, which is usually during the winter. The most common types of cover crops are legumes, grasses, and brassicas.&nbsp;



Despite the well-known soil benefits of planting cover crops, their use across the country remains relatively low at less than 5% of total cropland (Bowman and Morales, 2024). However, significant variation in relative use is seen across the US territory. Figure 1 shows the spatial (county-level) distribution of cover crop planting based on data from the 2022 Census of Agriculture. Darker tones indicate a higher percentage of cover crop use. As seen in the graph, cover crops are relatively more common in the South and the Northeast than in the Midwest, reflecting both managerial decisions and weather factors that facilitate their planting. However, in absolute terms (given by the total number of acres planted with cover crops), none of the top ten states relying on this so-called “climate smart” practice are in the Southeast or Mid Atlantic (Table 1). Texas leads with 1.55 million acres, followed by Iowa, Indiana, Nebraska, and Missouri. All states in the list experienced an increase in the number of acres with cover crops between 2017 and 2022.&nbsp;



Despite the agronomic benefits associated with cover crops, their use remains limited largely due to the costs of planting the crops, terminating them in a timely manner, the labor involved in these tasks, and the potential negative impact on the yield of the following cash crop. Moreover, the benefits to the soil are generally experienced after two or more years, rendering their financial impact negative over short periods of time. For this reason, federal programs run by the USDA generally offer monetary support to encourage the use of cover crops. Importantly, recent research by Gutierrez-Li and Rejesus (2026) finds evidence that cover crops (if planted for several years and in a large enough area) can help reduce pesticide use, likely by fostering the development of natural predators that aid in pest control. Their work suggests that the benefits of planting cover crops are likely broader and not limited to enhancing soil quality.&nbsp;



For farmers considering implementing this practice, several considerations ought to be made. First, a clear determination of the short-term costs, such as seed, termination, additional input requirements for the subsequent cash crop (e.g., additional nitrogen), and yield loss of the cash crop. Second, an estimation of the savings associated with a lower need for fertilizers and pesticides over the long run. Third, the specific combination of species that will maximize the benefits to the cash crops and align with their growing seasons. Starting small, as well as talking to other local farmers and Extension agents with knowledge on cover crops, can prove essential for learning about the opportunities associated with this planting practice.



Figure 1. Cover Crops as a Percent of Total Cropland: 2022



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="468" height="420" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.23.1-1.png" alt="" class="wp-image-44034"/><figcaption class="wp-element-caption">Source: United States Department of Agriculture, Economic Research Service</figcaption></figure>



Figure 2. Top 10 States in Cover Crop Use: Millions of Acres in 2017 and 2022



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="978" height="520" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.23.1-2.png" alt="" class="wp-image-44036" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.23.1-2.png 978w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.23.1-2-768x408.png 768w" sizes="auto, (max-width: 978px) 100vw, 978px" /><figcaption class="wp-element-caption">Source: Farmdoc Daily, University of Illinois at Urbana-Champaign. Values in red (blue) correspond to 2017 (2022).</figcaption></figure>



References



Bowman, M. and Morales, M. (2024). 2022 Census of Agriculture: Cover Crop use Continues to be Most Common in Eastern United States. Charts of Note. Economic Research Service. U.S. Department of Agriculture.



Gutierrez-Li, A. and Rejesus. R. (2026). Cover Crops and Pesticide Use. Unpublished manuscript. North Carolina State University.&nbsp;



Zurlauf, C. (2024). Cover Crops and Covered Cropland, 2022 US Census of Agriculture. Farmdoc Daily (14): 37.&nbsp;University of Illinois at Urbana-Champaign



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Gutiérrez-Li, Alejandro. &#8220;<a href="https://southernagtoday.org/2026/05/12/cover-crops-in-the-united-states-trends-benefits-and-considerations-for-farmers/">Cover Crops in the United States: Trends, Benefits, and Considerations for Farmers.</a>&#8221; Southern Ag Today 6(23.1). June 1, 2026. <a href="https://southernagtoday.org/2026/05/12/cover-crops-in-the-united-states-trends-benefits-and-considerations-for-farmers/">Permalink</a>

Cover Crops in the United States: Trends, Benefits, and Considerations for Farmers

Recent events have brought renewed attention to a long-running legal battle between the state of Oklahoma and major poultry companies in Arkansas over environmental concerns and water pollution.&nbsp;&nbsp;The case centers on allegations that poultry waste generated in northwest Arkansas was contributing to water pollution in eastern Oklahoma, particularly in the Illinois River Watershed (IRW).



The lawsuit began in 2005 when Oklahoma officials filed claims in federal court against several poultry companies, including Tyson Foods, Cargill, and Cobb-Vantress.&nbsp;&nbsp;Poultry production generates large quantities of chicken litter- a mixture of manure, bedding, feathers, and feed residue.&nbsp;&nbsp;Growers commonly apply chicken litter to fields as fertilizer because it contains valuable nutrients such as nitrogen and phosphorus. However, excessive phosphorus application can create runoff problems that impair nearby streams and rivers.&nbsp;&nbsp;In this case, Oklahoma officials argued that phosphorus from chicken litter spread on farmland in Arkansas was washing into the IRW, contributing to algae growth and declining water quality.



After years of discovery, pretrial motions and a fifty-two day trial, closing arguments were heard in February 2010.&nbsp;&nbsp;The trial involved numerous legal claims, including public nuisance, trespass, negligence, and violations of environmental laws. Oklahoma sought injunctive relief that would require changes to litter management practices and requested damages for environmental remediation. The poultry companies denied liability and argued that growers, as independent contractors, controlled litter application decisions and should be held directly responsible for any damages. The companies also argued that the growers complied with existing state regulations and nutrient management requirements.



In January 2023, the court issued its&nbsp;<a href="https://nationalaglawcenter.org/wp-content/uploads/2026/02/OKAR23.pdf">219 page ruling</a>.&nbsp;&nbsp;In short, however, the court held that poultry litter was a key non-point source of pollution in the watershed.&nbsp;&nbsp;Additionally, it found that the poultry companies were responsible for the damages caused by the litter.&nbsp;&nbsp;The court did not, however, specifically forbid the future use of litter.&nbsp;&nbsp;Further, the court did not identify specific consequences for the ruling.&nbsp;&nbsp;Instead, the parties were directed to “meet and attempt to reach an agreement with regard to remedies to be imposed”.



The parties were unable to reach an agreement.&nbsp;&nbsp;Further, the poultry companies filed a motion to dismiss, arguing that in the 13 years between the trial and the ruling, conditions in IRW “materially changed” enough that it was unfair to hold the poultry companies responsible for litter application.&nbsp;&nbsp;The court held a hearing on the motion in December 2024, where experts from both sides presented evidence about the effects of the litter.&nbsp;&nbsp;Six months after the hearing, the court issued&nbsp;<a href="https://nationalaglawcenter.org/wp-content/uploads/2026/02/OKAR25.pdf">a ruling</a>&nbsp;finding that conditions in the watershed were not “materially changed,” and continuing phosphorus run-off from litter application continued to be a significant source of injury to the IRW.



Soon after that, the court issued&nbsp;<a href="https://nationalaglawcenter.org/wp-content/uploads/2026/02/Frizzell-Judgement-1.pdf">its ruling on damages</a>.&nbsp;&nbsp;In addition to civil penalties of $10,000 per violation, the court held the companies jointly and severally responsible for environmental cleanup efforts of the watershed.&nbsp;&nbsp;Remediation would be paid for through a dedicated account, initially funded by the companies at $10 million.&nbsp;&nbsp;A court-appointed special master would oversee remediation activities- predicted by the court to last 30 years- and provide ongoing progress reports.&nbsp;&nbsp;The remedies also included restrictions on poultry litter application rates, generally limiting application to two tons per acre, while also holding the companies responsible for removal, storage, transport and disposal of future litter from barns in the watershed.



In the next few months, however, the Oklahoma Attorney General’s office announced settlements with several of the companies that would 1) provide a sum of money to facilitate cleanup and 2) progressively reduce the amount of litter applied in the IRW.&nbsp;&nbsp;No civil penalties would be imposed.&nbsp;&nbsp;The settling companies include Cargill, George’s, Peterson Farms and Tyson, who cumulatively agreed to pay $31 million.&nbsp;&nbsp;&nbsp;



However, in April 2026, the judge rejected the settlement proposals.&nbsp;&nbsp;In&nbsp;<a href="https://storage.courtlistener.com/recap/gov.uscourts.oknd.22038/gov.uscourts.oknd.22038.3300.0.pdf">his ruling</a>, he held that the proposed sum and scope of the settlements, which was substantially less than his ruling on damages, was insufficient to cover the costs of the cleanup.



Currently, there are pending appeals for both the substantive rulings and the rejection of the settlement.&nbsp;&nbsp;The Oklahoma Attorney General and Oklahoma Secretary of Energy have joined the settlement appeal.&nbsp;&nbsp;



While the results of this case are yet to be finalized, the Oklahoma legislature has passed legislation ensuring that similar cases in the future will be limited.&nbsp;&nbsp;In 2024,&nbsp;<a href="https://legiscan.com/OK/text/SB1424/id/3004880/Oklahoma-2024-SB1424-Enrolled.pdf">Senate Bill 1424</a>&nbsp;was passed.&nbsp;&nbsp;It prevents lawsuits against poultry companies over chicken waste pollution as long as the poultry farm has an approved waste disposal plan with the state.&nbsp;



This case underscores the difficulty of regulating “nonpoint source pollution,” a category that includes runoff from farms and agricultural land. Nonpoint source pollution is not directly regulated in the Clean Water Act, which leaves much of the responsibility for addressing agricultural runoff to the states and creates significant challenges for enforcing water quality protections when pollution comes from widespread, diffuse sources rather than a single discharge point.



The consequences of this ruling will have significant implications not only for poultry companies, but also for growers and others involved in the poultry industry, as well as residents of the area and those who enjoy the recreational opportunities available within the watershed.&nbsp;&nbsp;As future decisions are made, updates will be available in Southern Ag Today.&nbsp;&nbsp;



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Rumley, Elizabeth. &#8220;<a href="https://southernagtoday.org/2026/05/12/oklahomaarkansas-chicken-litter-case-continues/">Oklahoma-Arkansas Chicken Litter Case Continues.</a>&#8221; Southern Ag Today 6(22.5). May 29, 2026. <a href="https://southernagtoday.org/2026/05/12/oklahomaarkansas-chicken-litter-case-continues/">Permalink</a>

Oklahoma–Arkansas Chicken Litter Case Continues

Authors: Walker Davis and Amy Hagerman



The Crop and Livestock Income Protection (CLIP) product, first offered in 2026, acts as an umbrella policy layered on top of your existing Revenue Protection (RP) policies, offering a higher coverage level across two or more different spring crops grown in the same county. Producers do still need to enroll in RP for each individual crop to be eligible for CLIP. RP policies trigger as they normally would, where CLIP triggers when&nbsp;combined&nbsp;revenues fall below the CLIP guarantee.&nbsp;



In a year with a revenue loss, indemnities trigger in two stages. First, individual crop revenue losses still work as they normally would. Consider a producer who has both corn and grain sorghum in a single county that experiences losses for both crops. The producer would work with his or her crop insurance agent to report the loss for each crop individually. Second, after all RP policy production to count valuations are determined, the combined revenue to count of the CLIP insured commodities is compared to the CLIP guarantee. If there is a shortfall, CLIP pays the difference. Because CLIP can be set at a higher coverage level than your underlying RP, it may trigger even when neither individual RP policy does.



CLIP coverage levels run from 55% to 85%, capped at 25 points above your lowest individual RP policy coverage election. To show what this means in practice, consider a Garfield County, Oklahoma producer with 500 acres each of corn and grain sorghum, both under RP at 75% coverage—a common coverage level in this area. The producer’s cost of that base coverage and comparisons of three options are provided in Table 1: (1) increase the coverage level of individual RP policies, (2) adding CLIP umbrella policy on top of 75% coverage RP, and (3) adding a Supplemental Coverage Option (SCO) area coverage on top of 75% RP policies. SCO will trigger based on county average revenue, and preference may be heavily influenced by field level performance as compared to the county average. A producer cannot enroll in both SCO and CLIP. This comparison is shown in Table 1.&nbsp;



Table 1. Premium Cost Comparison: Revenue Protection Coverage Level Increase vs. CLIP



<figure class="wp-block-table aligncenter is-style-stripes has-small-font-size"><table><tbody><tr><td>Scenario</td><td>RP Level</td><td>Add On</td><td>Total Premium</td><td>Producer Premium</td><td>Subsidy Amount</td></tr><tr><td>Base</td><td>75%</td><td>None</td><td>&nbsp;$56,777&nbsp;</td><td>&nbsp;$22,711&nbsp;</td><td>&nbsp;$34,066</td></tr><tr><td>RP1</td><td>80%</td><td>None</td><td>&nbsp;$66,439&nbsp;</td><td>&nbsp;$32,555&nbsp;</td><td>&nbsp;$33,884&nbsp;</td></tr><tr><td>RP2</td><td>85%</td><td>None</td><td>&nbsp;$77,330&nbsp;</td><td>&nbsp;$45,625&nbsp;</td><td>&nbsp;$31,705&nbsp;</td></tr><tr><td>CLIP1</td><td>75%</td><td>CLIP 80%</td><td>&nbsp;$59,467&nbsp;</td><td>&nbsp;$23,494&nbsp;</td><td>&nbsp;$35,982&nbsp;</td></tr><tr><td>CLIP2</td><td>75%</td><td>CLIP 85%</td><td>&nbsp;$63,006&nbsp;</td><td>&nbsp;$25,452&nbsp;</td><td>&nbsp;$37,554&nbsp;</td></tr><tr><td>SCO</td><td>75%</td><td>SCO 86%</td><td>&nbsp;$69,511&nbsp;</td><td>&nbsp;$25,258&nbsp;</td><td>&nbsp;$44,253&nbsp;</td></tr></tbody></table><figcaption class="wp-element-caption">Source: USDA RMA Cost Estimator, 2026 crop year. Note: Premium estimates were generated using the USDA Risk Management Agency Cost Estimator tool for the 2026 crop year using county transitional (T) yields. Individual producer premiums will vary based on their actual APH yield history, total acreage of commodities insured by CLIP, unit structure, insurable type, production practice, and location (e.g. state, county, and map area if applicable).</figcaption></figure>



The simple comparison in a single county offers a few insights.&nbsp;



<ol class="wp-block-list">
<li>CLIP offers comparable individual-based revenue coverage at significantly lower producer-paid premium. CLIP1 yields savings of $9,061, or 28% less than RP1 for comparable 80% coverage protection for producers growing multiple spring crops. </li>



<li>Savings widen substantially at higher coverage levels. Electing 85% RP on both crops individually carries a producer premium of $45,625, while a CLIP 85% umbrella policy achieves comparable protection for a producer premium of $25,452.</li>



<li>SCO offers a comparable producer cost to CLIP but with a fundamentally different trigger. The SCO scenario (86% coverage) has a near-identical producer premium to a CLIP policy with 85% coverage, differing by just $194 for the entire operation. However, these two products behave very differently at claim time: SCO triggers on county-average revenue loss, where CLIP triggers on personal revenue loss. Your crop insurance agent can provide a comparison of SCO with CLIP for an individual operation, including the production history of the fields in question and the county benchmarks. </li>
</ol>



CLIP may provide a viable option to increase protection for a producer growing multiple spring crops. Although it cannot currently be used for winter crops such as wheat or oats, producers do have the option to include under CLIP livestock insured through the Weaned Calf Risk Protection program. CLIP is now available in 13 states. These states include Alabama, Arkansas, Colorado, Georgia, Kansas, Louisiana, Mississippi, Nebraska, North Dakota, Oklahoma, South Dakota, Tennessee, and Texas. It must be purchased by the earliest sales closing date of your eligible crops and is sold exclusively through licensed crop insurance agents.&nbsp;



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Davis, Walker, and Amy Hagerman. &#8220;<a href="https://southernagtoday.org/2026/05/12/crop-and-livestock-income-protection-clip-basics-for-spring-crop-producers/">Crop and Livestock Income Protection (CLIP) Basics for Spring Crop Producers.</a>&#8221; Southern Ag Today 6(22.4). May 28, 2026. <a href="https://southernagtoday.org/2026/05/12/crop-and-livestock-income-protection-clip-basics-for-spring-crop-producers/">Permalink</a>

Crop and Livestock Income Protection (CLIP) Basics for Spring Crop Producers

Biofuels policy underpins recent expansion in soybean crush capacity. At present, soybean crush levels, as seen in Figure 1, are setting monthly records due to this growth. Strong biofuel policies and soybean meal demand place the crush expansion on firm footing. This article focuses on the recent renewable volume obligations (RVOs) put forth for the Renewable Fuel Standard (RFS) and the implications for the soybean oil market.



Figure&nbsp;1: Monthly U.S. Soybean Crush



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2158" height="1168" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-1.png" alt="" class="wp-image-44013" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-1.png 2158w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-1-1024x554.png 1024w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-1-768x416.png 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-1-1536x831.png 1536w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-1-2048x1108.png 2048w" sizes="auto, (max-width: 2158px) 100vw, 2158px" /></figure>



EPA&#8217;s final &#8220;Set 2&#8221; rule, released March 27, 2026, established RVOs under the RFS for 2026 and 2027. Renewable volume obligations are the mandated levels of biofuels required for blending in the U.S. transportation fuel supply each year. A renewable identification number (RIN) is the unique number generated for each gallon of biofuel produced or imported into the U.S. The recent RVO’s list requirements in RIN gallons. Biomass-based diesel under the RFS, in general, generates D4 RIN’s while ethanol generates D6.&nbsp;



Biomass-based diesel RVO increases are unprecedented, jumping 67 and 70 percent above 2025 levels to reach 9.07 billion RIN gallons in 2026 and 9.20 billion in 2027. By using EPA data applied to both the D4 and D6 RIN markets, estimated projections indicate D4 net RIN generation must climb from 7.10 billion gallons in 2025 to 10.4 billion in 2026 and 11.7 billion in 2027—increases of 55 and 67 percent, respectively.<a href="applewebdata://97C42CBB-D496-4616-BA77-CF4E00E8F898#_edn1">[i]</a>&nbsp;The 3.89-billion-gallon jump between 2025 and 2026 alone exceeds the entire 2025 D4 RIN ending bank generated under the previous RVO’s.



Two sources of D4 demand drive this optimistic scenario for D4 RINs. The first is the biomass-based diesel RVO itself. The second is the D6 shortfall, a structural deficit in ethanol RIN supply that forces obligated parties to substitute D4 RINs to satisfy conventional fuel obligations. Because U.S. ethanol usage holds limited prospects for domestic growth, approximately 1.42 and 1.41 billion gallons of D4 RINs must fill the D6 RIN gap in 2026 and 2027.



Figure&nbsp;2: D4 RIN Generation



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2158" height="1210" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-2.png" alt="" class="wp-image-44015" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-2.png 2158w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-2-1024x574.png 1024w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-2-768x431.png 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-2-1536x861.png 1536w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-2-2048x1148.png 2048w" sizes="auto, (max-width: 2158px) 100vw, 2158px" /></figure>



Growth in D4 RIN generation during the renewable diesel boom under the previous RVOs is obvious in Figure 2. In fact, a historically large 2.43-billion-gallon buffer in D4 RINs accumulated at year-end 2024 and is projected to collapse to just 200 million gallons by year-end 2026. The low volumes produced and imported during the first quarter of 2026 while awaiting policy finalization ate into any buffer provided by the RIN bank coming into the year. The estimated RIN generation necessary equates to 6.5 and 7.3 billion physical gallons in 2026 and 2027, respectively. At present, a range of possible D4 RIN supply needs is calculated to be between 850 – 950 million a month for the remainder of the year. This total is well above historical generation levels with only one point, December 2024 due to expiration of the biodiesel tax credit pulling imports forward, hitting the estimated needs for the RVOs.



The RIN market will operate without a meaningful bank cushion moving forward, with physical production and imports needing to closely match required generation. EIA states current operating capacity for biodiesel at 1.96 billion gallons and renewable diesel at 4.89 billion. The potential for running above operable capacity exists and should be expected for moderate durations. Even so, the production necessary is very tight for 2026, given the first three months of the year saw slower production utilization as the EPA finalized the rules. A disruption to feedstock supply chains, BBD plant capacity shortfalls, or demand surprises for additional fuel will have limited banked supply to absorb it. Implications for feedstock markets, including soybean oil, are already being felt.



Figure&nbsp;3: Soybean Oil Use for Biodiesel



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2158" height="1168" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-3.png" alt="" class="wp-image-44016" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-3.png 2158w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-3-1024x554.png 1024w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-3-768x416.png 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-3-1536x831.png 1536w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.3-3-2048x1108.png 2048w" sizes="auto, (max-width: 2158px) 100vw, 2158px" /></figure>



Soybean oil prices increased to over 75 cents per pound in the first quarter of 2026, as confirmation of the RVOs set in. Demand for soybean oil should not wane. As shown in Figure 3, USDA forecasts large growth in soybean oil use for biodiesel in 2026-27. Soybean oil traditionally constituted between 35 and 40 percent of feedstock for biodiesel and renewable diesel production. In USDA’s latest WASDE, soybean oil use for biodiesel production in the 2025-26 marketing year remained at 14.2 billion pounds due to the slow start of the marketing year. The 2026/27 marketing year came in at 17.8 billion pounds. A continuation of strong crush levels and soybean oil demand appears highly probable, barring major disruption.



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<a href="applewebdata://97C42CBB-D496-4616-BA77-CF4E00E8F898#_ednref1">[i]</a>&nbsp;Detailed calculations can be found at: Hubbs, T. and S. Irwin. &#8220;<a href="https://farmdocdaily.illinois.edu/2026/04/rewriting-the-rfs-playbook-the-impact-of-final-rvos-on-projected-d4-biomass-based-diesel-rin-generation-for-2026-2027.html" target="_blank" rel="noreferrer noopener">Rewriting the RFS Playbook: The Impact of Final RVOs on Projected D4 Biomass-Based Diesel RIN Generation for 2026-2027</a>.&#8221;&nbsp;farmdoc daily&nbsp;(16):73,&nbsp;Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign,&nbsp;April 27, 2026.



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Strong RVO’s, Strong Crush: Biofuel Policy Tightens Soybean Oil Balance Sheet

By-product values for cattle and hogs have surged higher in recent weeks to the highest levels since January 2023 for cattle and January 2024 for hogs.&nbsp;&nbsp;By-products include the hides, offal, variety meats (organs), and many other items.&nbsp;&nbsp;By-product values are often referred to as the “drop credit” because it’s the value of anything that “drops” off the carcass in the packing plant.



Cattle



Steers hide, and offal values have climbed from $12.32 per cwt to $14.35 per cwt over the last two months.&nbsp;&nbsp;In the case of by-products, the values are quoted in dollars per cwt of the live steer.&nbsp;&nbsp;Hides and offal were worth about $11.50 per cwt at this time last year.&nbsp;&nbsp;



Some by-product values have more than doubled in value compared to a year ago.&nbsp;&nbsp;Honeycomb tripe and liver prices are 112 percent and 106 percent higher than last year.&nbsp;&nbsp;Cheek meat, head meat, and lips are up from 52 percent to 78 percent above a year ago.&nbsp;&nbsp;Hide values are a bit mixed.&nbsp;&nbsp;Heavy steer hides are up 10 percent, and butt branded steer hides are 33 percent higher than a year ago.&nbsp;&nbsp;Cow hides are as much as 60 percent lower than last year.&nbsp;&nbsp;



What is driving these values higher?&nbsp;&nbsp;The first reason is reduced supplies.&nbsp;&nbsp;As cattle slaughter has declined, there are reduced supplies of hides and offal.&nbsp;&nbsp;Another reason is surging exports.&nbsp;&nbsp;Variety meat exports during the first quarter of 2026 were 14.1 percent larger than during the first quarter of 2025.&nbsp;&nbsp;Cattle hide exports increased from 36.7 million metric tons to 44.7 million tons over the same period.&nbsp;&nbsp;In terms of value, variety meat exports increased 45.5 percent and hides increased 18 percent.&nbsp;&nbsp;While a lot of attention has been paid to reduced beef and veal exports this year, hides and offal exports are a bright spot in trade.



Hogs



Hog by-products values are up about 16 percent compared to a year ago and have steadily increased this year.&nbsp;&nbsp;Lard values have increased, year-over-year, by 46 percent.&nbsp;&nbsp;Choice white grease, snouts, and salivary glands have increased from 10 percent to 45 percent compared to last year.&nbsp;&nbsp;



Like beef, exports in metric tons of pork variety meat and lard have increased this year.&nbsp;&nbsp;Pork variety meat exports increased 1.8 percent in the first quarter of 2026 compared to 2025.&nbsp;&nbsp;Sausage casing and lard exports have increased by 20 percent and 47 percent, respectively, compared to 2025.&nbsp;&nbsp;Pig skin exports have declined 43 percent in volume.&nbsp;&nbsp;By value, sausage casings and lard exports have increased by 38 percent and 40 percent, while the value of variety meat and skin exports has declined by 15 percent and 31 percent, respectively.



On balance, by-product values are boosting cattle and hog values this year.  Growing exports are an important part of higher values.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1920" height="1440" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-1.png" alt="" class="wp-image-44004" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-1.png 1920w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-1-1024x768.png 1024w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-1-768x576.png 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-1-1536x1152.png 1536w" sizes="auto, (max-width: 1920px) 100vw, 1920px" /></figure>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1920" height="1440" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-2.png" alt="" class="wp-image-44005" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-2.png 1920w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-2-1024x768.png 1024w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-2-768x576.png 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2026/05/6.22.2-2-1536x1152.png 1536w" sizes="auto, (max-width: 1920px) 100vw, 1920px" /></figure>



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Anderson, David. &#8220;<a href="https://southernagtoday.org/2026/05/12/by-product-values-surge-higher/">By-Product Values Surge Higher</a>.&#8221; Southern Ag Today 6(22.2). May 26, 2026. <a href="https://southernagtoday.org/2026/05/12/by-product-values-surge-higher/">Permalink</a>

By-Product Values Surge Higher

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Part 1:&nbsp;<a href="https://southernagtoday.org/2025/07/21/whos-driving-the-broiler-revenue-bus-part-1of-3/">https://southernagtoday.org/2025/07/21/whos-driving-the-broiler-revenue-bus-part-1of-3/</a>



Part 2:&nbsp;<a href="https://southernagtoday.org/2025/12/22/broiler-revenue-drivers-part-2/">https://southernagtoday.org/2025/12/22/broiler-revenue-drivers-part-2/</a>



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In early 2025, USDA’s Agricultural Marketing Service (AMS) proposed the Poultry Grower Payment Systems and Capital Investment Systems rule. If finalized, this rule would amend the Packers and Stockyards Act and require poultry companies to change how contract broiler growers are paid. The proposed changes closely reflect payment terms required by the&nbsp;<a href="https://www.justice.gov/jmd/media/1239241/dl?inline">U.S. Department of Justice</a>&nbsp;for the Wayne‑Sanderson Farms merger completed in 2022.



Under the proposal, integrators would no longer be allowed to use negative performance-based payment adjustments that reduce grower pay. All growers would instead receive a guaranteed minimum base pay rate, regardless of individual farm performance. According to USDA, the intent of the rule is to create a more “fair comparison” across contract payment systems. Companies could still offer positive performance incentives, but they would not be required to do so. Although the rule was originally scheduled to take effect on July 1, 2026,&nbsp;<a href="https://www.ams.usda.gov/content/usda-announces-proposed-delay-effective-date-grower-payment-systems-final-rule">implementation has been delayed</a>&nbsp;until at least December 31, 2027.



Given the potential implications of this rule, two prior SAT articles examined&nbsp;<a href="https://southernagtoday.org/2025/07/21/whos-driving-the-broiler-revenue-bus-part-1of-3/">whether contract pay rate or total pounds produced</a>&nbsp;has a greater impact on grower revenue, and&nbsp;<a href="https://southernagtoday.org/2025/12/22/broiler-revenue-drivers-part-2/">whether those differences are large enough</a>&nbsp;to influence management decisions. Part 3 of this series builds on that work by evaluating how the proposed changes could affect revenues for farms with different production performance levels.



Most broiler growers today are paid based on a rate per pound (hundredweight in our example) multiplied by the total live weight of birds delivered to the processor. Under the current tournament payment system, the final pay rate varies depending on each farm’s cost of production relative to other farms delivering birds in the same tournament period. Factors such as mortality, feed conversion, and average daily gain influence these costs. Farms that perform below the weekly average for these measures typically receive a lower effective pay rate, while higher-performing farms receive a higher rate.



If the proposed rule were implemented, many companies may choose to move to a flat,&nbsp;guaranteed&nbsp;base pay&nbsp;system. This base rate would probably be set close to what most companies already refer to as “average pay” or “contract base pay,” which currently serves as the starting point for pay adjustments under tournament systems.



To better understand how this shift could affect grower revenue, we compare farms with different performance profiles across 17 flocks during the same period. One of the farms, “Farm B”, was analyzed in Parts 1 and 2 of this series. It is an older, but updated, farm that performed slightly below average over the three-year period. “Farm C” is a newer farm growing similar-sized birds but achieving above-average performance over the same period. Both farms operated under a contract base pay rate of $7.45 per hundredweight (CWT) before tournament performance adjustments.



The key question: What would have happened to flock-level and overall revenues if the proposed rule had been in place during this period? To answer this, each farm’s actual tournament-based revenue was compared to a hypothetical scenario in which all birds were paid at the flat base rate of $7.45 per CWT. Revenues were analyzed on a per–square foot basis by flock, with percentage changes by flock shown in Figure 1 and 2 below.&nbsp;



As expected, a guaranteed base pay system benefits lower-performing farms while reducing revenue for higher-performing farms.&nbsp;&nbsp;Farm B would have seen a net revenue increase of 2.9 percent. This would have raised its effective pay rate from $7.23 to $7.45 per CWT, or about $0.015 per square foot. In contrast, Farm C would have experienced a revenue decline of approximately 1.4 percent, reducing its effective rate by $0.10 per CWT, from $7.55 to $7.45, or about $0.008 per square foot. Support for the proposed rule obviously varies among growers.&nbsp;



Integrators are concerned about their bottom-line production costs and the signals they send to growers.&nbsp;&nbsp;As the ruling is currently written, the option would remain for integrators to implement a guaranteed minimum pay rate by the pound that is “fair and not arbitrarily low”, allowing for positive performance incentives.&nbsp;&nbsp;However, as the industry moves forward, there could still be winners and losers, and continued questions of fairness, transparency, and the incentives in payment systems.&nbsp;



Figure 1. Farm B



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Figure 2. Farm C



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Brothers, Dennis. &#8220;<a href="https://southernagtoday.org/2026/05/12/broiler-revenue-questions-part-3/">Broiler Revenue Questions – Part 3</a>.&#8221; Southern Ag Today 6(22.1). May 25, 2026. <a href="https://southernagtoday.org/2026/05/12/broiler-revenue-questions-part-3/">Permalink</a>

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