With several key moves during the 2024 rice market, and harvest behind us, we can let the dust settle and make some observations and conclusions as we look toward 2025. A major shift in domestic production patterns emerged in 2022; volatile input costs, triggered by the Russian-Ukraine War and supply chain disruptions, led to a decline in rice acreage as southern U.S. farmers opted to grow less input-intensive crops like soybeans and corn. These challenges were exacerbated by a severe drought in California that substantially reduced short/medium grain rice production. Rice production rebounded in 2023 and maintained that level in 2024, when more stable fertilizer prices shifted producers back to rice to counter the risk of lower prices, as was the case in other commodities (Figure 1). Recent conversations with agronomists indicate that U.S. rice farmers may maintain or expand rice acreage and production in 2025.



Figure 1. U.S. All Rice Class Production and Acres Harvested (2014 &#8211; 2024)



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2520" height="1315" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-1-1.png" alt="" class="wp-image-40901" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-1-1.png 2520w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-1-1-1024x534.png 1024w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-1-1-768x401.png 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-1-1-1536x802.png 1536w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-1-1-2048x1069.png 2048w" sizes="auto, (max-width: 2520px) 100vw, 2520px" /></figure>



The November 2024 World Agricultural Supply and Demand Estimates (WASDE) report indicates the current outlook for U.S. rice is for larger ending stocks, weaker exports and unchanged supplies and domestic use from October 2024 (USDA-AMS, 2024). All rice exports combined are lowered 1 million cwt to a total of 100 million. All rice ending stocks are increased 1 million cwt to 46.7 million, a 19% increase from the 2023/24 marketing year. The seasonal average farm price for long grain and southern short/medium grain is unchanged at $14.50/cwt, suggesting a cautious domestic response to the stock increases (Figure 2).



Figure 2. Rice Marketing Year Average Farm Prices (2020/21 &#8211; 2024/24F)



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="728" height="336" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-2.png" alt="" class="wp-image-40900"/></figure>



Internationally, it’s important to note the spread between India’s rice, Thailand/Vietnam rice, and U.S. milled rice. U.S. long grain is and has remained for several months at $800/metric ton, while Vietnam and Thailand are currently selling at $550 and $500/metric ton, respectively. The price gap widened following the September 2024 lift of India’s export ban on non-basmati milled rice. Currently, India has set the price floor at $490/metric ton. India’s return to the international market has forced Thailand and Vietnam to lower their prices by 10-13%, impacting demand for U.S. long grain rice in countries like Iraq. Iraq’s preference for cheaper rice from Asia, influenced by the price differential, has reduced demand for U.S. rice exports and poses a challenge for U.S. farmers (Childs and Jarrell, 2024).&nbsp;



Looking ahead, global rice exports for 2025 are expected to increase by 4% YoY, bringing total exports to 56.3 million metric tons. India is projected to reclaim much of their share, reaching a volume of 21 million tons. However, countries like Pakistan, Thailand, Vietnam, and the United States are expected to see a decline in export volumes (Figure 3).&nbsp;



Figure 3. Milled Rice Exports (2020/21 &#8211; 2024/25Nov)



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2520" height="1265" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-3.png" alt="" class="wp-image-40903" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-3.png 2520w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-3-1024x514.png 1024w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-3-768x386.png 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-3-1536x771.png 1536w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.3-3-2048x1028.png 2048w" sizes="auto, (max-width: 2520px) 100vw, 2520px" /><figcaption class="wp-element-caption">Source: USDA-FAS, 2024</figcaption></figure>



References



United States Department of Agriculture, Agricultural Marketing Service. (2024).&nbsp;World Agricultural Supply and Demand Estimates (WASDE-654). Retrieved November 9, 2024, from,&nbsp;<a href="https://www.usda.gov/oce/commodity/wasde/wasde1124.pdf">https://www.usda.gov/oce/commodity/wasde/wasde1124.pdf</a>



United States Department of Agriculture, Foreign Agricultural Service – PSD Reports. (2024).&nbsp;World Rice Trade. Retrieved November 9, 2024, from,&nbsp;<a href="https://apps.fas.usda.gov/psdonline/app/index.html#/app/downloads">https://apps.fas.usda.gov/psdonline/app/index.html#/app/downloads</a>



United States Department of Agriculture, National Agricultural Statistics Service. (2024).&nbsp;Rice Production and Acres Harvested. Retrieved October 2024, from,&nbsp;<a href="https://quickstats.nass.usda.gov/">https://quickstats.nass.usda.gov/</a>



Loy, R., and Hunter, B. (2024).&nbsp;The Disparity Between Crop Prices Received and Input Prices Paid.”&nbsp;Southern Ag Today 4(28.3). July 10, 2024. Available at,&nbsp;<a href="https://southernagtoday.org/2024/07/10/the-disparity-between-crop-prices-received-and-input-prices-paid/">https://southernagtoday.org/2024/07/10/the-disparity-between-crop-prices-received-and-input-prices-paid/</a>



Childs, N., &amp; Jarrell, P. (2024).&nbsp;Rice outlook: October 2024 (Report No. RCS-24I).&nbsp;U.S. Department of Agriculture, Economic Research Service. Retrieved November 2024, from,&nbsp;<a href="https://www.ers.usda.gov/webdocs/outlooks/110219/rcs-24i.pdf?v=5219.8">https://www.ers.usda.gov/webdocs/outlooks/110219/rcs-24i.pdf?v=5219.8</a>



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Loy, Ryan. &#8220;<a href="https://southernagtoday.org/2024/11/12/sifting-through-the-rice-market-rising-supplies-and-growing-competition/">Sifting through the Rice Market: Rising Supplies and Growing Competition.</a>&#8221; Southern Ag Today 4(48.3). November 27, 2024. <a href="http://sifting-through-the-rice-market-rising-supplies-and-growing-competition">Permalink</a>

Sifting through the Rice Market: Rising Supplies and Growing Competition

Over the weekend, USDA APHIS announced a new restriction on livestock from Mexico due to an occurrence of New World Screwworm (NWS) in the Southern Mexican state of Chiapas.&nbsp;&nbsp;APHIS is restricting the importation of animal commodities originating from, or transiting through, Mexico immediately while awaiting more information of the size and scope of the outbreak.



History



The screwworm,&nbsp;Cochliomyia hominivorax, is a fly that is a flesh-eating parasite. The screwworm fly spreads by depositing its eggs around an open wound.&nbsp;&nbsp;The larvae then crawl into the wound feeding on the animal’s flesh.&nbsp;&nbsp;The adult female fly mates only once in its lifespan, which led to the strategy of controlling the screwworm fly by releasing sterile male flies, thus preventing reproduction.&nbsp;&nbsp;Eradication efforts through releasing sterile male flies began in the 1950s and resulted in eradication from the U.S.&nbsp;&nbsp;In fact, it was ranchers who donated money and raised $2.8 million to match the federal appropriation that ramped up eradication in Texas in the early 1960s.&nbsp;&nbsp;Later coordinated efforts with Mexico and Central American countries pushed the flies down to Panama.&nbsp;&nbsp;But in recent years, the flies have been making a comeback in Central America overwhelming the strategy of sterile fly release.&nbsp;&nbsp;The last reported occurrence in the U.S. was in deer in Big Pine Key, Florida in 2016.&nbsp;&nbsp;



During the eradication efforts in the 1950s, ranchers could send in sample tubes of flies for identification.&nbsp;&nbsp;Knowing the location of occurrences allowed for pinpointing release areas.&nbsp;&nbsp;Figure 1 is a picture of the sample tubes.&nbsp;&nbsp;Figure 2 is a map of the screwworm overwintering range in average years (Graham, 1985).&nbsp;&nbsp;&nbsp;



Imports



Feeder cattle imports from Mexico are an important source of cattle for U.S. cattle feeders and beef production.&nbsp;&nbsp;Imports have a highly seasonal pattern with the most entering in the Spring and late in the year.&nbsp;&nbsp;These steers and spayed heifers often first go to stocker grazing programs and then to feedlots.&nbsp;&nbsp;Imports in 2024 have amounted to about 5 percent of feedlot placements.&nbsp;&nbsp;Cattle enter the U.S. through 11 ports of entry: 3 in Arizona, 2 in New Mexico, and 6 in Texas.&nbsp;&nbsp;Year to date, 1,195,702 feeder cattle have entered the U.S.&nbsp;&nbsp;Of those, 29 percent have entered through Arizona, 51 percent through New Mexico, and 20 percent through Texas.



A simple, back of the envelope analysis would estimate that a 5 percent decline in feeder cattle supplies would lead to about an 8.6 percent increase in feeder cattle prices, all else held equal.&nbsp;&nbsp;We might also consider the impact regionally, as most of these feeder cattle would be fed in the Southern Plains or the Southwest.&nbsp;&nbsp;The limitation on imports would likely have a significant effect on feeders in those areas.&nbsp;



Other Considerations



One of the major differences today compared to pre-eradication is the presence of many more deer and exotics.&nbsp;&nbsp;In the “old days”, there were few deer in parts of Texas due to the impact of screw worms on deer survival.&nbsp;&nbsp;Eradication allowed rapid increases in the deer population.&nbsp;&nbsp;The recent development of the exotic wildlife industry presents the potential for much larger economic harm from re-infestation.



Old timers will speculate that one reason there were so many great team ropers from Texas is because of the constant checking cattle closely and doctoring them for screw worms.&nbsp;&nbsp;The pest even enters popular literature in The Good Old Boys by Texas writer Elmer Kelton.&nbsp;&nbsp;In this novel the protagonist, Hewey, spends a ton of time roping, checking, and doctoring their calves.



It’s important to remember that screw worms can be controlled.&nbsp;&nbsp;The use of sterile male flies allows proven and effective control.&nbsp;&nbsp;Cooperation with our southern neighbors pushed eradication as far as Panama.&nbsp;&nbsp;But, as is often the case, these old menaces return.&nbsp;&nbsp;Fortunately, control is possible but, it requires vigilance.



Figure 1.&nbsp;&nbsp;Tubes for Ranchers to Return Screwworm Samples to the Eradication Program.&nbsp;&nbsp;From the library of David Anderson.&nbsp;&nbsp;


<div class="wp-block-image">
<figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="1906" height="2530" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.2-1-1.jpg" alt="" class="wp-image-40916" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.2-1-1.jpg 1906w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.2-1-1-771x1024.jpg 771w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.2-1-1-768x1019.jpg 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.2-1-1-1157x1536.jpg 1157w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.2-1-1-1543x2048.jpg 1543w" sizes="auto, (max-width: 1906px) 100vw, 1906px" /></figure></div>


Figure 2.&nbsp;&nbsp;Map of Screwworm Range.&nbsp;&nbsp;


<div class="wp-block-image">
<figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="328" height="247" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/4.48.2-2.jpg" alt="" class="wp-image-40913"/><figcaption class="wp-element-caption">Source: Graham, 1985.</figcaption></figure></div>


<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/2024/11/Slide1.jpeg" alt="" class="wp-image-40914" srcset="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/Slide1.jpeg 1920w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/Slide1-1024x768.jpeg 1024w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/Slide1-768x576.jpeg 768w, https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/Slide1-1536x1152.jpeg 1536w" sizes="auto, (max-width: 1920px) 100vw, 1920px" /></figure>



For Further Reading:



Graham, O.H. (editor) “Symposium on Eradication of the Screwworm from the United States and Mexico.”&nbsp;Entomological Society of America.&nbsp;&nbsp;1985.



Kelton, E.&nbsp;&nbsp;The Good Old Boys.&nbsp;&nbsp;Doubleday.&nbsp;&nbsp;1978.



Novy, J.E.&nbsp;&nbsp;“Screwworm Control and Eradication in the Southern United States of America.”&nbsp;&nbsp;FAO.



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Anderson, David, Josh Maples, and Charley Martinez. &#8220;<a href="https://southernagtoday.org/2024/11/26/an-old-menace/">An Old Menace.</a>&#8221; Southern Ag Today 4(48.2). November 26, 2024. <a href="http://an-old-menace">Permalink</a>

An Old Menace

This article is a companion to the article titled:&nbsp;<a href="https://southernagtoday.org/2024/10/28/the-long-term-economic-struggles-of-southern-cotton-farmers/">The Long Term Economic Struggles of Southern Cotton Farmers</a>&nbsp;published in Southern Ag Today on October 28, 2024.



Besides cotton, another primary row crop suitable to southern soils and the climate is peanuts. As a legume, peanuts are often used as a rotational crop with cotton and/or corn. Peanuts are grown primarily in the southeastern U.S. from Virginia down to Florida and over to Alabama, with some acreage as far west as New Mexico, Texas, and Oklahoma. In 2024, the U.S. is projected to produce 3.2 million farmer stock tons of peanuts (USDA ERS).&nbsp;Market year average prices are expected to be around $530 per ton (USDA FSA), and if realized, the projected total value of peanut production is expected to be $1.7 billion. Not only are peanuts an important rotational crop, but they also contribute significantly to the rural farm economies of the Southern region.



Peanuts are capital intensive particularly because of the specific harvest equipment that must be used to dig up the vines. Then after the vines dry, another machine picks the peanuts from the vines. Analysis of data from the USDA Economic Research Service illustrates the financial challenge of the rising costs of peanut farming. Figure 1 highlights the ongoing profitability challenges southern peanut farmers have faced over the last 29 years. These data account for actual production costs incurred during the production process by farm operators, landlords, and contractors and include expenses for labor, equipment, and other inputs. Revenues generated from peanut sales are also analyzed. The revenues do not include government payments and crop insurance indemnities received by producers. Potential government payments during this time period may include traditional farm bill programs for farmers with base acres, as well as ad-hoc disaster relief programs.



According to Figure 1, the average peanut farmer managed to earn a profit in only five of the last twenty-nine years. On average, peanut growers faced annual losses of $57 per acre. Referring back to the companion article linked above, cotton farmers also faced average annual losses of $94 per acre during this same time period. These long-run average losses per acre show the continued financial challenges incurred by southern farmers despite growing crops that are suitable for the regional climate and soils. As with cotton, long-term economic losses to peanut production put the sustainability of Southern agriculture at risk. A continuation of these trends could result in a prolonged decline in agricultural production, eroding the economic foundation of rural farming communities across the Southern region. It is evident that there continues to be a need for effective agricultural policies and support programs.



Figure&nbsp;1. Peanut Production Total Costs, Revenue, and Returns for Producers in the United States (1995 – 2023).


<div class="wp-block-image">
<figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="540" height="224" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/tempImageTVkZWY.jpg" alt="" class="wp-image-40892"/><figcaption class="wp-element-caption">Data Source: U.S. Department of Agriculture (USDA) Economic Research Service (ERS), Commodity Costs and Returns for Peanuts, May 1, 2024.</figcaption></figure></div>


References:&nbsp;



Liu, Yangxuan. “<a href="https://southernagtoday.org/2024/10/01/the-long-term-economic-struggles-of-southern-cotton-farmers/">The Long Term Economic Struggles of Southern Cotton Farmers.</a>”&nbsp;Southern Ag Today&nbsp;4(44.1). October 28, 2024.&nbsp;<a href="https://southernagtoday.org/2024/10/01/the-long-term-economic-struggles-of-southern-cotton-farmers/">https://southernagtoday.org/2024/10/01/the-long-term-economic-struggles-of-southern-cotton-farmers/</a>



U.S. Department of Agriculture (USDA) Economic Research Service (ERS), Commodity Costs and Returns for Peanut, Updated on May 1, 2024.



U.S. Department of Agriculture (USDA), Economic Research Service (ERS), Oil Crops Outlook: October 16, 2024.&nbsp;<a href="https://www.ers.usda.gov/webdocs/outlooks/110202/ocs-24j.pdf?v=2829.3">https://www.ers.usda.gov/webdocs/outlooks/110202/ocs-24j.pdf?v=2829.3</a>



U.S. Department of Agriculture (USDA) Farm Service Agency (FSA), Projected 2024/25 Market Year Average Prices. Updated October 31, 2024.&nbsp;<a href="https://www.fsa.usda.gov/documents/2024-myapdf-1">https://www.fsa.usda.gov/documents/2024-myapdf-1</a>



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Liu, Yangxuan, amd Amanda R. Smith. &#8220;<a href="https://southernagtoday.org/2024/11/12/the-long-term-economic-struggles-of-southern-peanut-farmers/">The Long Term Economic Struggles of Southern Peanut Farmers.</a>&#8220; Southern Ag Today 4(48.1). November 25, 2024. <a href="http://the-long-term-economic-struggles-of-southern-peanut-farmers">Permalink</a>

The Long Term Economic Struggles of Southern Peanut Farmers

‘Tis the season for camo, foothills that are sprouting pickup trucks, and men, women and children afoot on varying terrain armed with rifles, bows, and dogs. If you are a landowner, there is a good chance you have been approached by someone seeking permission to hunt on or traverse your land. Before counting points on bucks, here are some points for landowners’ consideration to prepare for this season.



Get a signed lease. A hunting lease will provide clarity and protection to all parties by defining access, laying out expectations, addressing property management and use, and providing some liability protections. Agreements should be documented in writing with detail to prevent any confusion or misunderstanding of the agreed terms and as insurance should a dispute or issue arise. When drafting a lease, be specific and thorough. The danger of a “simple” lease is that most lease disputes don’t arise over terms that are clearly set forth in the lease, but rather most disputes arise from terms that are not addressed in the lease. Among the important lease terms such as naming the lessor(s) and lessee(s), payment terms, length of lease, liability, identifying the property and access points, remedies for breach and the like. A thorough hunting lease should address management kills, ATV use, fence and trail repairs, fallen trees, feeding plots, use and location of outbuildings, blinds and tree stands, whether guests are permitted and how many at once, communication with lessor, whether the hunting rights are exclusive or nonexclusive, wildlife that may be hunted, known or potential hazards, and other considerations of important to either party. If a dispute arises, a court will first look at the lease, and only the lease, to resolve it. Absent extenuating circumstances, additional agreements or promises which are not reflected in the lease itself will not be enforced.&nbsp;



Reinforce to anyone hunting on your land that it is their responsibility to know the property boundaries. It is unlawful for hunters to track or retrieve wounded game on private property without permission. Hound hunters should check to see if their state has a right to retrieve law. These statutes generally allow the owners of hunting dogs to enter upon the land of another without permission for the purpose of retrieving their hunting dogs. Virginia’s 100-year-old statute was recently challenged by a group of landowners arguing that Virginia’s right to retrieve law amounted to a taking of private property without just compensation, converting their private property to public use.<a href="applewebdata://138EC3C4-50D1-4972-80DE-84EA7D9796FB#_ftn1">[1]</a>&nbsp;Despite alleging that hounds were a nuisance which had killed a landowner’s chickens and would spook horses allegedly justifying compensation from the state, the circuit court held that the law was merely an exception to criminal trespass and did not deprive the landowners of any property rights. In response, Virginia’s Board of Wildlife Resources considered two proposals which would have required hound hunters to use GPS collars and make reasonable attempts to prevent their dogs from entering another’s property. Though it was questioned whether the Board had authority to require such measures, both were ultimately rejected.&nbsp;



Hunting leases are contractual agreements to which every other basic principle of contract law applies. Make sure leases are written, thorough, and reviewed by a knowledgeable agricultural attorney licensed in your jurisdiction. If you are hunting on your own land or that of others, know the property boundaries and as necessary, consult with a local attorney on your state specific laws related to one of the oldest practices in the world.



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<a href="applewebdata://138EC3C4-50D1-4972-80DE-84EA7D9796FB#_ftnref1">[1]</a>&nbsp;Medeiros, et al v. Virginia Dep’t of Wildlife Res., Record No. 230691 (Va. Sept. 26, 2024) (unpub. order).



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Friedel, Jennifer Shaver. &#8220;<a href="https://southernagtoday.org/2024/11/12/preparing-for-the-camo-season/">Preparing for the (Camo) Season.</a>&#8221; Southern Ag Today 4(47.5). November 22, 2024. <a href="http://preparing-for-the-camo-season">Permalink</a>

Preparing for the (Camo) Season

I’m writing this somewhere over the Atlantic Ocean as I travel home from England.&nbsp;&nbsp;I was there for the last several days at the invitation of the British Embassy in Washington, D.C., along with several U.S. agricultural officials, including Congressional staff and a handful of state secretaries, directors, and commissioners. The purpose was to learn about the agricultural industry in one of the most beautiful and storied countries on the planet, but it also provided a good opportunity to compare with current events unfolding at home. Not surprisingly, farmers and ranchers in both countries face a lot of the same challenges: enduring erratic weather; striking the right balance between conserving resources and growing food; and navigating unpredictable politics, just to name a few.



With respect to the latter, both countries have recently gone through elections. This past summer in the general election in the U.K., the opposition Labour Party led by Keir Starmer – now Prime Minister – defeated the governing Conservative Party. The new government recently introduced a new inheritance tax proposal. While there are far more details (and nuance) than I have space to discuss today, the proposed changes will impose an inheritance tax of 20% on business and agricultural assets beyond £1 million (roughly $1.26 million at today’s exchange rates) beginning in April 2026. Much like in the United States, growth in land values and equipment costs have resulted in a situation where farms have significant net worth – at least on paper – but little liquidity.&nbsp;&nbsp;In other words, producers have little ability to pay huge tax burdens when an operation is passed along to an heir. Proponents of the proposal will argue that any transfers to individuals more than seven years before death will continue to fall outside the scope of the new inheritance tax. However, producers will counter that death doesn’t respect the timeframes set by the government, and they will argue that the proposal stands to destroy the heritage their families have built – to say nothing of the eventual impact on food security. On Tuesday of this week, British farmers and ranchers descended on London to protest the new government’s proposal.



While England is a long way from the United States, it’s not all that different from here. Throughout our own election season this Fall – and as part of the debate about how to pay for the now-defunct&nbsp;Build Back Better Act&nbsp;– a number of proposals were discussed to significantly change the taxation of unrealized capital gains and estate taxes in the United States. In June 2021, at the request of Rep. GT Thompson (R-PA) and Sen. John Boozman (R-AR), our team at the Agricultural and Food Policy Center (AFPC) authored a report that estimated the impact of two of these proposals, the&nbsp;Sensible Taxation and Equity Promotion Act&nbsp;and the&nbsp;For the 99.5 Percent Act. At the time, our analysis showed that a generational transfer under the two bills would impact 92 of AFPC’s 94 representative farms (increasing the average tax liability by $726,000 per farm) and 41 of 94 representative farms (increasing the average tax liability of $2.2 million per farm), respectively.



While our election results this Fall very likely mean that agricultural producers in the United States won’t face a near-term change in the treatment of unrealized capital gains and estate taxes, the events unfolding “across the pond” are a very clear reminder that elections have consequences…and that policies (well-intentioned or not) often have&nbsp;unintended&nbsp;consequences.



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Fischer, Bart L. &#8220;<a href="https://southernagtoday.org/2024/11/21/what-a-difference-an-election-can-make/">What a Difference an Election Can Make.</a>&#8221; Southern Ag Today 4(47.4). November 21, 2024. <a href="http://what-a-difference-an-election-can-make">Permalink</a>

What a Difference an Election Can Make

Producers can keep track of their price risk protection through revenue insurance in a given growing season by comparing the Harvest (Fall) Price to the Projected (Spring) Price determined by USDA-RMA. In the broader picture of a marketing plan, revenue crop insurances provide a form of price guarantee at a premium expense similar to locking in a price guarantee using a put option contract (Biram and Smith, 2022). A previous article examined the price protection offered by Revenue Protection (RP), Supplemental Coverage Option (SCO), and Enhanced Coverage Option (ECO) crop insurance for corn and rice (Biram, 2023). That article only considered the change in prices and did not consider the potential change in yield. This article builds on the previous one by considering both the price and yield protection offered by ECO, and providing a snapshot of how changes in county yields can also trigger indemnities.



ECO is an area-based crop insurance product and must be paired with farm-level insurance like Yield Protection (YP) or RP. The liability insured by ECO is calculated using the same parameters as RP (e.g., APH farm yield and futures prices) at coverage levels of 90% and 95%. The futures price used is based on the higher of the Projected Price and the Harvest Price determined by USDA-RMA. Unlike RP – which triggers indemnities based on farm-level losses –ECO triggers an indemnity based on county-wide losses and will trigger a full indemnity when county-level revenue losses fall to 86%.



A county-level map is provided in Figure 1, which shows the extent that the final county yield can change relative to the expected county yield and still trigger an indemnity for corn that is equal to the producer paid premium (i.e., breakeven indemnity). In other words, this map answers the question of how much the county yield must change to trigger an indemnity that will at least cover the producer-paid premium. The producer premium was determined for RP at the 75% coverage level (RP-75) under optional units paired with ECO at the 95% coverage level (ECO-95) with the associated premium subsidy rate applied. Projected and Harvest Prices reported by the&nbsp;<a href="https://prodwebnlb.rma.usda.gov/apps/PriceDiscovery/GetPrices/YourPrice">RMA Price Discovery Tool</a>&nbsp;are used with theassociated price volatility.&nbsp;



As an example, a county shaded in the darkest green shows that the final county yield may increase at least 21-26% for an indemnity to trigger which covers the producer premium. This suggests the price decline in the futures market was severe enough to allow for yield upside risk that would offset indemnities triggered on price alone. Conversely, a county shaded in the darkest red indicates that the final county yield must decline at least 6-11% before a large enough indemnity to cover producer premium is triggered. This implies that the price decline was not severe enough to trigger an indemnity on price alone. Most counties have experienced severe enough price declines in corn that yield can increase in comparison to the expected yield and potentially obtain a net indemnity above zero (e.g., yellow and green shaded counties).



A similar pattern exists for cotton and soybeans (Figures 2-3). Nearly all counties insuring cotton under ECO-95 and RP-75 allow for yield upside risk, or favorable potential, to determine an indemnity equal to producer premium with most counties allowing for 7-10% yield upside risk. The same story holds for soybeans with potential yield upside risk of 9-14% for most counties which indicates the extent of futures price declines for both cotton and soybeans in 2024. Rice is the exception with no counties allowing for yield upside potential in determining an indemnity equal to producer premium (Figure 4). This is expected given there was virtually no change (i.e., $0.002/lb) in the rough rice futures price between planting and harvest.



This analysis shows that price risk protection, which does not require a crop insurance premium, could be provided through ECO-95 if yields do not increase by more than 5% across most counties. However, given the potential for record yields across most of the U.S., this potential may be largely eclipsed. While this yield upside could be beneficial, it only considers one half of the profit equation, gross revenue. Further, price declines, paired with elevated production expenses, have not been met by risk protection from other farm bill programs, such as Price Loss Coverage and Agriculture Risk Coverage. This underscores the lack of price risk mitigation provided by current farm policy tools and the need for an updated farm safety net.



Figure 1. Percentage Change in County Yield for ECO-95 to Result in Zero Net Indemnity (Corn)



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="624" height="324" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/tempImageLZ1dKc.jpg" alt="" class="wp-image-40870"/><figcaption class="wp-element-caption">This map shows the percentage change in the final county yield relative to the expected yield required to trigger an ECO indemnity that will be equal to producer paid premium. This assumes RP and ECO coverage levels of 75% and 95%, respectively.&nbsp;<a href="https://www.datawrapper.de/_/pDQAf/?v=2">Click here for an interactive version of this map showing county-specific percentages.</a></figcaption></figure>



Figure 2. Percentage Change in County Yield for ECO-95 to Result in Zero Net Indemnity (Cotton)



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="624" height="320" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/tempImagep9d7Ii.jpg" alt="" class="wp-image-40872"/><figcaption class="wp-element-caption">This map shows the percentage change in the final county yield relative to the expected yield required to trigger an ECO indemnity that will be equal to the producer paid premium. This assumes RP and ECO coverage levels of 75% and 95%, respectively.&nbsp;<a href="https://www.datawrapper.de/_/vbemn/?v=2">Click here for an interactive version of this map showing county-specific percentages.</a></figcaption></figure>



Figure 3. Percentage Change in County Yield for ECO-95 to Result in Zero Net Indemnity (Soybeans)



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="624" height="316" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/tempImageUK8wZl.jpg" alt="" class="wp-image-40873"/><figcaption class="wp-element-caption">This map shows the percentage change in the final county yield relative to the expected yield required to trigger an ECO indemnity that will be equal to the producer paid premium. This assumes RP and ECO coverage levels of 75% and 95%, respectively. <a href="https://www.datawrapper.de/_/gzMBK/">Click here for an interactive version of this map showing county-specific percentages.</a></figcaption></figure>



Figure 4. Percentage Change in County Yield for ECO-95 to Result in Zero Net Indemnity (Rice)



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="624" height="284" src="https://sat-wp.afpc.tamu.edu/wp-content/uploads/2024/11/tempImageD7bZ0P.jpg" alt="" class="wp-image-40874"/><figcaption class="wp-element-caption">This map shows the percentage change in the final county yield relative to the expected yield required to trigger an ECO indemnity that will be equal to the producer paid premium. This assumes RP and ECO coverage levels of 75% and 95%, respectively.&nbsp;<a href="https://www.datawrapper.de/_/Zo4qS/">Click here for an interactive version of this map showing county-specific percentages.</a></figcaption></figure>



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References



Biram, Hunter, and S. Aaron Smith. “<a href="https://southernagtoday.org/2022/08/the-option-to-augment-the-crop-insurance-price-floor/">The Option to Augment the Crop Insurance Price Floor</a>“.&nbsp;Southern Ag Today&nbsp;2(35.1). August 22, 2022.&nbsp;<a href="http://the-option-to-augment-the-crop-insurance-price-floor/">Permalink</a>



Biram, Hunter. “<a href="https://southernagtoday.org/2023/08/28/comparing-the-harvest-price-and-projected-price-in-revenue-protection-crop-insurance-for-rice-and-corn/">Comparing the Harvest Price and Projected Price in Revenue Protection Crop Insurance for Rice and Corn.</a>”&nbsp;Southern Ag Today&nbsp;3(35.1). August 28, 2023.&nbsp;<a href="http://comparing-the-harvest-price-and-projected-price-in-revenue-protection-crop-insurance-for-rice-and-corn/">Permalink</a>



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Biram, Hunter. &#8220;<a href="https://southernagtoday.org/2024/11/12/can-yield-upside-risk-eclipse-price-downside-risk-protection-in-eco-crop-insurance/">Can Yield Upside Risk Eclipse Price Downside Risk Protection in ECO Crop Insurance?</a>&#8221; Southern Ag Today 4(47.3). November 20, 2024. Permalink

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