October 2016
Ag Insight

Ag Insight

USDA makes cheese purchase, extends MPP sign-up deadline

The U.S. Department of Agriculture has announced plans to purchase approximately 11 million pounds of cheese from private inventories to assist food banks and pantries across the nation, while reducing a cheese surplus that is at its highest level in 30 years.

The purchase, valued at $20 million, will be provided to families in need across the country through USDA nutrition assistance programs, while assisting the stalled marketplace for dairy producers whose revenues have dropped 35 percent over the past two years.

USDA also announced that it will extend the deadline for dairy producers to enroll in the Margin Protection Program for Dairy to Dec. 16, 2016, from the previous deadline of Sept. 30. This voluntary dairy safety net program, established by the 2014 Farm Bill, provides financial assistance to participating dairy producers when the margin – the difference between the price of milk and feed costs – falls below the coverage level selected by the producer.

A USDA web tool, available at www.fsa.usda.gov/mpptool, allows dairy producers to calculate levels of coverage available from MPP based on price projections.

On Aug. 4, USDA announced approximately $11.2 million in financial assistance to U.S. dairy producers enrolled in MPP-Dairy, the largest payment since the program began in 2014.

While USDA projects dairy prices to increase throughout the rest of the year, many factors such as low, world-market prices, increased milk supplies and inventories, and slower demand have contributed to the sluggish marketplace for dairy producers. USDA will continue to monitor market conditions in the coming months and evaluate additional actions, if necessary, later this fall.


Ten percent of farmland expected to change hands through 2019


The relatively advanced age of the U.S. farming population has sparked interest in the manner in which land will be transferred to other landowners, including the next generation of farm operators.

A recent study showed about a third of principal farm operators were at least age 65, compared with 12 percent of self-employed workers in nonagricultural businesses. The research also showed farmland owners reported plans to transfer an estimated 93 million acres in the five-year period from 2015-19 – some 10 percent of all land in farms – through a variety of means.

Landowners anticipate selling 3.8 percent of all farmland, with just 2.3 percent to be sold to non-relatives. A larger share of land (6.5 percent) is expected to be transferred through trusts, gifts and wills.

The share of farmland available for purchase by nonrelatives will likely rise above the 2.3 percent figure as some individuals (or entities) who inherit land may choose to sell it. Also, those who inherit land but don’t sell it may decide to rent it out to farm operators.

In 2014, 39 percent of all farmland was rented and 61 percent was owned by farm operators.


Forecasts for farm exports show rally under way

USDA has announced its first forecast for U.S. agricultural exports for fiscal year 2017 and a revised forecast for FY 2016. Both forecasts indicate U.S. agricultural exports have begun to rally and will continue the record-setting pace that began in 2009.

The projected $133 billion in total exports for FY 2017 is up $6 billion from the last forecast and would be the sixth-highest total on record. The United States’ agricultural trade surplus is also projected to rise to $19.5 billion, up 40 percent from $13.9 billion in FY 2016. The United States has posted an agricultural trade surplus since recordkeeping began in the 1960s.

The projected growth in 2017 exports is led by increased sales of oilseeds and products, horticultural goods, cotton, livestock, dairy and poultry. And with a rise in global economic growth, beef demand also is expected to strengthen.

While USDA continues working to eliminate the remaining restrictions on beef exports instituted by some trading partners after the December 2003 BSE detection, beef exports have already recovered considerably. Beef exports are expected to reach $5.3 billion in 2017, well above the $1.5 billion in FY 2004.

China is projected to return as the United States’ top export market in 2017, surpassing Canada as the No. 1 destination for U.S. agricultural goods.

USDA also revised the forecast for FY 2016 exports to $127 billion, up $2.5 billion from the previous forecast. This would bring total agricultural exports since 2009 to more than $1 trillion, smashing all previous eight-year totals.


U.S. vegetable favorites show little change


What vegetables do U.S. consumers favor most?

Data from 2014, the most recent year for which figures are available, show potatoes, tomatoes and sweet corn were the three most popular vegetables, the same ranking as in 1974.

However, while per capita availability (a proxy for consumption) of potatoes and sweet corn has declined over the last four decades, per capita tomato availability grew from 73.2 pounds in 1974 to 87.8 pounds in 2014.

According to USDA’s Economic Research Service’s food availability data, an average of 385.4 pounds of fresh and processed vegetables per person was available for U.S. consumers to eat in 2014, up from 334.1 pounds in 1974, but down from peak per capita vegetable availability of 424.3 pounds in 1996.

Fresh tomato availability increased by 74 percent and canned tomatoes by 10 percent during the same period. Onion availability also grew from 12.7 to 19.7 pounds per person from 1974-2014.

In 2014, cucumbers and romaine and leaf lettuce at 11.3 and 10.8 pounds per capita, respectively, replaced cabbage and carrots in the top seven rankings. Head lettuce was the fourth most popular vegetable in 1974, but dropped to fifth in 2014, perhaps related to the growing popularity of romaine and leaf lettuce.


Few farms affected by 2014 Farm Act eligibility income cap

Although the 2014 Farm Act revised the maximum income limitations (the income cap) that determine eligibility for most commodity and conservation programs and payments, the new rules aren’t expected to affect more farm operations.

The 2014 Act replaced the separate limits on farm and nonfarm income specified in the 2008 Farm Act with a single total adjusted gross income cap of $900,000.

Based on data for 2009-14 – a period of overall increasing farm sector income – a comparison of the impact of the income caps imposed by the 2008 and 2014 Farm Acts found the number of potentially ineligible farms increased over the period under both income caps. However, the potential number of farms affected by the 2014 income cap is below the number affected by the 2008 income caps, averaging 1,500 farms per year (about 0.1 percent of all farms) for the period 2009-14.


Farm types show different energy usage levels


Farms consume energy directly in the form of gasoline, diesel, electricity and natural gas and indirectly in energy-intensive inputs such as fertilizer and pesticides. But energy usage varies considerably according to the type of farm operation.

Farm businesses with annual gross cash farm income of over $350,000, or smaller operations where farming is reported as the operator’s primary occupation, vary in mix and intensity of direct- and indirect-energy use.

Those concentrating on rice, peanut, wheat and cotton production spent 43-49 percent of their total cash expenses on direct- and indirect-energy inputs, more than any other crop and livestock producers.

Fertilizer and pesticides, indirect energy uses because they require large amounts of energy to manufacture, account for the greatest share of energy expenses among farm businesses primarily producing crops.

For livestock producers, feed is also an important indirect-energy expense, but, in this analysis, those costs are accounted for in the crop budgets.

Fertilizer expenses accounted for 18-22 percent of total cash expenses for farm businesses concentrating in wheat, corn and other cash-grain production, and 14-17 percent for farm businesses primarily producing other field crops.

Cotton and rice production was associated with relatively high shares of direct-energy inputs – fuel used to apply chemicals and electricity to power irrigation equipment.

Peanut producers, who use electricity for irrigation and on-farm drying of their harvested crop, had the highest share of electricity use at 6 percent, followed by farm businesses concentrating on poultry and cotton at 4 percent.