October 2014
Ag Insight

Ag Insight

Enrollment underway for new dairy farm risk management program

Enrollment in the new dairy Margin Protection Program is underway and will continue through Nov. 28. The voluntary program, established by the 2014 Farm Bill, provides financial assistance to participating farmers when the margin – the difference between the price of milk and feed costs – falls below the coverage level selected by the farmer.

The USDA also has launched a new web tool to help producers determine the level of coverage under the Margin Protection Program that will provide them with the strongest safety net under a variety of conditions. The online resource, available at www.fsa.usda.gov/mpptool, allows dairy farmers to combine unique operation data and other key variables to calculate their coverage needs based on price projections.

Producers can also review historical data or estimate future coverage based on data projections. The secure site can be accessed via computer, Smartphone, tablet or any other platform, 24 hours a day, seven days a week.

The Margin Protection Program, replacing the Milk Income Loss Contract program, gives participating dairy producers the flexibility to select coverage levels best suited for their operation. Participating farmers must remain in the program through 2018 and pay a minimum $100 administrative fee each year. Producers have the option of selecting a different coverage level during open enrollment each year.

Dairy operations enrolling in the new program must comply with conservation compliance provisions and cannot participate in the Livestock Gross Margin dairy insurance program. Farmers already participating in the Livestock Gross Margin program may register for the Margin Protection Program, but the new margin program will begin only when their Livestock Gross Margin coverage has ended.

The Margin Protection Program final rule was published in the Federal Register on Aug. 29, and dairy farmers have until Oct. 28 to determine to comment on whether they think the regulation accurately addresses management changes such as adding new family members to the operation or inter-generational transfers. Written comments can be submitted at www.fsa.usda.gov or www.regulations.gov.


Genetically engineered seeds planted on over 90 percent of U.S. corn, cotton and soybean acres

U.S. farmers have adopted genetically engineered seeds rapidly in the 19 years since their commercial introduction, despite their typically higher prices.

In 2014, adoption of GE varieties, including those with herbicide tolerance, insect resistance or both traits, reached 96 percent of cotton acreage, 94 percent of soybean acreage (soybeans have only HT varieties), and 93 percent of corn acreage planted in the United States.

Contract broiler growers have higher median and greater range of household income

Households raising broilers have higher median incomes than other farm households and other U.S. households, USDA’s Economic Research Service reported. But the median figures don’t tell the whole story.

First, some background: Household income for farmers combines the income the household receives from off-farm activities with the income the household earns from the farm business, net of expenses and payments to other stakeholders in the business.

In 2011, the median income among all U.S. households was $50,504, while the median income among farm households was $57,050. The median for contract broiler growers was higher, at $68,455.

However, the range of household incomes earned by broiler growers is also wider than other groups, even though contract growers are much more demographically homogeneous than both the U.S. population and the overall farm population.

The wider range reflects, in part, the financial risks associated with contract broiler production. Grower costs can vary widely, and flat annual broiler production in recent years has increased the risk that growers will get fewer chicks placed or that their contracts won’t be renewed.

Exports account for a growing share of U.S. milk disappearance

U.S. commercial exports of dairy products have grown since 1995, accounting for an increasing share of the total commercial disappearance of U.S milk production.

On a milk-equivalent skim-solids basis (a method of adding up quantities of diverse milk products based on their skim-solids content), U.S. commercial exports grew on average 11.8 percent per year between 1995 and 2013, with their share of total commercial disappearance rising from 3.4 percent in 1995 to 18.7 percent in 2013.

Commercial exports of nonfat dry milk and skim milk powder played a major role in the increase. In recent years, major U.S. markets for NDM and SMP have been Mexico, China, the Philippines and Indonesia.

Domestic commercial disappearance serves as a proxy for U.S. consumption, calculated as a residual after accounting for production, on-farm use, imports, exports and changes in stocks. The commercial data also exclude USDA net removals (price support purchases plus subsidized exports minus sales to the commercial market) that were significant in earlier years, but a minor factor since 2004.

Russia food import banto affect small share of U.S. agricultural exports

Russia’s recently announced a 1-year ban on imports of food from the United States should affect only relatively small shares of U.S. agricultural exports, according to USDA economists.

In calendar year 2013, U.S. agricultural exports to Russia totaled $1.31 billion, or 0.8 percent of total U.S. agricultural exports of $162.16 billion. Major U.S. products shipped to Russia in 2013 were poultry meat and products ($312 million), tree nuts (primarily almonds, $172 million), soybeans ($157 million) and live animals (primarily cattle for breeding purposes, $149 million).

However, imports of non-food items, including soybeans and live animals, do not appear to be on Russia’s banned list. U.S. exports of poultry meat and products to Russia accounted for 5.6 percent of U.S. exports in this category in 2013, but U.S. poultry exports to Russia have declined in recent years because of restrictive tariff rate quotas and phyto-sanitary measures.

Exports of high-quality breeding cattle to Russia accounted for 16.8 percent of U.S. live animal exports in 2013 and are imported by Russia to upgrade its cattle and dairy herds.

Russia was the 16th largest U.S. export market for tree nuts, accounting for 2.3 percent of those exports.

India’s cotton output now nearing world’s largest

After exceeding the United States in cotton production 7 years ago, India’s cotton output has continued to expand rapidly and now is poised to surpass China, the world’s largest producer.

India’s cotton production began to expand with the introduction of genetically modified Bt cotton.

Since 2000/01, India’s cotton area has increased about 2.8 percent annually and is now more than double the area sown to cotton in China and more than triple U.S. cotton area. However, India’s cotton yields, while improving about 6 percent annually since 2000/01 to an average of 530 kilograms per hectare (kgs/ha) during 2009/10-2013/14, remain well below those achieved in China (1,357 kgs/ha) and the United States (916 kgs/ha).

With gains in production, India has emerged as the world’s second largest exporter of raw cotton, after the United States, and the second largest consumer of raw cotton, after China. Cotton processed in India is destined for its large domestic market as well as exports of cotton yarn, fabric and clothing.

U.S. expected to reclaim role as leading soybean exporter

With soybean production forecast at a record 103.4 million metric tons (3.8 billion bushels) in 2014/15 (September/August marketing year), the United States is expected to reclaim the role of leading global soybean exporter that it lost to Brazil in 2012/13.

A record harvested area of 84.1 million acres is expected to enhance U.S. price competitiveness and boost U.S. soybean exports to a record 45.6 million metric tons.

U.S. soybean meal and oil exports also are expected to increase, with soybean meal shipments abroad forecast to edge up to 10.66 mmt in 2014/15 from 10.57 mmt in 2013/14. Soybean oil exports could reach 0.95 mmt, up from 0.77 mmt in 2013/14.

If achieved, the plentiful supplies will drive U.S. farm prices lower. USDA forecasts the average farm price for soybeans in 2014/15 will be in the $9.50-11.50 per bushel range, down from an estimated $13 per bushel in 2013/14.

The last time the U.S. farm price for soybeans averaged below $12 per bushel for a crop year was in 2010/11 when it reached $11.30, a record at the time.