Trends in Ohio Government Payments During the COVID-19 pandemic

By: PhD student Rabail Chandio and Professor Ani Katchova, Farm Income Enhancement Chair, in the Department of Agricultural, Environmental, and Development Economics (AEDE), OSU, Anil Giri, Research Agricultural Economist and Dipak Subedi, Agricultural Economist at the Economic Research Service, USDA, and Nick Paulson, Professor and Gardener Hinderliter Professor in Farm Management in the Department of Agricultural and Consumer Economics at the University of Illinois, Urbana-Champaign.

In 2021, net cash income for the US and Ohio farms were higher than the 21-year average. As expected, a major component of farm income was the government payments for various support programs, including the coronavirus pandemic support. This report provides details on how government payments evolved for farmers in Ohio and the US in the recent past after a record high in 2020.

USDA – Economic Research Service data released on Feb. 7, 2023, show Ohio producers had a record high net cash income of $4.65 billion in 2021 coming from a gross cash income of $13.63 billion in inflation-adjusted 2023 dollars. In inflation adjusted dollars, both the net and gross cash incomes were higher than the 21-year averages of $3.1 billion and $11.5 billion, respectively. Net cash farm income encompasses gross cash farm income (cash receipts from farming as well as farm-related income and government payments) minus cash expenses. It does not include noncash items—including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings—reflected in the net farm income measure. Therefore, a major contributor to the high net and gross cash incomes in 2020 and 2021 was not only high commodity prices leading to higher cash receipts but also the record high government payments.

At the onset of the pandemic, the supply chain disruptions and uncertainty in the market signaled lower incomes and uncertain prices, creating the need for higher PLC and ARC payments to farmers in addition to COVID-support payments. As commodity prices rallied beginning in August 2020, the PLC and ARC programs triggered lower levels of total support in 2021. Moreover, adhoc disaster assistance payments remained the largest component of government payments in 2021. As the US agricultural sector entered a period of higher income with higher commodity prices, ARC and PLC program payments are expected to be lower for 2022.

Link to the report: https://aede.osu.edu/sites/aede/files/publication_files/OhioGovernmentPayments2023.pdf

 

 

Coffee and Grain Market Conversation Slated for April 14, 2023

OSU Extension invites Ohio grain producers to grab a cup of coffee and join the next edition of a quarterly grain market conversation with Dr. Seungki Lee, Assistant Professor in the Department of Agricultural, Environmental and Development Economics (AEDE) from 7:30 to 8:00 a.m. on Friday, April 14, 2023.

During this webinar held via Zoom, Dr. Lee will provide his insights on the World Agricultural Supply and Demand Estimates (WASDE) crop report. “These early morning webinars will be a great way for Ohio farmers to learn more about the factors impacting the corn, soybean, and wheat markets” said David Marrison, Interim Director for OSU Extension’s Farm Financial Management and Policy Institute.  Producers are encouraged to bring their questions to this early morning conversation.

Click here for the program flyer 

There is no fee to attend this quarterly webinar session. Pre-registration can be made at go.osu.edu/coffeewithDrLee.

Additional sessions will be held on September 15, and November 17, 2023.

These webinars are sponsored by: OSU Extension, Farm Financial Management & Policy Institute (FFMPI), and the Department of Agricultural, Environmental and Development Economics (AEDE) all located in The Ohio State University College of Food, Agricultural, and Environmental Sciences (CFAES).

Where Could the U.S. – Mexico GM Corn Dispute End Up?

By: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University;  Seungki Lee, Assistant Professor, Agricultural, Environmental, and Development Economics, Ohio State University and Chris Zoller, Associate Professor and Extension Educator, Agriculture & Natural Resources, Ohio State University Extension – Tuscarawas County

Background to the Dispute

The recent announcement by the Office of the US Trade Representative (USTR) that it was requesting technical consultations with Mexico under the Sanitary and Phytosanitary Measures (SPS) Chapter of the United States-Mexico-Canada Agreement (USMCA), is the latest step in the ongoing dispute over Mexican efforts to ban imports of genetically modified (GM) corn (Office of USTR, March 6, 2023).

The dispute has its origins in a decree issued by the Mexican President Andrés Manuel López Obrador on December 31, 2020, calling for GM corn for human consumption to be phased out by the end of January 2024 (Reuters, February 13, 2023).  Not surprisingly, given Mexico is the second-largest export market for US corn totaling $4.792 billion in 2022 (USDA/FAS, 2021) (see Figure 1), with about 17 million metric tons of yellow corn crossing the border annually (USDA/ERS, December 13, 2022), the original decree ratcheted up trade tensions between the two countries.  Following US pressure, Mexico scrapped the 2024 deadline banning GM corn for animal feed and industrial use on February 13, 2023, all the while retaining the ban on its use for human consumption (Reuters, February 13, 2023).

Despite these changes, the recent move by USTR is essentially the first step in the process by which the USMCA dispute settlement mechanism is triggered, once other efforts/mechanisms to resolve the issue have failed – specifically, in its response to a letter from USTR, Mexico did not “…allay U.S. concerns with Mexico’s measures concerning [genetically engineered] GE corn….Therefore, the United States does not consider that further use of other mechanisms would resolve the matter…”  (Ambassador Katherine Tai, USTR, March 6, 2023).

Dispute Settlement under USMCA

Like the World Trade Organization (WTO), USMCA has a defined legal process by which trade disputes involving its member countries are to be settled.  Once other procedures have been exhausted, technical consultations are the first stage of the process, USTR appealing to Chapter 9 of the USMCA addressing SPS measures,

“…Pursuant to Article 9.19.2, the United States requests technical consultations with Mexico with regard to Mexico’s measures concerning genetically engineered (GE) corn and certain other GE products.  These measures may adversely affect U.S. trade with Mexico and appear to be inconsistent with Mexico’s commitments under the Sanitary and Phytosanitary (SPS) Measures chapter of USMCA…” (Ambassador Katherine Tai, USTR, March 6, 2023)

Substantively, USTR is arguing that in seeking to implement its regime on GM corn imports, Mexico is violating its commitment to ensure any SPS measures are “…based on relevant scientific principles…” (Article 9.6.6(b)), and an “…approval procedure that requires a risk assessment…” (Article 9.6.4 (a)). Therefore, the United States and Mexico should meet with “…the aim of resolving the matter cooperatively…” (Article 9.19.3)

If this fails, under Chapter 31 of USMCA concerning dispute settlement, the United States can seek establishment of an independent panel to investigate and rule on Mexico’s measures relating to GM corn, which, once constituted, would be expected to present its initial report within 150 days (Article 31.17.1).  After a further period of 60 days, allowing for country comments and finalization of the report, the report would be made public (Article 31.17).   Assuming the panel rules against Mexico, resolution of the dispute should then occur within 45 days, Mexico either removing its GM corn measures, providing compensation to the United States, or provision of some other remedy (Article 31.18.2).  If Mexico fails to implement the panel ruling, the United States would be allowed to suspend trade benefits with Mexico equivalent to the damage caused by the latter’s GM corn measures (Article 31.19.1), most likely in the form of a tariff(s) against specific Mexican products.

How Might a USMCA Panel Rule?

In thinking about how a USMCA panel might rule, it is important to note the chapter on SPS measures draws heavily on the approach applied in the WTO’s own SPS Agreement, the definitions contained in the latter being incorporated into the USMCA chapter on SPS measures.  Therefore, while the United States is not expected to file a complaint against Mexico under WTO rules, it seems reasonable to argue the 2006 WTO ruling in favor of the United States against the European Union’s (EU) regulation of GM crops would likely influence any USMCA panel ruling.  The WTO panel found the safeguard measures implemented by six EU member states against the import of specific GM crops, were not based on a risk assessment as required under the WTO’s SPS Agreement (Sheldon, Brown Journal of World Affairs, 2007).  In other words, a USMCA panel is very likely to find for the United States against Mexico on the grounds that Mexico has not applied scientific principles and appropriate risk assessment in seeking to ban the import of GM corn.

Implications for the Ohio Corn Market

The direct economic impact of not resolving this dispute on the Ohio corn market would likely be modest, given the modest reported value of Ohio corn exports to Mexico over the past two years, as compared to the 10-year average of $6.64 million, and the small proportion of white corn in US corn exports (see Figure 1). Specifically, over the last two years, Mexico accounted for only 2 percent of corn exports from Ohio, while Canada and Asia accounted for the largest shares at 39 and 35 percent respectively (see Figure 2). There are two reasons for these export market shares: Mexico’s import diversification and increased use of Brazilian corn (S&P Global Commodity Insights, December 29, 2022), and strength of the US dollar.

However, two broader factors could result in substantial indirect impacts on Ohio farmers.  First, there would likely be a “ripple” effect as additional supplies are diverted to the domestic market, driving down corn prices.  As a result, Ohio corn farmers would likely see increased risk of a squeeze on their margins.  Second, and more broadly, if this dispute is not resolved in favor of the United States, it would introduce considerable regulatory uncertainty, with the potential of undermining the stable operation of commodity markets. This could increase the cost of any risk management measures such as hedging and options, placing further financial strain on Ohio grain producers.

Figure 1. Corn Exports to Mexico (MX)

Note: Corn export graphs (bars and scatters) correspond to the left-axis. Exports from US to MX are in billion dollars, and exports from Ohio to MX are in 10 million dollars. The line graph stands for the portion of white corn in total corn exports to MX and corresponds to the right-axis.

Source: US Census Bureau

Figure 2. Corn Exports from Ohio

Source: US Census Bureau

Planning for 2023

This latest development is another example of volatility in commodity markets and shows how world events impact US and Ohio agriculture.  As you plan for the 2023 planting season, we encourage you to know your cost of production and understand the impact to your returns if the commodity market drops.  How do a five, ten, and twenty percent drop in price impact your bottomline?

We encourage you to invest time developing cropping budgets.  If you are looking for guidance in budget development, please see the 2023 OSU Extension Production Budgets available here: https://farmoffice.osu.edu/farm-management/enterprise-budgets#2022.

 

Don’t Miss the March Madness Edition of the Farm Office Live on March 17

The OSU Extension Farm Office team invites you to attend the March Madness Edition of the “Farm Office Live” Webinar on Friday, March 17 from 10:00 to 11:30 a.m. This monthly webinar allows Ohio farmers and agribusiness personnel to learn more about current farm management and agricultural law issues.

In this month’s webinar, the Farm Office Team will present the following topics:

  • Federal & State Legislative Update (Peggy Hall)
  • New Postnuptial Agreement Legislation (Robert Moore)
  • Marital and Non-Marital Assets (Robert Moore)
  • Selling Timber- Call Before You Cut (Dave Apsley)
  • Update on Crop Input Costs and Crop Budget Outlook for 2023 (Barry Ward)
  • Sales Tax Exemption Issues (Jeff Lewis)
  • 2023 Spring Crop Insurance Update (Eric Richer)
  • Emergency Relief Program (David Marrison)

There is no fee to attend this webinar.  However, registration is required at go.osu.edu/farmofficelive

Check out farmoffice.osu.edu for all your farm management and ag & resource law needs.

U.S. Agricultural Projections to 2032

by: Chris Zoller, Extension Educator, ANR in Tuscarawas County

The United States Department of Agriculture (USDA) released its Agricultural Projections to 2032 report in mid-February.  This article will highlight the crop portion of the report.  The full report is available here: https://www.ers.usda.gov/webdocs/outlooks/105853/oce-2023-01.pdf?v=1029.

This report is based on data available as of October 2022 and is made using several assumptions.  These include, but are not limited to, macroeconomic factors, a continuation of the 2018 Farm Bill, normal weather, and several others.  It is not to be considered a forecast.  Rather, the report is to be used as a baseline.

U.S. Crops

The figure below shows prices of corn, soybeans, wheat, and cotton for the period 2002 – 2032.  Corn prices are expected to fall from the present levels to $5.70 per bushel in 2023/2024 to 2026/2027 to $4.30 per bushel in 2032/2033.  Any growth in corn demand is expected to come from feed and residual use, primarily from demand to feed beef, pork, and poultry.

Baseline projections for soybeans are like corn.  Soybean prices will drop from their current highs to settle at $13.00 per bushel in 2023/2024.  This downward trend is expected to continue until settling at $10.30 per bushel in the 2032/2033 marketing year.  Expect modest increases in soybean crush to keep pace with soybean oil and meal demands.

Wheat, like corn and soybeans, is expected to decline in price over the projection period.  Wheat is projected to fall from a high of $9.20 in 2022/2023 to $5.70 per bushel by the end of the projection period.

 

Planted Acres

The Baseline projection from USDA shows relatively no change in planted area of the eight major crops (corn, soybeans, wheat, barley, cotton, oats, rice, and sorghum).  The figure below demonstrates planted area from 2002 – 2032.  Rising yields of corn, soybeans, and wheat will compensate for steady or declining acres planted.

Feed and Residual, Ethanol, & Exports

The figure below projections for grains used for feed and residuals, ethanol, and the export market.  Feed and residual and exports are expected to see the greatest increases, with ethanol use projected to remain level.

 

Planning

As the report outlines, these projections are based on several factors that likely will change.  Some are within your control, while many are not.  Let’s assume the price projections, for instance, are correct.  Can you remain or become successful at these prices?  What implications do these projections have for your farm business?  What can you do to prepare?

Consider the following suggestions:

Managing a successful farm business is no easy task.  However, there are many people, resources, and tools to help you chart a course for long-term success.  I encourage you to

Please Participate! Using Data-Driven Knowledge For Profitable Soybean Management Systems

By: Dr Laura Lindsey

Help us help you grow more profitable soybeans through the power of data science. Soybean agronomists are developing an app to help you make decisions in real time. The more data we collect, the more accurate the tool will be. (And…the more data we have from Ohio, the more applicable the tool will be to our state!) The app will allow growers to drop a pin in a field, enter input variables, and receive crop management decision help directly and through online scouting tools such as Sporecaster and Tarspotter.

This is what we are asking from you:

This project is funded by the North Central Soybean Research Program and led by Dr. Shawn Conley at University of Wisconsin- Madison and Dr. Paul Esker at Penn State University. All data we receive will be treated with confidentiality.

 

 

Coffee & Grain Webinar Recap- Tight Supply Drives High Commodity Prices

On Monday morning’s Coffee and Grain Zoom, Dr. Seungki Lee (Assistant Professor in the Department of Agricultural, Environmental and Development Economics) discussed  the grain market outlook and the new crop prospects based on the USDA February World Agricultural Supply and Demand Estimates (WASDE) report. In all three major crops – corn, soybean, and wheat, strong prices are projected in the 2022/2023 market mainly due to the tight supply. Additionally, Brazil was singled out as its production can swing both the 2022/2023 and 2023/2024 commodity markets.

Click here to read Dr. Lee’s Summary Report

Farm Office Live Webinar to be Held on February 17 at 10:00 a.m.

Ohio’s farm and agribusiness industry are invited to attend OSU Extension’s  “Farm Office Live” webinar on Friday, February 17, 2023 from 10:00 to 11:30 a.m.  The Farm Office Team providing farm management and agricultural and resource law updates during this webinar.

This month’s session topics and featured speakers include:

Ohio Land Values and Cash Rents- Barry Ward

Making the 2023 Farm Bill Decision- Chris Bruynis

Legislative Update- Peggy Hall

Understanding Farm Insurance Policies – Robert Moore

Farm Accounting: Chart of Accounts with a Purpose- Bruce Clevenger

Pandemic Assistance Revenue Program (PARP) & USDA Disaster Declarations- David Marrison

There is no fee to attend this session. Register or watch replays at: go.osu.edu/farmofficelive

OSU Extension Offering Quarterly Grain Market Update – Grab your Coffee for First Update on February 13

OSU Extension invites Ohio grain producers to grab a cup of coffee and join a quarterly grain market conversation with Dr. Seungki Lee, Assistant Professor in the Department of Agricultural, Environmental and Development Economics (AEDE) from 7:30 to 8:00 a.m. on February 13, April 14, September 15, and November 17, 2023.

During these webinars held via Zoom, Dr. Lee will provide his insights on the World Agricultural Supply and Demand Estimates (WASDE) crop report. “These early morning webinars will be a great way for Ohio farmers to learn more about the factors impacting the corn, soybean, and wheat markets” said David Marrison, Interim Director for OSU Extension’s Farm Financial Management and Policy Institute.  Producers are encouraged to bring their questions to this early morning conversation.

Click here for Coffee with Seungki Lee Flyer

There is no fee to attend these quarterly webinar sessions. Pre-registration can be made at go.osu.edu/coffeewithDrLee. These webinars are sponsored by: OSU Extension, Farm Financial Management & Policy Institute (FFMPI), and the Department of Agricultural, Environmental and Development Economics (AEDE) all located in The Ohio State University College of Food, Agricultural, and Environmental Sciences (CFAES).

Thinking about selling home-based or farm-raised foods? Our webinar series offers help

By: Peggy Kirk Hall, Associate Professor, Agricultural & Resource Law

Direct food marketing in Ohio is hot. The latest USDA survey identified 7,107 Ohio farms with direct food sales–third highest in the nation.  That might be why our program receives more legal inquiries about food sales than any other area of law.  And that is also why we’re hosting a three-part webinar series on “Starting a Food Business,” providing an introduction to what a producer needs to know about selling home-based and farm-raised foods directly to consumers and retailers.

The free webinar series will be from 7—9 p.m. on January 24, February 28, and March 28 in 2023, with these different topics each night:

January 24:  Start-Up Basics.  What do you want to sell?  We’ll review initial considerations for selling your food product.  We’ll cover food safety, licensing, legal, and economic considerations for starting up a food business.

February 28:  Selling Home-Based Foods.  Learn about food product development, Ohio’s Cottage Food and Home Bakery laws, and requirements for selling canned foods.

March 28:  Selling Meat and Poultry.  A look at the economics, processing options, and labeling and licensing requirements for selling meat and poultry.

Our teaching team for the webinar series includes:

Nicole Arnold, Asst. Professor and Food Safety Field Specialist for OSU Extension.  Nicole supports food handlers, consumers, and educators with food safety education and risk communication efforts.

Peggy Kirk Hall, Assoc. Professor and Agricultural Law Field Specialist for OSU Extension.  Peggy directs OSU Extension’s Agricultural & Resource Law Program and regularly teaches and writes on food laws.

Emily Marrison, OSU Extension Educator in Family and Consumer Sciences.  Emily’s food science background provides expertise and insight on food safety, product development, and selling home-based foods.

Garth Ruff, Beef Cattle Field Specialist for OSU Extension.  Garth has a background in animal science and specializes in livestock production and marketing, farm management, and meat science.

The webinar series is free, but registration is necessary.  Find details and the registration link at go.osu.edu/foodbusiness.