Ep. 16 Arkansas Net Farm Income to Decline for Second Straight Year

00;00;08;20 – 00;00;23;02
Riley Smith
But anyway. You ready to get started? Good morning. Good morning. Welcome to another episode of Morning Coffee and AG Markets with your host, Riley Smith. We got Doctor Biram with us in the studio today. How are you?

00;00;23;05 – 00;00;23;15
Dr. Hunter Biram
Great.

00;00;23;15 – 00;00;31;27
Riley Smith
So we got him in here today talking about the Arkansas net farm income. And what it is to come to decline for the second straight year.

00;00;32;00 – 00;00;46;04
Riley Smith
So talking about that. My first question I got for you, before we get into the meat and potatoes of all this, the farm income report, can you tell us about the collaboration between Raff and UA-CES?

00;00;46;04 – 00;00;46;16
Dr. Hunter Biram
Yes.

00;00;46;23 – 00;01;14;15
Dr. Hunter Biram
Yeah. So, this report is born out of a cooperative agreement between the University of Missouri’s Rural and Farm Finance policy, Analysis Center. So for those of you who may know, there’s a center called the, the Food and AG Policy Research Institute, or FAPRI for short. And Raff is the sister center to to FAPRI So, they kind of run in parallel to one another.

00;01;14;18 – 00;01;38;04
Dr. Hunter Biram
And so this is actually the third year we’ve been in this agreement with them. And, so the main objective is to produce a state level farm income projection in the spring and a revision in the fall. For the state of Arkansas. So very much follows the national farm income, approach in that there is a forecast in the projection in the springtime.

00;01;38;04 – 00;01;53;01
Dr. Hunter Biram
And then and there’s a fall revision. And so, we have both those reports come out every year. And so today the focus is to talk more about that. Revision that happened this fall.

00;01;53;04 – 00;02;01;21
Riley Smith
So, in that revision, how much is, Arkansas net farm income expected to decline in 2024?

00;02;01;24 – 00;02;31;26
Dr. Hunter Biram
Yeah. So we’re looking at about $328 million decline from 2023. That’s about 10% year over year decline. But we’re also saying that this is about a $1.06 billion drop from the record that was set in 2022. So, you know, you see 23 and $28 million. And, while that is not an insignificant amount of decline, when you put it in the context of, you know, we’re in the second year of this decline in net farm income, we’re looking at a $1 billion drop from that record that we set in 2022.

00;02;31;27 – 00;02;38;17
Dr. Hunter Biram
So, you know, we’re looking at multi-year declines. Not a great picture for us.

00;02;38;20 – 00;02;41;26
Riley Smith
So our expenses driving this.

00;02;41;29 – 00;03;03;02
Dr. Hunter Biram
That’s a really good question. I mean, if, you know, a lot of people want to say, oh, man, these expenses are just eating us alive right now. And I’m not saying that they’re not. I’m not. That’s saying the two inches are insignificant, but they’re really not driving, this decline in, farm income. We’re actually seeing about a $570 million reduction in, production expenses.

00;03;03;02 – 00;03;20;00
Dr. Hunter Biram
Of course, I say this with a little bit of a caveat. You know, it’s mostly from lower feed expenses. And, you know, you’re a cattle guy and cattle, you know, you know what? The primary expenses, for cattle production are going to be, and that’s going to be a feed. And, what’s driving that? Feed the crop prices.

00;03;20;00 – 00;03;41;06
Dr. Hunter Biram
What’s happening with crop prices? Well, they’re coming down and they’re very low. And, you know, you have been talking about that locally, actually, you’ve been seeing how there’s lower commodity prices, and how people are buying, corn, in bulk for, for deer and other things. Have you heard of too many people mixing, feed on farm for their cattle?

00;03;41;08 – 00;04;05;16
Riley Smith
Oh, yeah. There’s a lot of guys that do, it takes it. I would I would go out on a limb and tell you that it takes a set amount of cattle, like, head wise. How many head you have to to justify, mixing your own on farm? I’ve got one guy that’s on my brain, that’s back at Beebe.

00;04;05;16 – 00;04;37;02
Riley Smith
He mixes his own. He has a commodity shed and basically it’s on cheap commodity. So, I mean, you, if you’re talking about, like, heifer ration or bull ration or something like that, a lot of times those guys have it mixed somewhere else and then have it hauled in and put in a gravity bin or something. But if you’re on like, cheap commodities, like your using sweet potatoes, or if you’re using like some these guys will use like old bread and like have contracts with ike Walmart places like like.

00;04;37;02 – 00;04;38;17
Dr. Hunter Biram
Old chips sometimes.

00;04;38;19 – 00;04;44;15
Riley Smith
Yeah. Yeah. Potato chips and stuff like that. Because all that is is fat. Yeah. And so they’ll mix.

00;04;44;15 – 00;04;45;18
Dr. Hunter Biram
Oh I would know that.

00;04;45;21 – 00;05;12;13
Riley Smith
Like they’ll mix all that and then they’ll mix, you know silage or hay with it in a, in a mixer and then feed it. So I mean there’s a lot of guys still do that. I mean the dairy industry was huge for that mix in their own. Yeah. And having fresh, fresh basically fresh feed every day. But as far as that goes, talking about, you know, buy in bulk, a lot of these guys are finding alternative.

00;05;12;15 – 00;05;43;08
Riley Smith
It’s been going on for years, but I mean, they’re really relying on it this year, having alternative sources to send their crop. So, you know, we were talking about corn, that specific market. A lot of guys are getting $2, $3 more a bushel than what the market price is for them right now. Now they might not be selling the quantity that you would when you sell the an elevator.

00;05;43;08 – 00;06;04;13
Riley Smith
Yeah. Etcetera. But it does help recover some of those expenses because they’re, they’re, you know, they’re getting $6 a bushel for it as deer corn, $7 a bushel for deer corn on the ton versus, you know, selling it for 416 a bushel in the market.

00;06;04;16 – 00;06;24;03
Dr. Hunter Biram
Yeah. And so exactly. So that, you know, really proves the point of like, listen, you know, we’re looking at decline in expenses, but the biggest line item for Arkansas is going to be for feed. And that’s going to be for livestock but also for chickens. Right. Like we are, you know, that’s going to be our primary expense is going to be from feed for for chickens, for turkeys, for, for, for a poultry.

00;06;24;03 – 00;06;46;13
Dr. Hunter Biram
But in the crop space, we’re going to focus more on fertilizer, fuel and oil interest even. And so those fertilizer filling all those expenses are virtually unchanged year over year. They’re slightly lower than than they were last year. Not not a not a large amount. And then looking at 2025, looking like those expenses are going to remain just about the same, actually not going to we’re not tracking a big decrease in that.

00;06;46;13 – 00;07;04;21
Dr. Hunter Biram
And then you look at interest and we were talking about that a lot. And Ryan from talking about that a lot, you know, we’re looking at 3% year over year decline in Aaron sorry a year over year increase in interest expense year over year. But a 23% increase since 2022. So this is going to reflect that, sharp increase in the cost of borrowing with those higher interest rates.

00;07;04;21 – 00;07;21;11
Dr. Hunter Biram
So, you know, yes, in the overall grand scheme of net farm income for Arkansas, expenses are going to fall, but most of that is going to be driven by feed. When you’re looking at an item, fertilizer, fuel and oil virtually unchanged. But the interest expense is going to be, higher for for a grower growers.

00;07;21;14 – 00;07;45;00
Riley Smith
You know, a lot of people, a lot of producers don’t think about how, grain affects the cattle market just as much as it does them. You know, talking about mix and, and and you were talking about poultry, not a thing that comes to my mind is, is that there’s how many, how many producers and growers do you know who contract with Tyson and contract with Cal main contract with

00;07;45;00 – 00;07;45;16
Dr. Hunter Biram
Peco

00;07;45;18 – 00;07;51;00
Riley Smith
Peco Right. And sell their corn crop to them directly.

00;07;51;00 – 00;07;51;07
Dr. Hunter Biram
Yep.

00;07;51;09 – 00;07;51;28
Dr. Hunter Biram
That happens

00;07;52;04 – 00;08;15;06
Riley Smith
To bust a quote unquote premium price for their corn crop. And you know, that’s, that’s another alternative route for a lot of producers. Now. But anyway, so I’m sure with the low crop prices having something to do with this, how much, are crop receipts expected to fall this year?

00;08;15;11 – 00;08;15;18
Dr. Hunter Biram
Yeah.

00;08;15;18 – 00;08;35;04
Dr. Hunter Biram
You know, just like what we’re talking about. Time with these lower corn soybeans. Not exempt either. But, overall, you know, you’re a you are right about that. You know, crop, receipts are should decline about $580 million year over year, about a 10% decline in crop receipts. And that’s that’s crops. You know, we’re not looking at livestock in this particular line item.

00;08;35;04 – 00;08;58;22
Dr. Hunter Biram
That’s just crops, $580 million, over half $1 billion decline in crop receipts year over year. So, you know, looking at it by crop corn’s looking down about a 21% decline year over year. Soybeans, 17%, cotton 10%. All these declines, rice is a little interesting. There’s actually a 9% increase year over year, but a lot of that’s going to be driven by, increased acreage.

00;08;58;22 – 00;09;19;04
Dr. Hunter Biram
I think we’re looking at about 30% increase in acreage since 2022, a little bit more acreage compared to 2023. But we’ve seen, a lot more acreage in rice the past couple of years. So acreage is going to drive a lot of that. Yields are going to drive a lot of that, you know. So overall we’re seeing more production, because the price is lower year over year.

00;09;19;05 – 00;09;33;28
Dr. Hunter Biram
You’re looking at more like a $14 100 white versus a 15, 15, $50 underweight marketing your average price compared to last year. So prices are down but production is up overall. And so that’s that’s what’s going to be driving that increase. In those receipts.

00;09;34;00 – 00;10;00;13
Riley Smith
And so on the livestock side, I know you’ve got a livestock background. You know, I would I would tell producers it’d be probably a pretty good time if they’ve got the storage space to store up on some of those commodities. Especially, you know, in the feed market, because it’s, I don’t know how long. You know, we want the crop producers.

00;10;00;13 – 00;10;11;20
Riley Smith
We want them to get a higher price for their grain. But at the same time, on the livestock side, I know the cattle markets doing really, really well right now. And they’re pretty high, actually.

00;10;11;22 – 00;10;19;07
Dr. Hunter Biram
Yeah. I mean, and certainly if, you know, if you’re a livestock, if you’re if you have cattle and you want to make sure on feed, this is definitely a time to be buying.

00;10;19;09 – 00;10;37;25
Riley Smith
Oh, this is just when you, you hear me talking about, you know, cheap gain. This would be a time where you could get a hot commodity for cheap, and, you know, cheaper than what you would normally would and be in storage, storing it up and being able to feed that out because eventually the cattle market’s going to come back down, the market’s going to go up.

00;10;37;25 – 00;10;39;06
Riley Smith
That’s just how it works.

00;10;39;06 – 00;10;40;20
Dr. Hunter Biram
That’s it.

00;10;40;22 – 00;10;51;17
Riley Smith
And this is one of the cases where it’s high and feed prices are low. And you could you could get a cheap gain on your cattle right now or livestock in general.

00;10;51;20 – 00;10;52;14
Dr. Hunter Biram
Right. Good points.

00;10;52;21 – 00;11;00;05
Riley Smith
But. Well, the record crop yields, we keep hearing about be enough to offset the price loss.

00;11;00;08 – 00;11;20;01
Dr. Hunter Biram
Yeah, we’ve seen some pretty large price declines. You know, I talked about those receipt changes, previously, and, I would say not really. I don’t think it’s very likely that those, record yields are going to be enough to offset that price loss in some areas. I think it will be. But I think by and large, it’s not going to be, you know, in terms of receipts, rice is the only one saying year over year increase.

00;11;20;01 – 00;11;23;16
Dr. Hunter Biram
And like I said, it’s mostly on record yields and, planning area.

00;11;23;18 – 00;11;32;04
Riley Smith
So in those receipts, which crops amount account. My bad for the most, crop receipts in the state.

00;11;32;07 – 00;11;48;14
Dr. Hunter Biram
Yeah. You know, I’m going to say the word, surprisingly here. But, you know, some people would be surprised that soybeans make up the most, but I think it’s only because they just may not be as knowledgeable about, you know, the, planted area for soybeans. I mean, we have about 3 million acres of soybeans.

00;11;48;14 – 00;12;07;27
Dr. Hunter Biram
That’s our top crop in terms of plant acres. And a lot of us know a lot of folks know Arkansas for rice. And yes, absolutely, we are a top rice producer in the country. All of it being an East Arkansas, primarily all the rice being and East Arkansas, some areas in southwest Arkansas. There’s going to be some rice there too, but, but rice actually comes in at number two in terms of receipts.

00;12;08;02 – 00;12;22;00
Dr. Hunter Biram
And acreage. So for receipts, rice, maize with about 32% of receipts, you know, soybeans 36%. And corn some B 13% of those receipts. Cotton 13%. So if you add all those percentages up that accounts for about 94% of all the, crop receipts in the state.

00;12;22;01 – 00;12;26;26
Riley Smith
That’s just what’s crazy to me, though, is is that our number one crop for soybeans, not rice? Yeah.

00;12;26;26 – 00;12;28;07
Dr. Hunter Biram
In terms of the receipts in the acreage.

00;12;28;07 – 00;12;32;23
Riley Smith
Yeah, right. Well planted acreage. You know, that’s a lot of beans.

00;12;32;25 – 00;12;39;03
Dr. Hunter Biram
That is a lot of beans. I think it’s also the number one crop in, Mississippi and Kentucky and in other areas. And so.

00;12;39;10 – 00;12;41;06
Riley Smith
Who’s ranked? Do you know who’s ranked number one?

00;12;41;06 – 00;12;42;03
Riley Smith
In soybeans?

00;12;42;06 – 00;12;50;08
Dr. Hunter Biram
in the country? I don’t know what’s probably going to be one of the, it’s going to be somewhere like, in the Midwest. I would expect.

00;12;50;10 – 00;12;52;12
Riley Smith
Oh, I didn’t think about them.

00;12;52;16 – 00;12;54;26
Dr. Hunter Biram
Oh, yeah. Yeah, they’re on that corn soybean rotation.

00;12;54;26 – 00;12;57;10
Riley Smith
Right. I did not think about them.

00;12;57;10 – 00;13;09;16
Dr. Hunter Biram
Yeah, for sure, but, I mean, it’s impressive. I still think this person that Arkansas is good. You know, we do have a lot of, receipts and economic activity generally just from these four crops that we’re talking about.

00;13;09;19 – 00;13;31;26
Riley Smith
Well, we’re pretty well, I mean, obviously, we know that Arkansas was rich in agriculture, but, I mean, that’s just the information that, that I knew and then that I’m learning in the last three weeks, like Arkansas is number one, crawfish, soybeans. Obviously, we thought it was number number one was rice. Arkansas was ranked number third in cotton production.

00;13;31;29 – 00;13;34;04
Riley Smith
That was a big one third.

00;13;34;04 – 00;13;34;14
Dr. Hunter Biram
Oh yeah.

00;13;34;18 – 00;13;36;04
Riley Smith
And the US in the U.S. Yeah.

00;13;36;04 – 00;13;40;15
Dr. Hunter Biram
And and yeah Texas number one man Texas. They got all that West Texas cotton.

00;13;40;18 – 00;13;50;10
Riley Smith
Bumby cotton is papaw always called it. But and then number one US number one. Number two in US exports in cotton.

00;13;50;12 – 00;13;54;13
Dr. Hunter Biram
Yeah, yeah. Scott. Yes. Scott laying down all the cotton knowledge.

00;13;54;16 – 00;13;57;09
Riley Smith
But that’s just like phenomenal to me.

00;13;57;09 – 00;14;05;21
Dr. Hunter Biram
That’s why it’s so important to have the data right. You got to have the numbers, the hard, fast numbers. There’s a lot of ideas get thrown around. But it’s good to have these numbers right in front of us so that we can know for sure.

00;14;05;24 – 00;14;16;08
Riley Smith
So with that, we’ve talked about the farm bill safety net on here several times. Is Arkansas exempt from the lack of protection being offered nationally?

00;14;16;13 – 00;14;35;19
Dr. Hunter Biram
Yeah. And I know you remember this Riley, but, you know, we talked about that National Farm income revision back in September. I think it was if we’re talking about that. And one thing that we noted was that shift from the market based assistance from your price less coverage or your PLC and your agricultural risk coverage,ARC, your PLC and ARC support.

00;14;35;21 – 00;14;57;23
Dr. Hunter Biram
Being the predominant form of government assistance and how that switched now over to much less so on the market based and more on the ad hoc assistance. And Arkansas is not exempt from that, national trend. Actually, the fall revision, that we just came out with, we we revised that number down $200 million, based on record yields, which is going to drive those ARC payments.

00;14;57;26 – 00;15;19;09
Dr. Hunter Biram
So if there’s low yields, more higher chance of ARC payments. But, with the record yields less likely to have ARC payments and then there’s, you know, I’ll say elevated prices, you know, the prices that, you know, I know that we’ve had price declines, but they’re elevated relative to the PLC statutory reference price. So they’re still largely above that, PLC reference price.

00;15;19;09 – 00;15;30;25
Dr. Hunter Biram
So, you know, elevated with an asterisk. Of course. Only cotton is projected to receive a PLC payment. So I don’t expect any counties to receive, any Ark payments based on these yields. And probably only cotton will get a PLC payment.

00;15;30;29 – 00;15;40;04
Riley Smith
Okay. Last and final question I got for you. What does the make up of, market based assistance versus hoc assistance look like?

00;15;40;08 – 00;16;08;11
Dr. Hunter Biram
Yeah, that that that shift from, the market base to ad hoc. I mean, we had 48% of government assistance in Arkansas was going to be the market based ARC/PLC support. And the, ad hoc assistance may have about 17% of that, government assistance in the 14 through 18 time period. So from 2014 to 2018, 48% of government assistance was market based, while 17% was ad hoc.

00;16;08;13 – 00;16;30;19
Dr. Hunter Biram
Now, from the 19 through 23 period. So from 2019 through 2023, 18% of government assistance was market based and 63% was ad hoc. So market base goes from 48% to 18%, and ad hoc goes from 17% to 63%. So we’ve seen a big shift. And, how government assistance is, helping our farmers stay in business.

00;16;30;19 – 00;16;33;26
Dr. Hunter Biram
And it’s mostly through ad hoc now and not so much market based assistance.

00;16;33;29 – 00;16;37;13
Riley Smith
Good deal. Well, I think that’s everything.

00;16;37;20 – 00;16;50;28
Dr. Hunter Biram
Yeah, I think there’s quite a bit in there. Encourage your listeners on this. There’s gonna be a link to the full report at the bottom. It’s not very long. We we try to only hit the high points in their reporting, so maybe 2 or 3 pages. There’ll be a link to that report at the end of the, newsletter.

00;16;51;00 – 00;16;57;29
Dr. Hunter Biram
And, there’ll be some more details with some, some neat figures, in the newsletter as well, and so but yeah, I appreciate you having me on today.

00;16;57;29 – 00;17;20;21
Riley Smith
Yeah, man. I think we covered all my questions. So with that, want to thank you for coming in and spend a little time with us talking about, the net farm income. Yeah, I’ll be looking for that report. It is out. Okay, so it is out. So y’all go check out the net farm income report for they replace that twice a year right.

00;17;20;23 – 00;17;25;05
Dr. Hunter Biram
That’s right. We’ll do a spring release and a fall release in the fall release came out on October 15th.

00;17;25;05 – 00;17;27;19
Riley Smith
Okay. So when’s the next one supposed to come out?

00;17;27;20 – 00;17;33;23
Dr. Hunter Biram
Well, I think the target is to come out with that in April of 25. So we’ll have a better idea of what 2025 looks like, in April.

00;17;33;27 – 00;17;54;09
Riley Smith
Well, if you’re a, producer and you’re listening, anybody listening? We encourage you to go look at that net farm income report and look at the cash receipts and, look at what the change has been from the spring to the fall and what is predicted from the fall to the spring. So, without that, you’ll stay tuned for my market report.

00;17;54;09 – 00;18;20;09
Riley Smith
Thanks. All right, guys, back with you. Market report December 24 Corn. Current prices at $4.17 per bushel month agos price was at $4.14 per bushel. That’s up $0.03. Year agos price was at $4.94 a bushel. That’s down $0.67. November 24 Rice current price is at $15.13 per hundredweight. A month agos price is at $15.55 per hundredweight. That’s down $0.42.

00;18;20;12 – 00;18;47;20
Riley Smith
And year agos price was at $16.12 per hundredweight. That’s down $0.99. November 24. Soybeans current price is at $9.92 per bushel. A month ago, price was at $10.39 per bushel. That’s down $0.47 a year. agos price was at $12.95 per bushel. That’s down $3.03. July 25 Wheat. Current prices at $6.13 per bushel. Month agos price was at $6.17 per bushel.

00;18;47;23 – 00;19;12;29
Riley Smith
That’s down $0.04 a year agos price was at $6.38 per bushel. That’s down $0.28, $0.25. My bad. December 24. Cotton $0.72 per pound. Month agos price is at $0.73 per pound. That’s down a cent a year agos price was at $0.83 per pound. That’s down $0.11 weekly U.S average for peanuts. Current price is at $506 per ton.

00;19;12;29 – 00;19;43;25
Riley Smith
A month ago, price is at $532 per ton. That’s down $26 a yea agos price is at $512 per ton. That’s down $6. That’s your commodity futures this week. Your, weekly input prices this week Urea is at $480 per ton, ammonium nitrate at $465 per ton, ammonium sulfate at $520 per ton. DAP is at $789 per ton, triple Super phosphates at $687 per ton.

00;19;43;25 – 00;20;10;15
Riley Smith
Potash is at $455 per ton, pellet lime is at $225 per ton, and your diesel prices this week off road diesel at $2.54 per gallon. High way diesel is at $3.30 per gallon, and your Mississippi River level at Memphis, Tennessee this week. River level. The current river level is at -8.69ft. A year ago was at -9.9ft. That’s your report this week.

00;20;10;17 – 00;20;35;13
Riley Smith
I want to thank you all again for tuning in to another episode of Morning Coffee and AG Markets. We hope you and enjoyed it and enjoyed your morning coffee and enjoy the rest of your workweek. Till next time we’ll catch you on the flip flop. Bye bye now!

00;20;35;15 – 00;20;35;23
Riley Smith