Ep. 45 Arkansas net farm income sees 22% Increase driven by federal economic and weather-related disaster assistance

00;00;00;00 – 00;00;34;10
Riley Smith
Well, all right, well, we’ll get started here. So today’s episode we’re covering Arkansas net farm income sees 22% increase driven by federal economic and weather related disaster assistance. Now, Dr. Hunter Biram, Dr. Ryan Loy, this is their, this is their baby. So I’m going to step back. I’m going to ask a few questions that I’ve got here in front of me, for them.

00;00;34;10 – 00;00;51;11
Riley Smith
And then I’m going to just let them take the limelight of this. So starting question, let’s start with the big picture. Can you break down the factors behind the projected 22% increase in Arkansas net farm income for 2025, despite the drop in crop receipts?

00;00;51;13 – 00;01;12;28
Dr. Hunter Biram
Yeah. You know, with this, increase. And if you look at all the other farm income reports that have been done with the Rural and Farm Finance Policy Analysis Center (RaFF), by and large, you’re seeing increases across states, across the board. But we had to be very, very careful how we interpret the increase. And we need to understand that it’s this whole report,

00;01;12;28 – 00;01;40;02
Dr. Hunter Biram
and what we’re finding in all these reports, is way more than a headline. Like, we got to go in, line item by line item. And so that’s what I’m going to start with, is just saying that this increase is largely driven by, economic and weather related disaster assistance that farmers are going to receive in 2025. And so, first, obviously, the Emergency Commodity Assistance Program, or the ECAP program, there’s already been about $7.5 billion distributed across the U.S. and in Arkansas.

00;01;40;04 – 00;02;01;00
Dr. Hunter Biram
You know, I can’t remember what it is, for Arkansas specifically right now, but we’re projecting about $286 million, total, through the ECAP program. But our, our policy brief that Ryan and I worked on with the director of RaFF, Alejandro Plastina, we came out very quickly after this American Relief Act was signed.

00;02;01;00 – 00;02;26;27
Dr. Hunter Biram
And we said, hey, like, it’s looking like based on the legislation, based on where the markets are, this will be about $286 million that’ll be going out to Arkansas farmers. And so we use that number and fed it into the net farm income estimates. And whatever was left of that total increase in government payments of about $670 million, whatever’s left will likely come from other funds that are appropriated for weather-related disaster relief.

00;02;26;27 – 00;02;35;17
Dr. Hunter Biram
So, again, we do see a 20% increase year over year, but a lot is going to be driven by ad hoc and supplemental disaster assistance.

00;02;35;18 – 00;02;52;19
Dr. Ryan Loy
Now, I think it’s really important to bring that up right off the top, right? Because you know, somebody could look at this and a reader could look at this and say, well, I mean, we’re looking at this table here and it says crop receipts are going to be down $470 million, while production expenses are increasing by $330 million.

00;02;52;19 – 00;03;12;22
Dr. Ryan Loy
So how is it the case that we increased by 22%? And it’s really important, just as you said at the beginning, to really understand that, you know, this is supplemental assistance, government assistance to come in and help, for the emergency commodity assistance and then weather related, disaster stuff. And so really, when you understand and you remove that, it really does paint a different picture of the net farm income.

00;03;12;22 – 00;03;15;08
Dr. Hunter Biram
Absolutely. And I think you meant a decline in production expenses.

00;03;15;09 – 00;03;16;04
Dr. Ryan Loy
Yes I did, thank you.

00;03;16;05 – 00;03;19;28
Dr. Hunter Biram
This waterfall graph, it can be tough to read. Yeah that’s tough.

00;03;20;01 – 00;03;21;11
Dr. Ryan Loy
That’s exactly what I meant.

00;03;21;13 – 00;03;35;20
Dr. Hunter Biram
So anyway. But yeah. So Ryan, as Ryan noted, we’re seeing about a $470 million decline in total crop receipts. And so what do we mean by receipts? I mean, a lot of people listening to me like, well, isn’t that what I get from the diner or what I get from Chili’s whenever meal is over?

00;03;35;20 – 00;03;53;28
Dr. Hunter Biram
Yes, that is true. But what we’re talking about really is crop revenues. It’s another way to think about it. So if you take total production, times the market average price, those are going to be receipts. And so we’re seeing almost a half $1 billion decline in those for the crops. For livestock,

00;03;53;28 – 00;04;19;20
Dr. Hunter Biram
we’re going to see a slight increase of about $50 million in receipts. And so it’s, it’s pretty much flat, year over year. Like if you were to look at this graph like, we’re going to have links to these reports and, and specifically to this farm income report. But if you just look at that waterfall graph, like it’s like livestock receipts are almost unchanged year over year. And labor has to deal with a, shrinking inventory, but also high prices.

00;04;19;23 – 00;04;27;25
Dr. Hunter Biram
And so it’s like the price and the quantity effect, you know, kind of outweigh one another in that regard. But, other than that, I mean, on the production side of things. Do you want to hit on that?

00;04;27;27 – 00;04;45;25
Dr. Ryan Loy
Absolutely. So on the production side of things and that’s, you know, that’s kind of how we do it. You know, the University of Missouri, RaFF, they kind of put together a model, and they have us ground truth it. So Hunter focuses on more the policy and the crop insurance stuff and the prices for, commodities, while I focus more on the production expenses.

00;04;45;28 – 00;05;04;18
Dr. Ryan Loy
And even with that decline in production expenses, this isn’t to say that, you know, a corn producer is going to see a decline in their production expenses on their farm this year. Because this, estimate is lump sum into the livestock. And so when you have low crop receipts, there’s going to be lower feed costs on that livestock side.

00;05;04;25 – 00;05;28;22
Dr. Ryan Loy
And that, increase, that decline in feed prices is greater than the increase of production expenses overall. And so it kind of canceled out and brought that, that value down, relative to 2024. So really, when we’re looking at production expenses going down, as I mentioned earlier, even though I mistakenly said it went up, what we’re really looking at is mostly driven by feed on the livestock sector.

00;05;28;22 – 00;05;32;18
Dr. Hunter Biram
Yeah, lower feed costs. And that’s being driven by lower commodity prices.

00;05;32;18 – 00;05;34;14
Dr. Ryan Loy
Exactly. To your crop receipts portion.

00;05;34;16 – 00;05;38;10
Dr. Hunter Biram
Exactly.

00;05;38;12 – 00;05;55;20
Riley Smith
So I guess that yeah, I was about to say, so that leads into our second question. Government payments played a major role this year. What can you tell us about the scale and sources of these payments, especially the Emergency Commodity Assistance Program, ECAP and other disaster aid?

00;05;55;23 – 00;06;17;21
Dr. Hunter Biram
Yeah. So the ECAP number is about $286 million. And we pulled that number from our RaFF policy brief that Ryan and I wrote with Alejandro Plastina, back in the winter time. And so, of the remaining, you know, there’s $670 million increase in the government payments. So of the 6 or $7 million, that’s not attributed to the ECAP program,

00;06;17;23 – 00;06;24;26
Dr. Hunter Biram
that’ll be going, likely going towards weather related disaster assistance.

00;06;24;29 – 00;06;35;16
Riley Smith
So along with that, crop revenues have taken a hit. So what’s behind the multi-year declines in corn, cotton, and soybean receipts? And how are prices factoring into that trending?

00;06;35;18 – 00;06;36;24
Dr. Ryan Loy
Well, really… go, go ahead, Hunter.

00;06;37;01 – 00;06;57;12
Dr. Hunter Biram
Yeah. I’ll, I’ll take it first stab at. And so, you know, there are some Arkansas crops, corn, cotton, and soybeans specifically, that are expected to see their second consecutive year of declining receipts. You know, corn receipts are projected to fall to $436 million in 2025, which is down 31% year over year and is down 42%, since 2023.

00;06;57;14 – 00;07;21;19
Dr. Hunter Biram
You know, cotton is expected to see a slight 1% drop, year over year. I believe that two year decline is actually 11%. Soybean receipts are anticipated to decline by about 6% compared to 2024, and 25% since 2023. You know, so what we are largely seeing is, just depressed commodity prices. And, that equates to a very depressed agindustry, really.

00;07;22;11 – 00;07;37;27
Dr. Hunter Biram
You know, for the long and he short of it, I mean, just no real, drivers of demand right now. You know, everyone’s having a good crop, and, I think those are the fundamentals of supply and demand, you know, drivers that that we’re seeing behind those low prices.

00;07;37;27 – 00;07;52;11
Dr. Ryan Loy
That’s right. Absolutely. Especially when we’re talking about three commodities here that are very export heavy, right? And with everything we don’t, you know, the uncertainty surrounding that right now, it just, you know, could add more of that uncertainty to that and depress prices even more.

00;07;52;11 – 00;08;06;14
Riley Smith
So. So despite commodity prices, corn acreage is expected to increase. What economic or agronomic considerations are influencing Arkansas farmers to plant more corn?

00;08;06;16 – 00;08;31;21
Dr. Hunter Biram
So I’ll start with this one. And then, Ryan, I want you to pitch in on the fertilizer side of things, because I think there’s a really interesting, you know, situation playing out here. So at the start of the season, the corn is, it’s the soy to corn ratio is what it, is the ratio that we look at trying to figure out, okay, how strong are the soybean prices relative to corn prices.

00;08;31;21 – 00;08;50;18
Dr. Hunter Biram
And historically it’s about, you know, soy bean prices are about two and a half times bigger than corn prices. And so we saw soybean to corn price ratios well above two and a half, going into planting this year. And that’s been showing up in the prospective plantings. We saw that there’s been a lot more corn. And so, that’s being reflected here in Arkansas,

00;08;50;18 – 00;09;10;23
Dr. Hunter Biram
too, looking at about 210,000 more acres, which I think that is the prospective plantings number for Arkansas. And there were favorable playing planting conditions early. What I mean by early is like, late February, early March, that’s early. And so we actually had a lot of people get some crops in the ground before that early planting day for crop insurance, which really amazed me.

00;09;10;25 – 00;09;28;20
Dr. Hunter Biram
And I think it’s really penalized a lot of people, because then we had the floods come in in early April. And we did a lot of work on that, and there’s going to be a link to that in the newsletter as well, looking at our damage estimates. And so when those floods came in, it wasn’t just that they dried up after a couple of weeks, although there was a lot of drying that happened.

00;09;28;23 – 00;09;33;10
Dr. Hunter Biram
But we’ve just continue to see weekly rains of about 2 to 3 inches, every single week.

00;09;33;14 – 00;09;36;17
Dr. Ryan Loy
It’s been pretty amazing to see during May. It really has been amazing to see.

00;09;36;17 – 00;09;58;00
Dr. Hunter Biram
And so the question becomes like, I mean, at what point is it too late to plant corn? And now we’re thinking, when is it too late to plant rice? I mean, I saw Jarrod Hardke came out, you know, talking about that. And so, will we start to see more soybeans and what is that doing? You know, you know, but before we even get into that, I do want to go back to this fertilizer thing, because we saw that with our Bloomberg grain markets, that fertilizer prices have been increasing.

00;09;58;00 – 00;09;58;29
Dr. Ryan Loy
That’s right.

00;09;59;02 – 00;10;01;16
Dr. Hunter Biram
And so what do you think might be driving some of that, Ryan?

00;10;01;20 – 00;10;20;14
Dr. Ryan Loy
That’s a really interesting question. When we’re talking about on average, what’s driving up those those fertilizer prices in the short-term, it could be a function of demand. It could be a lot of things. I if I were to be asked, it could be a function of demand. You know, we see a lot more imports in quarter one of this year because people are anticipating something that’s happening later on.

00;10;20;14 – 00;10;40;07
Dr. Ryan Loy
They want it now, because it doesn’t have any of those tariffs or extra costs added to it. It could be the case that people are trying to book way ahead of time right now, in anticipation for a change next year or crop rotation. That could be the case. Could also be the case that people are forced to switch now, and so they need to adjust what they had booked before, and get new.

00;10;40;07 – 00;10;46;00
Dr. Hunter Biram
So what about just with corn? Because I mean, you know, soybeans that require urea, right. But so corn is more urea-heavy.

00;10;46;01 – 00;11;05;00
Dr. Ryan Loy
That’s right, that’s right. And so I mean, again, if we’re talking about straight from a demand, if corn acreage is going to increase, that demand for that urea is going to completely continue to increase. Assuming that the supply is fixed. So assuming that they don’t, you know, produce more with that response, which they could. But looking at that without any other context to it, that would be my initial guess.

00;11;05;00 – 00;11;08;05
Dr. Hunter Biram
Yeah. Cool. Thanks for that.

00;11;08;08 – 00;11;26;16
Riley Smith
All right. So I guess we’ll flip, kind of, flip, commodi-, or, sectors real quick. So on the livestock side, what stood out to you the most? Can you walk us through some of the key changes in, like, broiler production, fed cattle prices and overall markets?

00;11;26;18 – 00;11;27;23
Dr. Hunter Biram
Do you want to get that one, Ryan?

00;11;27;29 – 00;12;02;18
Dr. Ryan Loy
Sure, yeah, absolutely. So, you know, on the livestock side, receipts remained pretty stable. Which you know, is a kind of stark contrast to, the row crop sector, right? But notable changes, were a 73 million pound increase in broiler chicken production. That’s a 29,000 head reduction in cash or, excuse me. So we’re looking at 73 million pound increase in broiler chicken production, a 29,000 head reduction in calf inventories and a 21 million pound reduction in total livestock marketings.

00;12;02;21 – 00;12;27;10
Dr. Ryan Loy
Finally, a $4.57 per hundredweight increase in the state average fed cattle price. You put all those things together, and that’s going to kind of make that more of that stable and not going to decline at all, right. When you’re talking about, as you mentioned earlier, that that lower supply on the on the calf or on the, on the cattle side, and going to kind of, excuse me, with the same demand, is going to generate a higher price at that time.

00;12;27;10 – 00;12;51;26
Dr. Hunter Biram
Yeah. You know, obviously James Mitchell, you know, he he contributes to this report, but he’s doing an LMIC meeting right now. But you know, as I talk with him, and you know my family, we also, we have a cow calf operation, and so I’ll look at it a little bit. But I think the interesting thing that I’m seeing here is yes, you hear about these record high, cattle prices, but, it doesn’t amount to anything if there’s nothing to sell.

00;12;51;26 – 00;13;06;08
Dr. Hunter Biram
That’s right. And there’s been a huge liquidation that’s happened that is going to be driving these high prices. And so what I’ve seen, you know, and what and what we’re projecting here in this report is just just that offsetting price and quantity, impact and how that’s, I think that’s super interesting.

00;13;06;11 – 00;13;23;22
Dr. Ryan Loy
I think it is too. It’s very interesting. And I know that and again, I’m kind of speaking out of my lane here, and James Mitchell is the expert here. But, you know, hearing him talk about the markets and the issues and concerns and the worries that this could end up like a 2014, 2015 scenario where, you know, we go from grapes to Grapes of Wrath pretty quick,

00;13;23;22 – 00;13;38;27
Dr. Ryan Loy
as far as the cattle prices are concerned, you know, they’re going to keep climbing and climbing and climbing and they could crash, you know, out of nowhere. So that’s been a concern that, while he’s on the market listening, or while he’s out on the survey listening to other livestock folks talk, that has been one of the major things I really think about, for sure.

00;13;39;00 – 00;13;40;29
Dr. Hunter Biram
I think that’s about all for us.

00;13;41;02 – 00;13;42;24
Dr. Ryan Loy
I think that’s perfect, gentleman.

00;13;42;27 – 00;13;44;25
Riley Smith
Yep, I think it was a good one.

00;13;44;28 – 00;13;45;13
Dr. Ryan Loy
Good deal.

00;13;45;18 – 00;13;48;21
Riley Smith
Well, if we don’t have anything else, I’m going to wrap this up.

00;13;48;23 – 00;13;50;06
Dr. Ryan Loy
Sounds great.

00;13;50;09 – 00;14;12;22
Riley Smith
All right. We y’all stay tuned for my market report. Thanks. All right guys, back with your market report. September 25 corn. Current prices at $4.43 per bushel a month ago’s price is at $4.57 per bushel. That’s down $0.14. And a year ago’s price was at $4.70 per bushel. That’s down $0.27. September 25 rice. Current price is at $13.36 per 100 weight. A month ago’s

00;14;12;24 – 00;14;39;07
Riley Smith
price is at $13.61 per 100 weight. That’s down $0.25. And a year ago, price is at $15.76 per 100 weight. That’s down $2.40. November 25 soybeans. Current price is at $10.52 per bushel. A month ago’s price is at $10.26 per bushel. That’s up $0.26. And a year ago’ price was at $12.18 per bushel. That’s down a $1.66. July 25 wheat.

00;14;39;07 – 00;15;05;02
Riley Smith
Current price is at $5.49 per bushel. A month ago, price was at $5.52 per bushel. That’s down $0.03. A year ago’s price was at $6.93 per bushel. That’s down $1.44. December 25 cotton. Current price is at $0.69 per pound. A month ago’s price is at $0.68 per pound. That’s up $0.01. A year ago’s price was at $0.77 per pound. That’s down $0.08. And weekly U.S. average, peanuts.

00;15;05;02 – 00;15;30;24
Riley Smith
Current price is at $512 per ton. A month ago’s price is at $502 per ton. That’s up $10. And a year ago’s price is at $520 per ton. That’s down $8. And that’s your weekly commodity futures this week. You fertilizer prices this week, Urea is at $547.50 per ton, ammonium nitrate at $520 per ton, ammonium sulfates $547.50 per ton. DAP is $762 per ton. Triple

00;15;30;24 – 00;15;58;08
Riley Smith
super phosphate $656 per ton potash, $447.50 per ton. AG lime $45 per ton and pelletized lime this week is $240 ton. Your diesel prices this week, off road diesel $2.41 per gallon. Highway diesel $3.21 per gallon. And your Mississippi River level at Memphis, Tennessee this week current levels at 19.1ft. A year ago was at 20.32ft. Want to thank you all again for joining in on another episode of Morning Coffee and Ag Markets.

00;15;58;08 – 00;16;25;24
Riley Smith
We hope you enjoyed it and enjoyed your morning coffee as you tuned into another episode. So until next week, we’ll catch you all on the flip flop, bye bye, now.