Knowledge and Use of Contracts, Digital Platforms, and Blockchain Technology by Small Scale Specialty Crop Growers: Focus Group Findings

In collaboration with AgLaunch and its Farmer Network, MSU conducted an online focus group with four small-scale, specialty-crop producers from Tennessee in December 2021. Insights from this focus group provide helpful information for Extension educators regarding farmers’ views and use of marketing contracts/agreements and digital trading, marketing, and payment platforms, including their experience trialing the features of different platforms and the advantages and disadvantages of the platforms used. The discussion also included farmers’ preferences for marketing their agricultural products, the effects of the COVID-19 pandemic on their operations, and farmers’ views and knowledge of blockchain technology, internet access, and mobile applications.

Here are the main findings of the focus group:

  • Participating farmers were small-scale (1 to 6 acres), specialty-crop growers of leafy greens, root crops, and other vegetables. Current certifications included Certified Naturally Grown (CNG) and USDA Organic, while past certifications included Good Agricultural Practices (GAP). The presence of a buyer requiring GAP certification drove the farmers’ decision to get certified.
  • Some digital trading/marketing platforms they use include Shopify and Barn2Door. Platforms they previously used or tested include Farmigo and Harvie for Community Supported Agriculture (CSA), Squarespace, and Local Line. They also discussed digital platforms to process payments at the farmers’ market, including PayPal, Square, Cash App, and (PayPal-owned) Venmo, as well as the pros and cons of these platforms based on their experience.
  • Their most important concerns regarding digital trading/marketing platforms and the features they seek in such platforms include the benefits outweighing the costs, convenience for their customers, ability to communicate with their customers, privacy and security, cybersecurity threats, customer service/support by the platform developers, training and technical assistance opportunities, and the platform’s ability to work/connect with other systems used on the farm (in other words, interoperability).
  • They agreed that the importance of communicating farm and product attributes to buyers through a trading/marketing platform depends on what their buyers want, their location, and their relationship with them. They also agreed that different buyers place different emphasis on these attributes.
  • They observed the repercussions of the COVID-19 pandemic regarding the closure of many restaurants and food-service institutions and the negative impact those closures had on produce suppliers. Some farms emphasized online sales, while others downsized or closed permanently.
  • They use or had used verbal or informal agreements instead of written or formal contracts. Key contract attributes include quality and processing specifications, payment method and turnaround, delivery and packaging requirements, delivery time, a guaranteed purchase, a guaranteed minimum price, and penalties for non-fulfillment. If formal contracts were an option, these would be important if they were selling higher volumes to wholesalers, selling to buyers with whom they did not have an established trust relationship, or if the transaction involved custom product requests for which they had to considerably invest additional time and resources. Depending on the parties’ risk tolerance, the higher their perceived risk from these transactions, the more they would favor formal contracts.
  • The farmers had heard about blockchain before, but their level of familiarity ranged from minimal to very familiar. After learning more about blockchain and smart contracts, most farmers expressed that they would feel comfortable using blockchain ledgers to store their information but thought the technology might be better suited for transactions with institutional buyers.
  • Their concerns about blockchain applications in agriculture and food supply chains included a need for a better understanding of these applications and their problem-solving capabilities, the cost and transaction fees, and long-term sustainability.
  • They expressed comfort using mobile applications in general. However, all farmers viewed internet access as an issue for rural and urban locations.

These findings may help guide the development of Extension education and outreach efforts to assist producers in their marketing decisions and the assessment of new online marketing tools. To access the full publication summarizing the experiences shared by farmers, please click HERE.

Did Pumpkins Cost You More in October 2020 Than in Previous Years?

It depends on whether you will be carving a jack-o’-lantern, decorating, or baking a pumpkin pie. And if carving a jack-o’-lantern, on what size. The U.S. Agricultural Marketing Service (AMS) surveys large retailers, and every week, publishes a national retail report of advertised specialty crop prices ending during a given period, usually an almost 2-week window. In this post, I take a closer look at the retail pumpkin prices for the Southeastern United States (i.e., Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia) published by the AMS in the specialty crop retail reports released in October 2018, 2019, and 2020.

On average, advertised retail prices for all pumpkins in the Southeastern United States in October 2020 were 8.9% higher than those in October 2019, and prices in October 2019 were 8.3% lower than those in October 2018, leading to similar average prices in October 2020 to those in October 2018 (Figure 1). Average retail prices for extra-large pumpkins in October 2020 were also close to those in previous Octobers, without much fluctuation in prices throughout the month this year (Figure 2). However, it seems that average retail prices for large and medium pumpkins this October were higher than in previous years, with medium pumpkins seeing yearly price increases. While average retail prices for large pumpkins in October 2019 were 1.9% lower than those in October 2018, they increased by 7.9% from October 2019 to October 2020 (Figure 3). Average retail prices for medium pumpkins in October 2019 were 1.7% higher than those in October 2018 and 18.0% higher in October 2020 than those in October 2019. Data collected from 311 stores show that advertised prices for medium pumpkins were highest for the period ending during the 2nd-3rd week of October 2020, when unit prices ranged from $4.00 to $8.00 and averaged $6.83 (Figure 4).

 

 

 

Many factors can drive up the prices of consumer goods, like supply chain disruptions, government policies that boost demand and economic growth to the point that demand exceeds production capacity, and people’s or firms’ expectations of higher prices. Food inflation measures how much more expensive food has become over a certain period. According to the latest inflation data available from the U.S. Department of Labor Statistics, the average price of food at home in the United States rose 1.0% from October 2018 to October 2019 and 4.0% from October 2019 to October 2020. Thus, the increases in retail prices for large and medium pumpkins in October 2020 relative to October 2019 (7.9% and 18.0% for large and medium pumpkins, respectively) were higher than the food inflation rate of 4.0% for October 2020. Although the food inflation rates published by the U.S. Department of Labor Statistics capture many factors influencing food prices during the previous 12 months, this comparison might suggest that the cost of those two pumpkin sizes in October 2020 grew at a faster pace than recent estimates of the overall cost of food.

In contrast with other sizes, miniature and pie type pumpkin prices were lower this year than in previous years. On average, advertised retail prices for miniature pumpkins in October 2020 were 13.3% higher than those in October 2019, and prices in October 2019 were 17.4% lower than those in October 2018, leading to lower average prices in October 2020 than those in October 2018 (Figure 5). Average retail prices for pie type pumpkins in October 2020 were also lower than those in previous Octobers, with pie type pumpkins having yearly price decreases. Average retail prices for pie type pumpkins in October 2019 were 6.7% lower than those in October 2018 and 5.0% lower in October 2020 than those in October 2019 (Figure 6).

 

 

Whether you will be carving a jack-o’-lantern, decorating, or baking a pie, the figures in this blog post can give you more insights on how pumpkin prices at your local store compare with average prices at major retailers in the U.S. southeast region—and on whether those local price tags are scary or not.

 

What Can Google Searches Tell Us About Changes in Consumer Behavior Toward Food and Plants Beyond COVID-19?

Google Trends is an online tool that allows you to analyze the popularity of Google Search inquiries. If you enter a search term, the site randomly samples Google Search’s massive database to produce indicators of Google users’ past interest in that term. For a given region and time range, the site calculates an index between 0 and 100 for each point in time and produces a chart of interest over time, among other indicators. If analyzing a single search term, a peak value of 100 indicates the point at which the term was most popular for the region and time range selected (that is, the point with the highest percentage of searches for that term out of all searches conducted). The other values represent search interest relative to the highest point on the chart. So, if point A has a value of 100 and point B of 50, the term was half as popular at point B than it was at point A.

I used this tool last year for a talk at the Southern Agricultural Economics Association in which I illustrated how people in the United States, including consumers, lobbyists, and policymakers, are actively searching online for information on key topics related to the food industry (such as the terms local food, food waste, food miles, cottage food, pasture-raised, cage-free, vegan, GMO, bioengineered, or gene editing), and how sometimes their interest starts picking up years before legislators pass major food bills into law. Recently, Dr. Tim Woods at the University of Kentucky asked me what one of my graphs would look like if I included observations from the COVID-19 era, a great question that I will try to answer in this post!

Figure 1 below shows the average Google Trends scores for the terms Local Food, Food Waste, Cottage Food, Online Groceries, and Home Gardening from 2004 to September 2020 so far. Figure 2 shows the Google Trends scores for the same search terms but disaggregated monthly from January 2018 to September 2020 so far. Because I am interested in search interest for these industry segments relative to themselves, which in this case makes any spikes more meaningful, I first entered each term in Google Trends and then combined the data, instead of comparing the different terms against each other.

 

 

 

Here are a couple of things that these figures might tell us: Figure 1 suggests that search interest in the terms Local Food, Cottage Food, Online Groceries, and Home Gardening in the United States has increased during 2020, with Online Groceries showing the most noticeable change relative to previous years, and that search interest in Food Waste has decreased during 2020. Many news outlets have reported that the pandemic has given consumers more reasons to eat local food, accelerated the trend toward online grocery shopping, and changed gardening forever, reports that might partly be behind the increases in search interest in these terms as people respond to media coverage. News outlets might also write more media coverage in response to high search interest.

Although the increase in online search interest might signal increased demand for information on these topics but may or may not translate into more actual transactions by the general U.S. public, some horticultural businesses might interpret this inflow of information as a sign of steady consumer demand for related products and services beyond 2020 and decide to pivot their businesses toward these industry segments. Yet, Figures 1 and 2 combined suggest that some of these segments might have more staying power than others. While search interest in Local Food, Online Groceries, and Home Gardening has increased during 2020, Figure 2 shows that their interest peaked between March and May of 2020 and dropped considerably in the following months. Interest in Cottage Foods was relatively low in March but peaked in July. After dropping, interest in Local Food and Cottage Food has increased, interest in Online Groceries has fluctuated, and interest in Home Gardening has continued to decline. A look at Google users’ search interest since 2004 to date (Figure 1) shows upward trends for Local Food and Cottage Food, an also upward but much flatter trend for Online Groceries, and a declining trend for Home Gardening. Interest in Local Food has increased over time at a pace slower than but similar to that in Cottage Food and Food Waste (as indicated by Local Food’s flatter trend), while interest in Online Groceries has increased over time at a pace much slower than that in Local Food (as indicated by Online Groceries’ flatter trend).

If pre-pandemic trends are any indication, it is possible that search interest in Local Food, Cottage Food, and Food Waste will continue to rise after the pandemic, maybe fueled by the recent interest in short local supply channels, the expansions to some states’ cottage food laws, and the growth in the upcycled food products industry. While search interest in Online Groceries has seen an upward trend since 2004, interest after COVID-19 might not grow as fast and dramatic as 2020 levels might suggest. It is also likely that interest in Home Gardening will wane beyond 2020. In a recent presentation at this year’s virtual Southern Outlook Conference, Dr. Ben Campbell from the University of Georgia reported that the Green Industry (which includes home garden centers, nurseries, turf, floriculture, among other sectors) has grown over the past decade and during COVID-19. He finds in a survey that 60% of respondents planted a garden, put in new turfgrass, or did some outdoor renovation like putting in new plant beds because they spent more time at home during the coronavirus pandemic. But he also warned that some firms might overproduce in 2021 because they might expect 2020 demand levels. Of course, many other factors like the effects of the pandemic-induced recession on the U.S. public’s income will influence the direction of these industry segments in the future, particularly for non-essential goods.

Heifer Price Seasonality

Last week we looked at steer price seasonal patterns in Mississippi (view that post HERE). This week, we are examining the same story but for heifer prices. The back story from last week about why seasonality matters is the same for heifers as it is for steers. Rather than repeat it, I’m going to focus on some seasonal differences between steers and heifers.

The graph above is a seasonal price index that shows how much monthly average prices differ from annual average prices. This is calculated by dividing each month’s average price by the average annual price. Next, the monthly average across the years of data is calculated to obtain an average price index. The price index calculated in this article has a base value of 1. This implies that if a given months price index is 1, the average price in that month is equal to the average annual price. If a monthly index value is 1.05, then the average price in that month is five percent higher than the annual average.

Mississippi heifer prices over the past 7 years in Mississippi generally follow the same pattern as steer prices – higher prices in the early Spring months and lower prices in the Fall. A few key differences stand out though when we look at specific weight classes. The percentage range is larger with heifers for some lasses. 500-600 pound steers range from 7% higher than average in March to 8% lower than average in October. For heifers, the range is 6% high and 12% low — an 18% range in a “normal” year. The length of time those five-weight heifers are seasonally lower on average also lasts longer than for steers as November is even lower than October. The “Low” for each weight class is lower for heifers than it is for steers. Remember, these “Lows” are relative to the annual average price for each sex.

There are a few caveats that are worth mentioning here. In general, there are more steers sold in each weight group than heifers and thus the price data each week is probably a little accurate for steers than heifers. If there are few heifers traded in a week but those few are really good (or bad), that can strongly influence those prices. Because this analysis was done over seven years, those issues are outweighed by values other years and no single week has a huge impact on the index.

A Second Look at the 2018 Farm Bill

As we begin to digest the details of the 2018 Farm Bill, I was given the opportunity to provide the webinar discussing the provisions of the bill.  More details will come out over time.  We will continue work to provide timely information as the bill is implemented.

http://extension.msstate.edu/agriculture/agricultural-economics

A First Look at the Farm Bill

So we have a new Farm Bill if, as all signs suggest, the President signs the new legislation.  The bill is estimated to cost $428 billion over the next 5 years and $867 over the next 10 years according to the Congressional Budget Office (CBO).  Over 76% of the cost is estimated to be for the Nutrition title of the bill.   CBO estimates the bill will spend about $1.5 billion more than continuing existing legislation.  This is in contrast to the $23 billion cut in the last Farm Bill.

The largest cut occurred in the Rural Development title by tighten some Rural Utility Services programs.  The Miscellaneous title has the greatest increase among the various titles, and contained funding for an animal disease vaccine bank, funding for feral hog eradication and Beginning farmer assistance.

 

 Commodity Programs

  • Farmers will be allowed to switch between the Agriculture Risk Coverage and Price Loss Coverage programs starting in 2019 and again in 2021, 2022 and 2023.
  • Payment limits remain at $125,000 and AGI limit at $900,000.
  • Expands program payments to nieces, nephews, and cousins.
  • Suspends ARC and PLC payments on land entirely in grass or pasture since 2009

 Agricultural Risk Coverage (ARC)

  • ARC-County guarantee will be:
    • Trend adjusted
    • Increased by substituting “transitional” T-yield of 80 percent of the county T-yield – up from 70 percent.
  • Will use RMA data and create separate dryland and irrigated yield for each counties

Price Loss Coverage (PLC)

  • One time update of PLC payment yields = 90% of 2013-2017 ( not allowed to change more than 10% from the 2008-2012 national average)
  • Payment = 85% x Base acres x base yield x [Reference price – maximum of loan rate or Market Year Average (MYA) price]
  • Cotton is now eligible through seed cotton program
  • Reference prices are unchanged but may rise if market prices rise over time by up to 15%
 

Commodity

 

Units

 PLC Reference Price Maximum Effective Reference Price
Corn bu. $3.70 $4.26
Grain Sorghum bu. $3.95 $4.54
Peanuts ton $535.00 $615.25
Rice  cwt. $14.00 $16.10
Seed Cotton lb. $0.367 $0.422
Soybeans bu. $8.40 $9.66
Wheat bu. $5.50 $6.33

 

Loan Programs

  • Programs are largely unchanged except loan rates are increased as follows:
Commodity 2014 Farm Bill 2018 Farm Bill
Corn $1.95/bu $2.20/bu
Cotton (ELS) $0.7977/lb $0.95/lb
Cotton (Upland) $0.45 ‐ $0.52/lb $0.45 ‐ $0.52/lb
Grain Sorghum $1.95/bu $2.20/bu
Peanuts $0.1775/lb $0.1775/lb
Rice $6.50/cwt $7.00/cwt
Soybeans $5.00/bu $6.20/bu
Wheat $2.94/bu $3.38/bu

 

Conservation

  • The Conservation Stewardship Program (CSP) takes cuts to fund more EQIP which is increased by $275 million.
    • Up to 1/2 of the money can be used for livestock operations.
  • The Conservation Reserve Program (CRP) will be expanded from 24 million to 27 million acres, with 2 million acres reserved for grasslands.
  • CRP payment rates will be capped to keep them below local rental rates.

Crop Insurance

  • Increase the basic administrative fee for catastrophic coverage
  • Buy-up crop Insurance subsidies are unchanged
  • Participants in Seed Cotton Program not allowed to purchase STAX
  • Allows enterprise units to cross county lines
  • Hemp will be a covered commodity
  • Directs RMA to study
    • Intermittent flooding on rice
    • Tropical hurricane coverage

So What Does an Average American Want in a Farm Bill?

I am really proud of our undergraduate research program at Mississippi State. This past year Alba Collart and I mentored Shea Gould an undergraduate researcher who has now joined our Department as a grad student.  In her undergraduate research she asked a representative sample of 465 U.S. adults their preferences for allocating funds to the programs authorized in a farm bill.  The survey focused on four broad categories of USDA spending – farm programs, conservation, nutrition, and a broad category subsuming all other USDA activities.

As Farm Bill conferees meet, the House of Representatives and Senate Bills are estimated to spend near current levels over the next ten years — essentially a zero-sum game of shifting priorities.  Consistent with the zero-sum game being played in Congress right now, we asked respondents to reallocate the USDA pie rather than shrinking or adding to USDA spending.

We find the average U.S. adult. U.S adults desire to spend about the same as currently spend supporting farmers – in fact they support a slightly increased shared of the total USDA budget – from 18 to 19%. Though slight in percentage terms, this increase corresponds to an annual increase of $1.4 billion.

American adults desire to see USDA spending a smaller share of its budget on nutrition assistance programs. Reductions in nutrition spending were reallocated to the other three categories. Even when a subset of survey respondents were shown current levels of spending on nutrition programs they still wanted to spend less, but chose to cut less.  Interestingly, spending on nutrition program have dropped significantly without a legislative change due in large part to an improving economy.

The biggest percentage change desired by American adults is that they would increase conservation programs from 7% to 22% of the total USDA budget.  That is a three-fold increase.  Our results show that survey respondents primarily wanted to take funding from nutrition programs.

Finally, the survey findings indicate a desire for increased spending on “other programs” which were summarized as encompassing research, marketing and regulatory activities, rural development, and food safety.  Because the survey addressed such a broad set of areas, it did not dig deeper into desired spending in subcategories. We hope to do follow up research on what was in the ‘other program’ category that led to a desire for increased funding?

Cattle on Feed Mostly Bullish

The latest USDA Cattle on Feed Report was released on Friday and showed some positive news for prices for the rest of Fall and into early 2019. The inventory is still large. Indeed it is another “record-large” total as 11.4 million head in feedlots is the largest October 1st total since the COF series began in 1996. However, it is what was contained in this report relative to pre-report expectations that provided some price support as futures prices showed strength in Monday trading.

Placements of cattle into feedlots were 2.05 million head during September. Importantly, this is 4.6% lower than September 2017. Perhaps even more importantly, this is about 5% lower than was expected pre-report. A lower placement and supply number than expected is what led to some market strength on Monday.

Relative to 2017, the number of heifers in the mix is 11% larger at 4.3 million head. The number of steers is up a more modest 2.3% at 7.1 million head. The story over the past few months has been of lower placement weights and that was again the case in September. This is an interesting dynamic that ultimately has an impact on lower average slaughter weights.

Fed Cattle Marketings were 3.6% lower than September of 2017. While this number is lower, it was well anticipated going into the report.

The combination of the anticipated marketing rate and the lower than expected placement rate led the inventory in feedlots number to be lower than expected. However, it is still a big number which is likely to keep a cap on market price potential in the near-term. It is encouraging to prices that it seems like there may be fewer supplies than expected, but the calf crop is still larger than a year ago and we still have to work through these large supplies. The combination of a large number of heifers in the mix and continued high cow-slaughter numbers do provide credence to the projection of a flattening total herd number over the next year or two.

Strong Domestic Demand for Beef

Domestic consumer demand for beef was very good in the first quarter of 2018 and also for the second quarter of 2018. The beef demand index chart above shows an index increase of about a half percent (2017 was 85.8 and 2018 was 86.2). We use index values because beef demand is difficult to measure and understand. Both price and quantity matter to demand. For example, 2015 was one of the lowest years for beef consumption per person but it was actually a relatively strong year for beef demand. That is because beef prices were high. Therefore, this index approach attempts to account for both pieces of the equation.

The stronger demand is a positive shift in the estimated demand relationship. What happened in the first quarter was classical, though not always obvious, economics. Compared to a year earlier, the Consumer Price Index deflated retail beef price (“all fresh” price as calculated by USDA’s Economic Research Service) was 2.1% above a year ago while the per capita disappearance (retail weight) slipped by a much less than expected 0.1%. So, the demand profile increased year-over-year but was below 2015 and 2016. Importantly, that demand measure for 2018’s first quarter was the third best since 1992.

Looking ahead regarding U.S. consumer beef demand, the question is will U.S. economic growth slow-down? More specifically the concern is if this slowdown will occur as early as the second half of 2019, since production/breeding decisions that would impact cattle supplies during that timeframe are already in place. The other demand concern is large domestic supplies of competing meats and poultry, specifically pork and chicken, and their impact on beef demand. Besides the export market being a factor, as to how much is available in the domestic market, an economic slow-down tends to influence demand for beef more than competing sources of animal proteins, which are less expensive.

This post includes information from the Livestock Marketing Information Center.

Income and Meat Demand

The figure above comes from an interesting new article published in the American Journal of Agricultural Economics. The authors use consumption data for seven food categories in more than 100 countries (including the U.S.) to see how food demand changes with income and population. In particular, let’s look at the area shaded red in the figure which refers to meat and seafood. The figure shows that as income increases, consumers demand less starchy staples and more meat and seafood among others. Within this meat and seafood category is beef.

Not only do consumers demand more meat, but also more food in general. Note that at a per capita annual income of $500, consumers food demands are just below 2,000 calories per day and very little meat and seafood. For consumers with incomes greater than $25,000, demand increases to over 3,000 calories with significantly larger meat and seafood demand. Those may sound like low annual incomes to U.S. readers, but the average for the countries used was just over $15,000. Here is a link to per capita incomes around the world if you’re interested.

This research is especially insightful for beef and other protein producers. This figure explains why growing middle classes in other countries can boost beef sales. Think of a country with a low but growing per-capita income (hello China at $17,000). Now project out what demand for meat will be for that country over the next decade or more as incomes rise. The authors take a stab at this, too. They project that between 2010 and 2050, demand for meat and seafood will double due to income and population effects. While increased population matters, the biggest driver for this category is projected to be the income effect.

We’ve all heard (and probably used) the projection of needing to feed 10 billion people worldwide by the year 2050 as support for agriculture in general. However, for animal protein producers, that number is compounded by the expected rise in incomes as countries develop. This also suggests that perhaps the biggest demand growth for meat will occur outside the U.S. – in countries that have the most room to grow their income.