Arkansas net farm income projected to decrease for second straight year

LITTLE ROCK — Arkansas’ net farm income is projected to decline for the second straight year, a fall cushioned slightly by lower input costs, the Rural and Farm Finance Policy Analysis Center said in its latest report.   

The center, working with agricultural economists from the University of Arkansas System Division of Agriculture, said in its “Fall 2024 Arkansas Farm Income Outlook” that Arkansas’ 2024 net farm income is expected to drop by 10 percent from 2023 levels and reach $2.96 billion.   

Net farm income report for Arkansas, October 2024. (Image by RAFF)

 Arkansas' net farm income is expected to see a $1.06 billion drop from its 2022 record-high levels. The report also compares the projected 10 percent reduction in state net farm income to the projected 6.2 percent decline in the U.S. net farm income projected by Mizzou’s Food and Agricultural Policy Research Institute. 

“Fertilizer and pesticides and fuel oils are going to decline by 9 percent year over year,” said Ryan Loy, extension economist for the Division of Agriculture. “These markets are finally stabilizing. They're coming off these market shocks from COVID, the supply chain issues, the trucker strikes in Canada, and the Ukraine war is kind of baked into the market now.”  

The report said total production expenses are estimated to decline 5 percent in 2024, as fertilizer, feed and fuel expenses retreat. An additional 5 percent decrease in production expenses is forecasted for 2025. 

Unfortunately, “the decrease in fertilizer, pesticides, fuel oils, and feed expenses are offset by the increase in purchased livestock expenses, which amount to a rise of $1.34 billion in 2025,” Loy said.

Cash receipts 

Farm cash receipts represent the total revenue a farm receives from the sale of its agricultural products, government program payments, and private insurance payments.  

The report said that in 2024, total cash receipts for Arkansas would decline by 2 percent or $317 million. Livestock receipts increased 5 percent, or $361 million, while crop receipts tumbled 10 percent, or $580 million. 

Ironically, 2024’s near-record yields are contributing to lower commodity prices. 

Hunter Biram, extension economist for the Division of Agriculture, said that Arkansas had  

Nearly a million and a half acres of rice which is the highest since 2020. Yield is near the record set in 2021 at 7,600 pounds per acre.  

“The price is the lowest that we've seen since 2021 when it came in right under $14 a hundredweight,” he said. 

Corn, which has had the fewest number of Arkansas acres since 2015, is forecast to have a near-record high yield. However, “the price for corn is the lowest that we’ve seen in five years.” 

Cotton was in the same boat.  

“The acreage is the highest that we've had since 2011,” Biram said. “We've got a lot of cotton acres out there, despite having the lowest price since 2020 and it’s at a near-record yield.” 

Arkansas’s 3 million acres of soybeans are projected to have a record yield of 55 bushels an acre, Biram said. “The price for soybeans is the lowest that we've seen since 2019, which is similar to corn.” 

Livestock and poultry 

However, the low prices that bedevil row crop growers is helping the cattle and poultry industry, which relies on crushed soybean and corn for feed.  

Higher egg, broiler, and cattle prices support 5 percent higher total livestock receipts in 2024, the report said, adding that poultry receipts are projected to increase by $287 million, while cattle and hog receipts are also projected higher, by $97 million.   

Loy noted that “feed prices declining this year pretty significantly – 18 percent. 

“Cattle prices are up 6 percent year over year. Most of the uptick over the last few years is due to the severe drought in the western U.S., which led ranchers to reduce herds,” he said. However, with cheaper feed, cattle prices are “expected to decline again in 2025.” 

Government assistance

The report also shows the proportion of government assistance has shifted from primarily market-based programs such as Agricultural Risk Coverage and Price Loss Coverage — known as ARC and PLC, to supplemental and ad hoc disaster assistance across this same period.

The Fall 2024 Farm Income Outlook is co-published by the University of Arkansas System Division of Agriculture and RaFF at the University of Missouri, which provides objective policy analysis and informs decision makers on issues affecting farm and rural finances. The center collaborates with a number of states to develop farm income projections with local expertise.  

“RaFF’s Farm Income Outlook for calendar years 2024 and 2025 is intended to inform policymakers, industry analysts, and agricultural practitioners about the expected profitability of the local agricultural sector and its main drivers. RaFF’s state-level projections complement and add granularity to national projections by the USDA and FAPRI-MU, providing valuable insights on local agricultural trends,” said RaFF Director Alejandro Plastina.   

The full report and data tables are online.  

 To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on X and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu. Follow on X at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on X at @AgInArk.  

Live cattle prices at an all-time high

by Kim Souza (ksouza@talkbusiness.net)

High live cattle prices are pushing beef production down and pushing retail beef prices higher during the summer grilling season. Cattle prices were at an all-time high at mid-year, according to Derrell Peel, livestock marketing specialist with Oklahoma State University Extension.

Peel reports fed steers averaged $195.81 per hundredweight, with large steers priced at $255.41 per hundredweight at auctions before July 4. He said high live weight prices have pushed beef production down 1.6% from the same six-month period a year ago. Steer slaughter is down 1.7% and heifer slaughter is down 1.5% from a year ago. Peel said higher steer and heifer carcass weights are more than offsetting the modest decreases in slaughter.

Wholesale choice boxed beef prices are equal to one year ago at $328.96 in early July. Peel said wholesale prices for popular grilling steaks are strong at midyear increasing the demand for ground beef and pushing those prices to record levels. Peel said the 83.3% lean ground beef hit a wholesale record price of $3.26 per pound in early July.

Live cattle prices at an all-time high

Cattle producers saw price improvements in late 2023

by George Jared (gjared@talkbusiness.net)

Cattle producers have had several turbulent years with low prices and higher input costs that were fueled largely by drought conditions. Cattle farmers that were able to maintain their herds benefitted in 2023 when prices jumped.

Throughout most of the year, both futures and cash markets for steers, calves and more marked a vast improvement over 2022. By the last week of November, prices for medium and large number one steer calves (weighing 500 to 600 pounds) were above $270 per hundredweight, more than $80 per hundredweight higher than the same time in 2022 and more than $100 higher than the average from 2017-2021.

James Mitchell, assistant professor and extension economist in the Department of Agricultural Economics and Agribusiness at the University of Arkansas System Division of Agriculture, said that the benefits of high prices largely fell to those with access to good grazing and forage.

Cattle producers saw price improvements in late 2023

YEAREND: As drought tightened cattle production, 2023 markets soared

LITTLE ROCK — Cattle market prices are as high as they’ve been in a decade. That’s good news for producers who have been able to maintain their herds in recent years, but a missed opportunity for those who weren’t.

HIGH DOLLAR — “It was an exciting year in terms of markets for cattle,” said the Division of Agriculture's James Mitchell said. “Cattle prices leading up to the fall were as high as we’ve seen them in 10 years — that had lots of people excited about the future. On the production side, it was exciting depending on who you asked.” (Image courtesy USDA.) 

Throughout most of the year, both futures and cash markets for steers, calves and more marked a vast improvement over 2022. By the last week of November, prices for medium and large No. 1 steer calves (weighing 500 to 600 pounds) were above $270 per hundredweight, more than $80 per hundredweight higher than the same time in 2022 and more than $100 higher than the average from 2017-2021.

James Mitchell, assistant professor and extension economist in the Department of Agricultural Economics and Agribusiness at the University of Arkansas System Division of Agriculture, said that the benefits of high prices largely fell to those with access to good grazing and forage.

“It was an exciting year in terms of markets for cattle,” Mitchell said. “Cattle prices leading up to the fall were as high as we’ve seen them in 10 years — that had lots of people excited about the future. On the production side, it was exciting depending on who you asked.” 

A wide swath of droughty conditions has made its way down the middle of the United States over the last several years — affecting first the Northern Plains states such as Montana and Idaho in 2021-2022, then the Southern Plains of Kansas and Texas and finally the Southeast in 2023.

“About three-quarters of Arkansas was heavily affected,” Mitchell said. “The southeastern United States has been hit incredibly hard by drought. All of our neighbors to the east — Tennessee, Mississippi, Alabama, Georgia, Kentucky, Florida — are in a pretty tough spot, still very much in a drought. So for them, there’s not much they can do with these high prices, because they don’t have any grass or forage. There was nothing they could really do this winter, in terms of retaining calves.

“So you’ve got significant portions of cattle-producing states suffering through drought, forcing them to shrink or liquidate their herds because of a lack of forage,” he said. “When you have three consecutive years of that, you’re going to have a tightening of beef cow availability, which means you’ve got fewer calves being born each year. So you have tighter and tighter supplies, which of course leads to higher prices — assuming demand holds steady.”

In January, the U.S. Department of Agriculture reported that the total U.S. beef cattle inventory was at its lowest since 1962, declining more than 3 percent from the previous year to 28.9 million head. The inventory reported an entire cattle inventory of 89.3 million. Mitchell said he believes the forthcoming USDA Cattle Inventory report, expected in January 2024, will reflect a fourth consecutive year of contracting cattle supply in the United States.

Of course, there’s almost nothing that can’t price itself out of the market. At a certain point, Mitchell said, consumer resiliency will give way to more competitive pricing for — in this case — other animal proteins, such as poultry, pork and fish.

“People consume less of something when it gets more expensive — it’s just a law of economics,” he said.

Mitchell said that rebuilding the country’s beef cattle inventory will be a multi-year process — one that can’t really even begin under the persistence of drought.

“Pastures are going to have to recover before we see any discussion of expanding cattle numbers,” he said. “Even if that does occur, it’s going to take a couple of years for that expansion to be noticed. We don’t have the cows; it’s going to take a year to develop heifers, another year for them to give us calves, and so on. So we’re looking at a few more years of declining cattle numbers.

“An important thing that’s different from 2014-2015, is that it’s going to be more expensive to buy back in and expand herds,” Mitchell said. “Interest rates are higher than they were 10 years ago. We expanded the herds very rapidly in 2014, we did that with low interest rates — so capital was inexpensive. That should lead to more careful calculation in terms of how we decide to expand herds.”

To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on X and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu/. Follow on X at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on X at @AgInArk.

Global supply, seasonal shift lead to lower cattle market prices

By Ryan McGeeney
U of A System Division of Agriculture 

LITTLE ROCK — After an impressively bullish first half of the year, market prices for beef cattle have fallen in recent months, owing in part to reports reflecting an increased supply.

SEASONAL SHIFT — After an impressively bullish first half of the year, market prices for beef cattle have fallen in recent months, owing in part to reports reflecting an increased supply. (Graphic courtesy CME.)

Prices for the January 2024 CME© feeder cattle contract, for example, fell from a high of $268 per hundredweight in mid-September to $219 per hundredweight by the end of November, according to the Chicago Mercantile Exchange. 

James Mitchell, extension economist and assistant professor in the Department of Agricultural Economics and Agribusiness at the University of Arkansas System Division of Agriculture, said the downturn in the markets is essentially due to two factors.

“Through the first eight months of this year, cattle markets trended higher,” Mitchell said. “We’ve seen really high prices throughout the year. Those prices were moving upward on what was mostly bullish information about cattle inventories and the size of our beef cow herd.”

Mitchell said that seasonality and a few recent reports from the U.S. Department of Agriculture have led to declines in futures and cash markets for cattle.

“The last two months, those prices have started to soften,” he said. Futures market prices are down significantly, Mitchell said, while local cash markets for calves have fallen less.

While falling market prices at the end of a calendar year is typical seasonal behavior for U.S. cattle markets, as cow-calf operators sell off calves in the fall, Mitchell said the decline also reflected industry reaction to two recent reports from the U.S. Department of Agriculture. The first was the USDA Cattle on Feed Report in September, when indicated larger-then-expected cattle placement in feed lots, Mitchell said.

“When you have larger-than-expected supplies, you will see downward pressure on cattle prices,” he said.

The second report was the November World Agricultural Supply and Demand Estimates report, commonly referred to as WASDE, which increased projected global beef production.

“If you see an increase of expected beef supplies in the future, that’s also a bearish piece of news about the expected value of cattle,” Mitchell said.

He said that current market activity indicates an exaggeration of the typical seasonal market trend.

“As you see prices come down more in the near-term on larger supplies, that tells me that we have a lot of producers that are just selling calves now, as opposed to retaining them, feeding them through the winter and selling them in March or April, coming off of a stocker operation,” he said. “Or it might just be that producers saw high prices and wanted to take advantage of that. Another part of that could be drought, it could be expensive feed; all those things could potentially contribute to that decision.

“I don’t think it’s a sign that anything’s broken, or that anything is inherently wrong with our cattle markets,” Mitchell said. “That’s just how they work: they’re seasonal, and they react to information.”

Drought and cattle
Much of the Southeast was affected by droughty conditions throughout the year. Mitchell said that with the relief of rain Arkansas received in October, the state’s producers were at least in better situations than those of producers in many neighboring states.

“From talking to colleagues in across the Southeast, I can tell you that they are as dry as they’ve been in a very long time,” he said. “So you have a lot of producers in that part of the country selling cattle because they can’t do anything with them. So that potentially makes it cheaper for Arkansas stocker operations to buy them.”

Mitchell said that current market trends are the perfect reminder of the benefits of crop insurance.

“We were in a very, very bullish market up to this point,” he said. “Prices just looked like they were going to continue to go up and up. It only took a couple of reports and some seasonal tendencies for those prices to decline. That’s why we have price risk management. It doesn’t matter if prices are trending down or up, you should consider PRM as part of your broader business plan. This is the kind of situation those tools are designed to protect you against.”

To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on X and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu/. Follow on X at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on X at @AgInArk.

While cattle prices continue to rise, high production costs, inflation undercut profits

By Ryan McGeeney
U of A System Division of Agriculture

LITTLE ROCK — It’s true: Cattle market prices are at what some analysts have called “historic highs.” Unfortunately, profits are not.

FLYING HIGH — For the entirety of 2023, slaughtered steer prices across all U.S. markets have remained above those of the previous year by 20-30 cwt, ranging from $155 to $170, and practically soared above the 2017-2021 average by 40 cwt or more. According to recent data from the U.S. Department of Agriculture, fed steer prices reached above $175 cwt last week, topping the 2014-2015 record of about $172. 

For the entirety of 2023, slaughtered steer prices across all U.S. markets have remained above those of the previous year by 20-30 cwt, ranging from $155 to $170, and practically soared above the 2017-2021 average by 40 cwt or more. According to recent data from the U.S. Department of Agriculture, fed steer prices reached above $175 cwt last week, topping the 2014-2015 record of about $172.

But of course, a dollar in 2023 is not what it was in 2014. According to the U.S. Bureau of Labor Statistics, inflation during those nine years has reduced the value of a dollar spent in the consumer price index by 28 cents.

James Mitchell, extension livestock economist for the University of Arkansas System Division of Agriculture, said inflation is just one reason to keep today’s market prices in perspective.

“I wouldn’t say we’re near ‘record territory,’” Mitchell said. “I’d say we have prices as high as we’ve seen in the last 10 years in nominal terms — which is still great. You have to be careful how you interpret that, however.”

Mitchell also emphasized that the cattle industry, as a whole, abides by a cyclical nature.

“We’ve had three, four consecutive years of liquidating cow herds, of tighter and tighter feeder cattle supplies, and that’s driven significantly higher,” he said. But producers shouldn’t expect that upward trend to continue indefinitely.

For cattle producers in the U.S. Southeast and elsewhere, 2014-2015 was an unforgettable season, for reasons both good and bad. Prices spiked to record highs at the end of 2014, owing largely to market demand, at a time when feed, fuel and other input prices remained relatively low. When supply began catching up, however, market competition pulled the floor out from beneath those prices, leaving many producers with larger herds they had to either maintain or sell off at much-lower-than-anticipated prices.

Mitchell said that today’s high input prices, while largely the bane of many producers’ existence, will at least help sustain the cattle market prices.

“All the inputs are much higher than they were 10 years ago,” he said. “Corn is still high, fertilizer is still high, fuel is still high. So, because profitability hasn’t moved up as high as prices have, I do think we’re going to see prices stay high for a more prolonged period amount of time. When we got into the fall of 2015, it seemed like prices just fell out from under us, and we continued along that path for the next couple of years.”

As always, spring and summer weather will play the wild card in cattle production. While Arkansas has seen a fairly wet few months, that augers nothing for the summer, when rainfall will be more critical for providing grazing material to livestock.

“We’ve been pretty fortunate in Arkansas, but I’d argue that moisture really doesn’t matter now as much as it does in the next few months,” Mitchell said. “We need timely, adequate rainfall through the spring and summer, when it matters most for both forage production and hay production. It doesn’t matter a whole lot if we’ve got rain in February and March.”

Even if Arkansas does see a dry summer, the state’s cattle producers still have a lead on some neighboring states that have dwelled in the doldrums of drought for more than a year now.

“We still have two of our biggest cattle states, Oklahoma and Texas, that are still very much in drought, so that’s limiting the options for a lot of those producers,” Mitchell said. “Kansas is in even more of a severe drought scenario.

“The prices may be high, but if we don’t have grass to feed cattle, there’s nothing we can do about it,” he said.

To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on Twitter and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu/. Follow on Twitter at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on Twitter at @AgInArk.