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APR: Fall 2021 Articles

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Brazil’s Transportation Infrastructure and Competitiveness in the Soybean Market

Xi He, Guilherme DePaula, and Wendong Zhang
In 2013, Brazil surpassed the United States to become the world’s largest soybean exporter. Brazil’s soybean production and exports have accelerated since its trade liberalization in the mid-1990s, and it has gained extra competitiveness over the United States in the export market during the US-China trade war, when China imposed several waves of retaliatory tariffs on US soybeans. For interested readers, a tool is available on the CARD website that shows historical revealed comparative advantages for six leading export countries. In the 2019/20 marketing year, Brazil’s soybean exports reached 92 million metric tons, about twice that of US soybean exports. While Brazil’s increasing competitiveness in the oilseed market depends critically on its advanced soybean production technology, its adaptation of a double-cropping soy-corn system in the savanna, extended periods of currency depreciation, and declining transportation costs resulting from expanding transportation infrastructure network are key factors as well.

What is the Tradeoff between COVID-19 and Economic Recovery?

Peter F. Orazem
Since July 2019, Iowa has lost 3.4% of its labor force and 3.3% of its employment. Nationally, employment is 3.7% below the July 2019 level, and so Iowa is doing slightly better on employment loss. However, the national labor force has fallen only 1.4% and in that way Iowa has performed much worse than the nation on labor force participation. That said, there has been a surge in Iowa’s labor force participation from June 2021 to July 2021 as the two-year decrease in labor force participation was -4.7% in June; and thus, there was a substantial improvement in Iowa’s labor force participation over the past month.

The SNAP Disbursement Schedule and its Effects

Katherine Harris-Lagoudakis and Hannah Wich
The Supplemental Nutrition Assistance Program, formerly known as the Food Stamp Program, is the largest food assistance program administered by the US Department of Agriculture. In 2017, SNAP provided aid to 12.9% of the United States population—the average household received $254 in benefits per month. The stated objectives of the SNAP program are to reduce hunger, malnutrition, and poverty through the provision of in-kind transfers to households who are eligible for benefits. Nevertheless, in a sample of SNAP households, approximately 61% indicated being food insecure in 2011 and 2012. Although SNAP is a federal program, each state is responsible for distributing benefits to its residents. Distribution dates for each household are determined at the state level and all 50 states currently deliver benefits according to a monthly distribution cycle.

Futures Market for Ag Carbon Offsets under Mandatory and Voluntary Emission Targets

Oranuch Wongpiyabovorn, Alejanro Plastina, and Sergio H. Lence
Increasing concerns about climate change have prompted actions, both by governments and the private sector, aimed at curbing the emissions of greenhouse gases. An important number of such initiatives involve the trading of GHG allowances and offsets. An allowance permits its holder to emit a specified amount of GHGs, whereas an offset is a certified reduction in GHG emissions that can be used to compensate for GHG emissions elsewhere. Recently, carbon offsets have attracted the attention of decisionmakers in agriculture for their alleged potential to enhance farmers’ profits, as some agricultural activities can generate offsets by capturing GHGs (e.g., methane capture from manure management, soil carbon sequestration, and fertilizer use reduction). The purpose of this article is to provide some background information on these markets and discuss the potential of the futures market for GHG offsets recently launched by the Chicago Mercantile Exchange Group to act as a catalyzer of the market for agricultural offsets.

Projections going into Harvest

Lee Schulz and Chad Hart
The changing of seasons from summer to autumn usually shifts the focus of agricultural market traders. For crops, the focus shifts from supplies to usage. For livestock, the focus shifts from the current year to the upcoming year. USDA’s monthly projections of the global agricultural supply and demand situation help frame those shifts and outline the anticipated movements within the markets. The September report provided a mix of signals across the crop and livestock markets. In general, the expansion of meat production is slowing down. While meat demand remains strong, animal numbers, especially in beef, have pulled back due to a variety of reasons. Livestock prices are projected to fall in 2022, given the slightly higher production, with the exception of beef. Crop production is also projected higher this fall, despite the drought. Crop usage, which was strong throughout most of the 2020 marketing year, fell off during the summer. The crop usage outlook for the 2021 crops was increased slightly, but still is below the previous year’s levels.

Predicting China’s Corn Acreage and Production in 2021/22 and 2022/23

Xi He, Miguel Carriquiry, Wendong Zhang, and Dermot Hayes
China’s corn imports exceeded its corn tariff rate quota of 7.2 million metric tons in 2020 and reached a record of 26 MMTs in the 2020/21 marketing year. While China’s recent corn import surge was largely due to its feed demand to recover its hog inventory from the African Swine Fever outbreak, the prospect for China’s corn imports is unclear. Figure 1 shows that China’s corn futures price with maturity in November 2021 declined from around $10.80 per bushel in May to $9.70 per bushel in September 2021. The current level is still high relative to the historical norm. Over this period, China’s hog futures price declined from the highest point of around $2 per pound to around $1 per pound. The hog futures price drop suggests that China’s hog inventory recovery is likely making good progress, which will put upward pressure on China’s corn imports in 2021/22 and 2022/23. The net impact will depend on China’s domestic corn production, and to estimate this we need reasonable estimates of Chinese farmers’ acreage and yield price supply elasticities.

Cover Crops and No-till in the I-States: Non-Permanence and Carbon Markets

Alejandro Plastina and Wendiam Sawadgo
Emerging voluntary carbon markets are attracting lots of attention in US agriculture, to the extent that agriculture carbon credits are usually referred to as the new cash crop. In essence, large companies would purchase carbon credits from multiple sources, including agriculture, to achieve their net zero emission goals. Farmers and ranchers would implement conservation practices that sequester carbon or provide other environmental benefits in exchange for compensation in cash or carbon credits depending on the carbon program. However, not all conservation practices are able to generate carbon credits.