Farmers Scrutinize Costs as Acreage for Major Crops Decreases

Click to enlarge

The total planting area of eight staple crops in the United States will decline almost annually through 2026, with acreage that year about 4% lower than in 2016, according to projections released Nov. 29 by the U.S. Department of Agriculture.
Individual crops will fluctuate. Soybean acreage is expected to rise by 2% in 2017 before falling off for two years and finally settling at 1.6% over the 2016 amount. Wheat and rice acreage will drop in 2017, by 3.4% and 15.6% respectively, but then will climb slightly and remain steady over the long term.
Meanwhile, prices of all eight mainstay U.S. crops will rise — modestly for the most part — through 2026. On the high end, soybeans will remain at more than $9 a bushel, and rice will move from the $10 range to more than $12. On the low end, the price for U.S. cotton will decrease from 67 cents to 64 cents a bushel in 2017, then increase to 68 cents in 2026.
Global land-usage and price projections mirror those in the United States. Growth in overall crop production will continue to slow through 2025, at about 1.5% annually, according to the 2016 Agricultural Outlook by the Organization for Economic Co-Operation and Development and the Food and Agricultural Organization of the United Nations.
Prices will remain flat globally, although unforeseen policy changes in individual countries are wildcards, the OECD-FAO report says.
“The long-term trend is always land coming out of production,” says Dr. Seth Meyer, World Agriculture Outlook Board Chairperson at USDA’s Foreign Agricultural Service. “Crop area tends to decline ever so slightly over time because some of that land is being diverted to non-agricultural uses.”
U.S. planting area is trending downward, Meyer says, partly because farmers are operating on tight profit margins. That in turn might affect manufacturers and distributors of crop protection products, as farmers look for ways to cut expenses and choose crops that are less expensive to plant.
“The input market needs to brace for that,” says Chris Hurt, professor of agricultural economics at Purdue University. “Crop prices have already been coming down, and that would also weaken fertilizer prices.”
On the other hand, the OECD-FAO report says that much of the projected growth in global crops will result from yield improvements. Meyer says that, among other factors, better crop management, advancements in seed genetics — and crop protection — can boost production.
“Those things are all part of the tool box to achieve greater yields,” Meyer says. “Farmers are making choices to cut costs and improve yields so they can improve their margins.

global-crop-report-chart-2-planted-acreage-8-major-crops
Click for larger image.


American Soybeans

In addition to wheat and rice, four other U.S. crops will fall in acreage in 2017, according to USDA projections: Oats will drop by 10.7%, sorghum by 7.4%, barley by 6.5%, and corn by 4.8%. Acreage for the four crops will remain relatively even or decline over the next 10 years.
Todd Davis, extension agricultural economist at the University of Kentucky, agrees that tighter margins are contributing toward less land usage. He says farmers are tightening their belts because it’s harder for them to secure loans.
“I’m reading more how lenders are monitoring cash flows more than in previous years,” Davis says. “And it will depend more than before on how much collateral (farmers) have.”
Weather also will play a role in the 2017 U.S. production rate. Meyer says weather was exceptionally good in 2016. Farmers shouldn’t expect a repeat in 2017, when unfavorable weather will likely take more land out of production. Only soybeans and cotton are projected to increase in area in 2017.
Hurt says soybeans are the hot 2017 crop. Compared to two other major Midwest crops, wheat and corn, soybeans will be more profitable for farmers, with a price of more than $9 a bushel. In comparison, corn is more than $3 a bushel, while the USDA predicts that wheat will hit $4.
“The price of corn would have to be over $4 to compete with soybeans, or soybeans would have to drop to below $8, for the two to be competitive on average-quality soils,” Hurt says.
Wheat prices are relatively low due to large wheat supplies. According to the USDA, the stocks-to-use ratio for wheat is 50.4%, meaning that half a year’s usage is in stock.
“That’s the highest wheat inventory in 30 years, going back to 1986,” Hurt says. “Those are burdensome supplies, and it’s a signal to wheat producers to look to something else to produce.”
The corn stocks-to-use ratio is 16.5%, which Hurt says is the highest corn inventory in 11 years. For soybeans, the stocks-to-use ratio is 11.7%, the lightest in 10 years.
Meyer says U.S. farmers, in addition to crop selection, are considering other ways to reduce costs. For example, new tractor sales have fallen. Crop protection is also in the mix, and is another reason why soybean acreage will climb next year, according to Hurt.
“Soybeans cost less to plant than corn and wheat,” Hurt says. “They don’t require added nitrogen. We will see a larger percentage of soybeans next year — a shift of 3% to 5% — compared to recent history, and it will weaken demand for fertilizer, primarily nitrogen.”
Davis says that when crop prices are high, like they were three to 10 years ago, farmers might not scrutinize how much they are spending on crop protection.
Now they are watching each line item in their budgets.
“Farmers are discriminating,” Davis says. “If diseases show up, they will probably use (crop protection). But they are trying to use more intensive analysis and observations of crops, and use fungicides only if they have a problem, and don’t use it if they don’t have a problem.”

global-crop-report-chart-3-harvested-8-major-crops
Click for larger image.

Rising Global Stocks
Although overall production growth is slowing and prices are flattening worldwide, some countries and crops will stand out over the next 10 years, according to the OECD-FAO report.
Latin America will lead the way in agricultural land expansion through 2025. The region will increase its planting area by 24%, and soybeans will fill most of that new space. By 2025, Brazil will become “the single most important” soybean grower in the world.
According to the OECD-FAO, soybean acreage in Latin America and the Caribbean will see a nearly 30% increase between 2015 and 2025. Land area for wheat will grow by more than 20%, and maize, along with other coarse grains, by 5%.
Hurt says to look for corn production to jump next year in Argentina. That’s because the Argentine government has eliminated a corn export tax, which will encourage farmers to plant more corn. Argentina will keep an export tax on soybeans.
This comes after a rough weather year in Argentina, Davis says, where flooding hurt the bean crop, which in turn helped drive up bean prices in other countries, including the United States. Brazil suffered a drought that affected both its corn and bean crop.
Also in Argentina, apple and pear production is projected to increase slightly in 2017, although production of table grapes will plummet by 33%, according to a November report by USDA Foreign Agricultural Service.
Meanwhile, in South and East Asia — already the world’s largest producer of agricultural products, according to the OECD-FAO report — production will climb by nearly 20% over the next 10 years. About 89% of projected increases in global rice production will take place in South and East Asian counties, mostly in India, Indonesia, and Bangladesh. The region is expected to see an increase in rice yields of about 15% by 2025.
Also in South and East Asia, maize yields will expand by about 12%, and soybean yields by about 16%, although soybeans are not a huge crop there now.
Global cotton production will increase slower than the consumption rate in the first few years of the 2015-2025 period, due to a hefty inventory. The projected 2025 stocks-to-use inventory for cotton is more than 40%.
As for global prices, the OECD-FAO report says all main-crop rates fell in 2015, “signaling that an era of high prices is likely to be over for all sub-sectors.” The report cites several reasons for price stagnation, including burgeoning global supplies.
Such supplies are accumulating as certain regions break records. According to a November USDA World Agricultural Production report, Russia, Ukraine, and Kazakhstan experienced record productions or yields in wheat in 2016. The Russian corn crop was expected to reach record levels in area, yield and production. And the United States and Argentina achieved record corn production.

Click to enlarge.

Another factor in price stagnation is slowing demand, due to economic sluggishness, reduced population growth and weak income growth in developing countries, the OECD-FAO says. About 80% of any increased demand will be handled through yield improvements and only slight expansions in crop acreage.
Regardless of overall price stagnation, the world can expect at least one significant price swing over the next 10 years. Weather might play a role, as climate change continues to cause extreme weather events, the OECD-FAO says.
Also, as in Argentina, policy decisions by some governments are hard to forecast. For example, China recently announced a revision to its grain policy, including the control of domestic prices and release of stocks.

Sandrick is a freelance writer based in Cleveland, Ohio. Contact him at: [email protected]

Africa/Middle East

Africa/Middle East

Marrone Bio Innovations Signs Distribution Agreement in North Africa

ÉLÉPHANT VERT, which has 300 employees in five countries in Africa and Europe and develops and markets organic amendments, biofertilizers, biostimulants and 100% natural biopesticides made in four production units, will develop and market two of MBI's products in Morocco, Tunisia and Algeria:

Africa/Middle East

Liberia: Agro-dealers Cautioned on Safe Use of Inputs

The president of the National Agro-dealers Association of Liberia (NADAL) has cautioned agro-dealers in the country on the proper use

Africa/Middle East

‘Big Three’ Donors Team Up to Boost African Ag Transformation

Three of the biggest funders of African agricultural transformation have launched a new $280 million partnership at the 2017 Agricultural Green Revolution Forum in Abidjan.

Africa/Middle East

Africa Faces Annual $2bn-plus Maize Deficit if Fall Armyworm Poorly Managed

The Centre for Agriculture and Biosciences International (CABI) has confirmed that Fall Armyworm (FAW) has been reported in 28 African

Africa/Middle East

South African Grain Laboratory’s Crop Protection Division Accredited

The South African Grain Laboratory (SAGL) recently released an update on the status of its new Crop Protection Division’s accreditation,

Africa/Middle East

Yara President: Africa Has Major Potential in Future Food Security

Europe will remain an important supplier of agricultural goods in the future but the greatest untapped potential lies in Africa,

China-Africa-field-worers-Photo-credit-Xinhua
Africa/Middle East

FAO: China’s Presence in South-South Cooperation Transforming Africa’s Agriculture

Africa has derived enormous benefits in agricultural transformation from China through the South-South Cooperation, an official of the United Nations

Africa/Middle East

Looking to Next Year: Announcing the 2018 AgriBusiness Global Trade Summit

The AgriBusiness Global Trade Summit is only one day old, but we’re already thinking about next year. For 11 years,

Africa/Middle East

Nigeria: Agro-input Dealers Say Adequate Farm Inputs will Boost Productivity

The Nigeria Agro Inputs Dealers Association (NAIDA) says the provision of adequate and affordable farm inputs will boost agricultural productivity

Shimon-Steinberg
Africa/Middle East

Communication Key in South African Biocontrols Industry

Communication. It’s essential to all parts of agriculture, and the biocontrols industry in South Africa is no exception. Which is

Africa/Middle East

Marrone Bio Innovations Ships First Products to Africa

MBI shipped its biofungicide, REYSANA, to Morocco for use by growers on tomatoes, grapes and cucurbits.

Africa/Middle East

South Africa Conditionally Approves Dow, DuPont Merger

The decision follows recent conditional approvals from global antitrust authorities in Canada and Mexico and from the U.S. Department of Justice on June 15.

Africa/Middle East

Is 2017 a Turning Point for West African Fertilizer Demand?

CRU forecasts growth in fertilizer consumption will lag far behind supply growth over the next five years.

Africa/Middle East

African Governments, GODAN Agree to Historic Declaration in Kenya for Comprehensive Open Data Collaboration

The Global Open Data for Agriculture & Nutrition (GODAN) initiative together with the Government of Kenya and 15 African Ministers

Africa/Middle East

Biocontrols Africa: The Retailer’s Perspective

  Kobus Pienaar, Global Business Journey Manager for Woolworths Foods talks about the Farming for the Future program and the

Africa/Middle East

Biocontrols Africa Conference & Expo Answers Why Bioproducts are Gaining Traction in South Africa

AgriBusiness GlobalTM Media is pleased to announce the launch of its first Biocontrols Africa Conference & ExpoSM on 12-13 July, 2017 in

Africa/Middle East

Syngenta Sales Boosted by Strength in Europe, Africa and Middle East

The company expects its pending merger with ChemChina to close in the second quarter of 2017.

Africa/Middle East

Conference Highlights Stoller Product Performance on Crops Across the Globe

Stoller Group might have 14 wholly owned subsidiaries operating in more than 50 countries around the world, but the 46-year-old

Africa/Middle East

An Invitation to Be Rewarded for Environmental Excellence

Dear Crop Protection Professional, As an AgriBusiness Global™ reader, you’re no doubt aware we organize the Environmental Respect Awards each

Latest News

Agrichemicals

FMC Corp. Receives Clearances to Acquire DuPont Crop Protection Assets

FMC Corp. has received approval from the Competition Commission of India (CCI) for the proposed acquisition of a significant portion

Agrichemicals

Arkansas Plant Board Backs 2018 Regulatory Changes for Dicamba

The Board’s regulatory changes concerning the use of dicamba will now be subject to a 30-day public comment period which will be followed by a public hearing that will be held on Nov. 8.

Agrichemicals

Univar Acquires Tagma Brasil

Tagma formulates more than 200 registered crop protection products and provides conception and preparation of new formulations; adaption of existing formulations; and technical assistance with processing and regulatory requirements.

Agrichemicals

Cropchem Obtains Registration for Three Formulations in Brazil

Cropchem, a Brazilian company specialized in the distribution of pesticides in the Brazilian market, has obtained the final registration for

Agrichemicals

How AgroStar Is Leading the Way to Simplify India’s Distribution

The start-up and innovative disruptor talks to AgriBusiness Global about how its farmer-facing app is changing distribution in India.