With global grain stocks at historically low levels, economies strengthening in some countries and production problems in others, U.S. growers are positioned to play a key role in satisfying growing demand for food, according to two Kansas State University agricultural economists.
"Global wheat production is up 9 percent this year," says Mike Woolverton. "Farmers have responded to higher prices by producing more, but there is still plenty of demand for that wheat."
Woolverton cited Iran´s recent purchase of 1 million tons of U.S. wheat -- its first from the United States in more than 25 years. That purchase and others were sparked in part by a drought in the Middle East, he notes.
Global demand for corn also is strong, which the economists expect will drive stocks 3 percent lower this year.
Dan O´Brien, Kansas State research and Extension economist, adds that grain and oilseed carryover from one year to the next has been less consistent since the U.S. government "got out of the grain storage business" in the mid-1980s.
Some countries with the largest populations do not have as much land suitable for growing crops as the United States, Woolverton says. China, with 1.33 billion people has 342.5 million acres of farmland; India with 1.15 billion people has 355.6 million acres; Brazil at 191 million people has 144.8 million acres and Russia, with 140 million people has 30.1 million acres. In comparison, the United States has 304 million people and 407.8 million acres of farmland.
Much of Brazil´s best cropland is far from ports and other transportation routes, and has hampered Brazil´s ability to significantly boost trade with other countries. Improving its infrastructure enough to be able to handle large quantities of exports will take years, he adds.
"Many of the importers (of U.S. feedgrains) have built livestock herds fed by imported U.S. grains," Woolverton says, adding that he expects that demand to remain firm.
One point of contention in recent months has been the idea that U.S. corn demand to fuel ethanol production has cut into corn supplies needed to feed the livestock industry. Ethanol demand has underpinned corn prices, Woolverton says, but other factors such as economic and income growth in developing countries, livestock feeding both domestically and internationally and growth in the global population, also are playing significant roles.
"Ethanol is not gobbling up all of our corn," he adds. Although there are 163 ethanol plants operating in the United States this year compared with 97 just two years ago, that growth trend is unlikely to continue.
"Funding for new ethanol plants has dried up," Woolverton says. "I don´t expect to see many more ethanol plants built. It hasn´t been that profitable."
With the recent price of corn, much of an ethanol plant´s profits are coming from distiller´s grains.
In the 2008-09 crop year, the United States is expected to use about 33 percent of the corn crop for ethanol. That is up from 23 percent in 2007/2008.
Soybean stocks are tight and expected to be tight again next year.
"Even though global soybean production will rebound this year to near a 'normal' level, the global stocks-to-usage ending ratio will decline for the third year in a row," Woolverton says.
"Production is struggling to keep up with the growth in global demand."
The fact that millions of acres are due to come out of the U.S.Department of Agriculture´s Conservation Reserve Program over the next few years will allow U.S. producers the option to put more acreage into crop production if market forces drive such an expansion. However, some of that land is not suitable for corn an other feedgrains production.
Rice is a potential bright spot for the United States on the world market. "We don´t eat a lot of rice in this country, but we export a lot of it," Woolverton notes, citing USDA data that show the United States as the world´s third largest exporter, behind Thailand and Vietnam, but
ahead of Pakistan and India.
You can find more information about this and other presentations offered at Kansas State's Risk and Profit Conference, hld in mid-August at www.agmanager.info.
Source: Kansas State University Research and Extension