Global Demand Taking Toll

Not everyone paints such a rosy economic picture; one economist notes there could be a domestic downside. The same economist does, however, expect agribusinesses to benefit.

Consumers usually reduce their purchases of goods and services if prices become too high. Buyers of U.S. corn, soybeans, and wheat seem to be ignoring that economic principle, however, as the nation’s grain stocks reach critically low levels, says Chris Hurt, a Purdue University agricultural economist.

With global demand for grain and oilseeds at record levels and a weak U.S. dollar, foreign buyers are outbidding domestic buyers for American grain. While the higher commodity prices are good for crop agriculture there are disconcerting downsides, Hurt says.

“Food consumers worldwide are going to have to pay more,” Hurt says. “We ended 2007 with our monthly inflation rate on food nearly 5 percent higher. I think we’ll see times in 2008 where the food inflation rate might be as much as 6 percent.

“I also think we’ll have discussions about food security in 2008,” he adds. “We’ll have discussions about whether we should allow the foreign sector to buy our food. Is food a strategic item that we need to keep in our country?”

For some U.S. crops, it’s almost too late. The 2007 U.S. wheat crop is virtually sold out, while domestic soybean stocks soon will fall below a 20-day supply. Corn inventories are stronger but with demand from export markets, the livestock industry and ethanol plants, supplies also could be just as scarce for the 2008 crop. The condition could become more serious if adverse weather trims U.S. crop yields this summer and fall.

The situation is reminiscent of another run on U.S. grain one generation ago, Hurt says. “This is a very rare circumstance,” he explains. “The last time we had this kind of uncertainty on food supplies was the early 1970s, when the former Soviet Union became a major buyer of wheat in the United States. In the fall of 1972 they were such aggressive buyers that they essentially bought the pantry out of our available wheat supplies.

“In 1973 we also virtually ran out of soybeans. The U.S. Congress and president responded by saying we cannot let the rest of the world have our strategic food supply, so they embargoed all foreign soybean shipments until we could replenish the supply.”

Hurt doesn’t expect a similar export prohibition this year but grain prices will have to keep climbing to slow the buying frenzy. It might take another month of grain price increases to get users to cut back, Hurt said. He estimated soybean prices could top $15 a bushel before all is said and done.

Farmland values and cash rental rates should continue rising, as producers look to expand their crop acreage to meet the grain demand, Hurt said. He also expects agribusinesses — especially those that offer seed, ag chemicals, fertilizer, machinery and financial capital — to benefit.

The challenge to satisfy the world’s hunger for grain promises to make for an interesting year, Hurt said.

“It turns out food is a security issue for every country of the world,” he said. “World agriculture has been so productive in the past 60 years that general food shortages have been rare. With this long period of abundant food supplies, most of the world’s consumers in developed countries have forgotten food’s strategic nature. Given the world’s appetite for basic crops, the hope for 2008 is for favorable yields throughout the globe that will give consumers and crop producers more time to adjust to this new high demand era.”

(Source: Purdue University)
 

Leave a Reply

Management Stories

ManagementGROWMARK Meeting Visit, Company Takeover Updates, and RNC Invite
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Other Changes
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More
Corn and ditch
ManagementStudy: Saturated Buffers Reduce Nitrates From Subsurface Field Drainage Systems
July 19, 2016
The Agricultural Drainage Management Coalition (ADMC), Agricultural Drainage Management Systems Task Force and Dr. Dan Jaynes with the National Laboratory Read More
Soybean Field
LegislationOhio Soybean Association Names Brian Hill Legislator Of The Year
July 19, 2016
The Ohio Soybean Association (OSA) has announced that State Representative Brian Hill (R-Zanesville) has been named one of two Legislators of Read More
Trending Articles
Heritage Cooperative
Retail FacilitiesKahler Automation Designs State-Of-The-Art Facility For Heritage Cooperative
July 4, 2016
Heritage Cooperative in Marysville, OH, needed an efficient liquid, dry and grain facility to serve the many needs of their Read More
The Andersons Waterloo
ManagementFirst Indiana Facility Certified Under 4R Nutrient Stewardship Certification Program
June 27, 2016
The 4R Nutrient Stewardship Certification Program has announced that The Andersons, Inc.’s Waterloo, IN, facility has been added to its Read More
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To Explore IT Solutions
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
Monsanto Luling Plant
Eric SfiligojWhat’s Next For Monsanto?
May 31, 2016
For the folks at Monsanto’s headquarters in St. Louis, MO, it has been an eventful few weeks. Back on May Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Eric SfiligojPity The Monsanto Haters
May 23, 2016
An old saying goes thus: “Be careful what you wish for. You just might get it.” Given current events, there Read More
Latest News
ManagementGROWMARK Meeting Visit, Company Takeover Updates, and R…
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
Crop InputsMonsanto: EU Approves Roundup Ready 2 Xtend Imports
July 22, 2016
Monsanto Co. announced today that the European Commission has granted import approval for Roundup Ready 2 Xtend soybeans. This milestone Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSyngenta Announces Alfalfa Seed Split Off
July 22, 2016
On September 1, 2016, Syngenta will transfer sales and distribution of alfalfa seed to the NEXGROW branded business that is Read More
Dow DuPont
Crop InputsDuPont, Dow Shareholders Approve Merger
July 21, 2016
DuPont and The Dow Chemical Company announced that, at their respective special meetings of stockholders held today, stockholders of both Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Oth…
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More
Monsanto Luling Plant
Crop InputsReport: Bayer Shareholder Proposes Monsanto ‘Host…
July 20, 2016
One of Bayer AG’s top 20 shareholders said Wednesday it may make sense for the life-science company to launch an Read More
Young Corn Closeup
Industry NewsNew Leaf Symbiotics Snags Former Monsanto Microbials Le…
July 20, 2016
NewLeaf Symbiotics, announced today the appointment of Dr. Janne Kerovuo as Vice President for Research and Discovery.  Dr. Kerovuo comes Read More
Corn and ditch
ManagementStudy: Saturated Buffers Reduce Nitrates From Subsurfac…
July 19, 2016
The Agricultural Drainage Management Coalition (ADMC), Agricultural Drainage Management Systems Task Force and Dr. Dan Jaynes with the National Laboratory Read More
Case sprayer nozzle closeup
EquipmentAgronomists, CCAs, Custom Applicators Invited To FSR Ag…
July 19, 2016
Agronomists, Certified Crop Advisers (CCA) and custom applicators can stay current on agronomy issues on the grounds of the Farm Read More
Soybean Field
LegislationOhio Soybean Association Names Brian Hill Legislator Of…
July 19, 2016
The Ohio Soybean Association (OSA) has announced that State Representative Brian Hill (R-Zanesville) has been named one of two Legislators of Read More
Eric SfiligojThe Latest Monsanto Rumors: A Game Of Tones
July 18, 2016
When companies are engaged in the back-and-forth of the acquisition game, the tone of their various announcements is always important. Read More
Nozzle spray close-up
AdjuvantsWest Central Distribution Introduces New Elite Family O…
July 14, 2016
West Central Distribution recently released a new line of Elite adjuvants to work alongside the new herbicide technologies that combat Read More
Bayer sign
Crop InputsBayer Makes New Offer For Monsanto
July 14, 2016
Bayer AG boosted its takeover offer for Monsanto Co. to about $65 billion in a bid to overcome the U.S. Read More
ManagementAn Update on Water
July 14, 2016
CropLife Editors Eric Sfiligoj and Matthew Grassi discuss agricultural water issues in conjunction with a recent field trip in Ohio. Read More
Co-Alliance employee
EmployeesNew Purdue Program To Focus On Talent Management
July 14, 2016
Purdue University’s Center for Food and Agricultural Business is starting a new professional development program to help food and agribusiness Read More
Industry NewsFMC Agricultural Solutions Appoints New Global Regulato…
July 14, 2016
FMC Corp. has named Andy Hedgecock as Global Regulatory Affairs Director for FMC Agricultural Solutions. He joins the company this Read More
Corn Field
Seed/BiotechWhat Can Inoculants Do For You?
July 13, 2016
When it comes to preventing disease and promoting growth in your plants, who couldn’t use a helping hand? By forming Read More
Microbes
Seed/BiotechMighty Farming Microbes: Companies Harness Bacteria To …
July 13, 2016
What if farmers, instead of picking up some agricultural chemicals at their local dealer, picked up a load of agricultural Read More