World needs to slash crop acres to cut grain surplus

WASHINGTON, D.C. — What will it take to drain the oceans of crop stocks that are drowning world crop prices?

And how weird is it to see world crop stocks surge so much after the drought-induced shortfalls of 2012?

“I don’t know how long it has been since we had four record years stack up back to back,” said Robert Johansson, the U.S. Department of Agriculture’s chief economist.

As well, it’s hard to tell how many months or years of “normal” world weather conditions would be needed to bring stocks down to more price-friendly levels.

Part of the problem with surging stocks of many crops has been the stubbornness of farmers around the world to cut back production. 

“You would expect to see land taken out of production,” said Johansson.

“We’re seeing that in the U.S. We’re not seeing that in South America.”

ADVERTISMENT

However, barring a drought or similar dramatic weather disaster in a major crop-producing region, reduced acreage is likely to be the eventual solution to the present glutted world market, Johansson said. 

U.S. farmers, stuck with a high American dollar, have already begun cutting some acres from production. A high U.S. dollar cuts crop prices compared to those in most other countries.

Crops such as wheat have been particularly hit by farmer reluctance, with this year likely to see an eight percent reduction in U.S. wheat acres, Johansson said.

Further acreage reduction is most likely to occur wherever farmers have the worst returns.

“As prices come down, where is the land going to fall out? Who is the high marginal cost producer?” said Johansson.

Some land might be removed from production in the Black Sea region, where conflict and political instability are making it physically difficult to grow crops and export them.

ADVERTISMENT

In Brazil, farmers might start cutting back on second-crop corn if returns are poor, Johansson said.

European farmers have experienced bad returns for wheat, so they might scale back.

Based on average weather and growing conditions, the USDA doesn’t expect a significant im-provement in crop values for years. That means there will be continued pressure to work down stocks, and none of the ways are easy or predictable.

“The way you work it out is you either get a drought or you get acreage leaving production,” said Johansson.

“Or you get something like a lot more people using biofuels.”

With a substantial increase in biofuel consumption hard to imagine today, that leaves farmers waiting for other farmers to cut acres, or for a drought to hit a crop somewhere. Until something like that happens, crop stocks will remain heavy.

ADVERTISMENT

  • Welderone

    The only solution I can see Ed is Canada and the EU and the U.S.A. and Australia must take 10% of their grain land out of production. As either summer fallow or chem fallow. It appears otherwise the overproduction will only keep grain prices at the low levels they are today.

  • Dr

    This is history repeating itself. And yet upon the Big Ag and chemicals recommendations (marketing) farmers are still getting bigger and chasing the holy grail of high yields.

    The old definition of insanity comes to mind “Doing the same thing over and over and expecting a different result” Huge mega companies are telling farmers how to “recipe” farm this makes the company rich and the farmer relatively poor.

  • Dayton

    The easy solution is to cut back on inputs.

  • Harold

    A surplus…… yet there are still many who are hungry and we will likely be saying the same old, same old, from 10 years ago to 10 years from now while we in the end game are filling the pockets of Industry instead of mouths. The whole chemical industry and the GE industries pretense of starvation and fear, obviously worked and produced more yield and a glut but did not eliminate even today’s starvation, their so called “holy grail”; who is fooling who? If Organic produces less yields like “they” say it does, then obviously organic would have prevented the loss known as overproduction and would have made the Chemical Corporations and their GE counterparts’ product and profits irrelevant. (not to mention a world less polluted)
    The starving cultures will likely find solitude in knowing of our Nations need to cut back production. The hungry being more superior in intellect will tell most that without jobs or money – you cannot afford to buy. On the other hand, we can’t afford to give it away; can we the people? Heart strings to Harp Strings? Can the multi-billion dollar corporations, for which we all bow to for the gain of their solid reasoning, afford to give something away; they say they cannot. They fund so called science and not so called dinner plates, unless it is the plate of another Elite. The Elite have the money and the power and hold all of the “biblical” sayings but the numerous charities have to resort to knocking on the public doors and begging. The biggest relief for the starving is their own death, whereas a witness, death contrarily was the only outcome true and real and that they no longer have to listen to, or be the subject of, our/worlds decades old “righteous” BS.
    What were GE plants and chemicals supposed to do?