Farm consolidation called key to improving yields

Analyst partly attributes higher yields in Ukraine and Russia to a trend toward larger operations; more efficient fertilizer use also a factor

WINNIPEG (MarketsFarm) — Consolidating smaller farms into larger operations around the world is central to improving crop yields, according to Neil Townsend and Jason Newton.

Townsend, chief market analyst for FarmLink Marketing Solutions, and Newton, chief economist at Nutrien, discussed consolidation Nov. 28 during the Big Picture Outlook at Grain World in Saskatoon.

“Get big or go home is definitely an attitude in a lot of industries. I think farmers are investing lots of money and prices haven’t co-operated,” Townsend said.

He cited a news report from Des Moines, Iowa, that said “44 percent of Iowa farmers have significant debt concerns.”

Newton attributed that situation, which has burdened farmers across the United States, to increasing land prices.

Both speakers also cited the U.S.-China trade war as a main factor in lower commodity prices.

Townsend said major importers have turned to sources other than the U.S. for supplies, particularly for crops like corn.

Townsend said Ukraine’s corn yields are increasing four to five percent per year and Russia’s wheat yields have climbed to 80 percent of Canada’s. Part of that can be attributed to a drought in the Black Sea region that saw many small- and medium-sized farms consolidate into larger operations, which eventually improved efficiencies and boosted yields.

Newton also credited the higher yields in both countries to efficient use of fertilizers, especially nitrogen.

As well, China has seen a huge turnaround, Townsend said. The country used to import 10 to 25 million tonnes of wheat annually. Today, it still imports three to six million tonnes, but to blend with other wheat to provide a taste that is otherwise absent in food production.

As for India, Newton said about 80 percent of the farms there are smaller than five acres and most have been passed down from generation to generation. That, and the nature of the highly regulated industry in India, will prevent any major consolidation from happening there for a long time.

“There’s reduced economic incentive to increase productivity,” Newton said, but he stressed consolidation in other countries has proven to be inevitable.

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