You don’t hear the agriculture boom theory repeated as often anymore. You know, the one where farmers live happily ever after with grain prices that never sink below the cost of production?
For most of the last decade, at nearly every gathering of farmers someone would trot out the theory that the future had to be bright for agriculture.
With a growing world population and untold millions of people with more money to spend on food, grain prices would never again languish at unprofitable levels.
As farmers, we never tired of hearing this story, and the people selling us inputs and equipment also loved the commentary.
Agriculture has certainly gone through an unprecedented boom as evidenced by the dramatic rise in farmland values.
But is the boom over? Land prices are no longer increasing as rapidly, and the commodity price outlook is no longer bullish.
India’s huge appetite for our pulse crops seems to be waning, and analysts wonder if China will start to liquidate its huge grain stockpiles. On the production side of the equation, countries such as Russia are capturing market share for wheat, flax and other commodities.
While the grain economy is still humming along quite nicely here in Canada, it’s a different story south of the border where farmland prices have been in decline for several years. Corn, soybean and wheat prices are below breakeven for many producers.
If not for the value of the Canadian dollar, we’d be in much the same boat. While the exchange rate has increased input costs, particularly on new farm equipment, it also increases the dollars generated for all of our exports.
What does the future hold? If you believe the rabid climate change activists, weather anomalies should be cutting into world grain production, but that isn’t happening. While there are the usual droughts and floods in various regions each year, a bad crop one place is more than offset by big crops elsewhere.
One of the factors in the grain price boom was the huge increase in ethanol production, but few expect significant growth in ethanol production.
However, a new factor is now in play. Let’s call it the anti-science revolution. As an example, Europe seems determined to ban gly-phosate. When this happens, it will also tighten the maximum residue limit on any grain it imports, which will affect production practices in many other countries.
Glyphosate is the most widely used herbicide in the world, and it’s also one of the safest. Unfortunately, science seldom triumphs over emotion these days. Expect many commonly used crop protection products to be lost because of an overabundance of caution on the part of regulators.
Meanwhile, the onslaught of public opinion against genetically modified crops shows no sign of lessening. While new technologies such as gene editing hold great potential, it isn’t yet clear whether this approach will be deemed acceptable by the general public.
Science has traditionally come to the rescue, increasing production to feed a growing world population. The anti-science revolution may be a factor that provides underlying support to grain prices over the long term.