Will you be ready for the next opportunities in crop marketing?
Here's a signal that the slump in grain and livestock prices is beginning to bottom out: The Wall Street Journal has just featured a story with the headline, "The Next American Farm Bust is Upon Us."
Feb. 10, 2017 By Jerry Carlson, Pro Farmer Editor Emeritus — During years of the ag outlook profession at Pro Farmer, our team gradually tested a truism: When big-city newspapers assign their top writers to feature a trend in agriculture, that trend is almost over.
The observation is similar to the charting rule which watches the percentage of "consensus" opinion: When most futures market bettors hold a bullish or bearish view, a turnaround in that trend is nearby.
The Feb. 9 WSJ feature by Jesse Newman and Patrick McGroarty is well-researched. And it's revealing in another way which offers insight on how to bolster your production endurance for the next decade... and beyond. As one Pro Farmer member once challenged our outlook staff at a seminar: "Guys, I've tried your smart marketing. Now what?"
The WSJ piece mentions several megatrends which hold production implications as well as marketing challenges. Quoting some examples:
"American farmers’ share of the global grain trade has fallen from 65% in the mid-1970s to 30% today, giving them less sway over prices."
How could that possibly have happened without a world-wide adoption of genetic engineering — which is largely restrained to North and South America? Yet, recent economic studies reveal that crop production costs per bushel of wheat and feed grains in the European Union are comparable or cheaper per bushel than in the United States.
Clearly, biotech beans were a major enabling tool to allow Argentine and Brazilian farmers to plow the pampas and displace cattle with corn and beans. But Ukraine, Europe's breadbasket, is legally non-GMO. More than 60 nations outside the U.S. curb plantings of GMO crops, touted here as essential to "feed the world."
"Farmers world-wide put nearly 180 million new acres into cultivation over the past decade. Lower production costs, proximity to fast-growing markets and improving infrastructure gave some overseas farmers an edge. Corn and wheat output has never been higher, and never has so much grain been bunkered away."
Here's another marketing edge which most of those overseas growers are guarding for future growth: Like U.S. wheat producers, and many alfalfa growers, they're fiercely insistent on protecting their genetic lines against cross-contamination with foreign genes from GMO technology. Ukranianian growers visiting here have teased us a bit about their becoming the non-GMO soybean grower to Europe, displacing the current flow of U.S. soybean meal to livestock producers across the EU.
If more and more studies like the one announced in Denmark document negative impacts on livestock health from glyphosate in feed, that will drive non-GMO bean premiums higher and give an edge to growers who've mastered growing without glyphosate or its kindred chelators.
A broad spectrum of farmers and consumers in China are rising up on social media, opposing the drive by a few high-level party leaders to showcase China as a "worldwide biotech leader in crops." The social media buzz is slowing a shift to biotech, and even making some inroads. Recent sampling of the Chinese population for glyphosate residues shows relatively low levels compared to U.S. tests, even though China imports major quantities of biotech beans.
The grassroots opposition to biotech is also having an impact on Chinese central planning: The just-released Central Government planning document signals a shift from biotech to more benign "green" technologies. Modern Farmer just posted a summary of the Chinese action; here's the link.
Mexico is also guarding its corn genetic base, forbidding biotech seed corn and even requiring that imported corn must be cracked or ground to avoid germination.
Even if low grain prices eventually cure low grain prices, some U.S. farmers will gain a profit advantage if they can manage beyond the brittle constraints of biotech seed costs, rising chemical costs and reliance on large acreages to overcome narrow margins. They can improve their soil health, cash in on non-GMO premiums, achieve equal or better yields than biotech crops, and sell more of their management rather than counting on acreage volume.