Category Archives: commodities

Map of Countries Sized by Population & a Changing Global Economy Dominated by Asia

This map was tweeted by @incrediblemaps and shows us the size of countries relative to their populations, which as we know has big implications for food security and the commodity trade markets.

On a related note, one of the news items that really got my attention last week was the WSJ sideline interview of Federal Reserve Bank of St. Louis President James Bullard, during his speaking engagement at the Credit Suisse Asian investment conference in Hong Kong.

From the WSJ’s blog:

…he can foresee a tri-polar world in which China and India are the major economic powers, counterbalanced by a bloc of the United States, Europe and Japan, whose populations together will total about one billion people.

“We’ve said the U.S. is a superpower, an economic superpower. But these are giants, they’re bigger than a superpower,” he said. “What would that world be like, both economically and politically? I think that’s really hard to understand. How much would the Western bloc be willing to cooperate politically to be a counterbalance to China and India?”

Mr. Bullard offered few specifics of what such a world would look like, but did acknowledge that it might require some adjustment on the part of ordinary Americans like those he serves in the heartland.

This future is a challenge to imagine, but has implications for the competition for oil and energy, number one, I think, and all of the other commodities, with ever-bigger demands on the Earth’s natural resources. It has jobs implications; global communications will continue to improve and evolve; technological advancements and innovations will be coming more and more from Asia; and, global politics and alliances will change, as Bullard states. Finally, it has big implications for food and agriculture. My personal view is that there will be very surprising innovations in both of these sectors.

In another weekend article, the NYT’s travel section contained this interesting paragraph:

Ernst & Young estimates that by 2030, nearly one billion people in China could enter into the middle class and have a disposable income that allows them to travel domestically and abroad. Ten years ago their government singled out tourism as a key pillar of economic growth, and as a result, they have invested well ahead of the curve in high-speed trains, hotel complexes and airports to absorb growth within the middle class. In fact, right now they are busy building 69 airports around the country, so that in the future no person in the country will be more than a 90-minute drive from an airport.

There are a few “somethings that are gonna haftagive” when we consider these rapidly changing global dynamics.

If you have any visions of where this puts people in Bullard’s heartland, in, say the year 2035, please let us know your ideas in the comments. What does the future look like for your children under this scenario? What will their standard of living look like? What will transportation and supply chains look like in the U.S. and in Asia? Where will the job opportunities be? Will there be enough jobs? What will global cooperation look like by then?

How Much Has the Production of Global Commodity Crops Increased in 40 Years?

This chart, which shows us the increase in MMT (million metric tons) of various commodity crops between 1969 through 2009, is from the recent Iowa State AGMRC publication, “Can We Meet the World’s Growing Demand for Food?” by Don Hofstrand.

The production of soybeans has increased the most, at 431% in those forty years, followed by vegetables, sugar cane, and maize.

The VALUE of U.S. Corn, Wheat, and Soybean Agricultural Exports Has Gone Up, not the AMOUNT

Readers note that one of the reasons I started the new SASD site was because there were always many more posts that I wished to make than I ever had time to make as one person. Here’s an example of something I’ve been wanting to write about for a long time and luckily, now, someone came along and did it for me. In recent years, we’ve heard much bragging over how well our agricultural exports have done, always “up”, when in actuality, their price has gone up, not the amounts… of corn, soybeans and wheat commodities, which is never said… which is a bit of spin, if you ask me. This trade is affected by currency valuations and availability of infrastructure (for which U.S. producers are very lucky), in addition to supply and demand.

Thanks to Daryll E. Ray and Harwood D. Schaffer, Agricultural Policy Analysis Center, University of Tennessee at Knoxville for this writing and great graph, below.

Price and the value of agricultural exports

Exports are a big deal for agriculture, always have been and always will be. Of course, the mix of agricultural exports has changed over time. Tobacco exports back to the mother country have been replaced with worldwide exports of grains, oilseeds, livestock products, and a host of other foods, some sent raw or in bulk, others highly processed.

Recent years have been particularly good for agricultural exports. Agricultural exports set a new record of $140.9 billion in Fiscal Year 2013. Agriculture Secretary Tom Vilsack commented, “The period 2009-2013 stands as the strongest five-year period for agricultural exports in our nation’s history.”

Last fall he encouraged Congress to pass a farm bill, partly as a means to keep up the “incredible momentum” of agriculture exports by continuing to fund trade promotions programs. The Agriculture Act of 2014 came through with funding for the Market Access Program. The 2014 Farm Bill also creates an undersecretary of agriculture for trade and foreign agriculture. Clearly, Congress and the Obama administration are fans of agricultural exports and are planning for continued growth in the value of agricultural exports

The question is: Will the value of agricultural exports during the time of the 2014 Farm Bill experience the remarkable growth that was chalked up during the tenure of the 2008 Farm Bill?

Let’s begin by asking a different question: besides the ethanol phenomenon, what is the most striking thing that happened to crop agriculture in previous 5 years? Yep, crop prices rose to levels that few thought were even remotely possible.

Next question: Were those mammoth crop price increases largely responsible for growth the value agricultural exports? In the case of grains (primarily corn and wheat) and soybeans, the answer is definitely yes.

Figure 1 shows the volume of corn, soybeans, and wheat exports to be somewhat variable but relatively flat (line with long and short dashes). On the other hand, the value of exports (solid line) has exploded since the mid-2000s as has the price per metric ton (dotted line). The price and value of exports move together with few exceptions.

Figure 1: Corn, soybeans, and wheat – Volume of exports in thousand metric tons, value of exports in billion dollars, and price per metric ton in dollars.

Corn and soybeans are the top two contributors to the total value of agricultural exports. Clearly, their export values in the years ahead will be highly influenced by their prices.

As column readers are aware, history tells us that multi-year periods of exceptionally high crop prices are usually followed by much longer periods of exceptionally low crop prices. If that is the case, Secretaries of Agriculture in future years may be explaining dramatic drops in the value of agricultural exports.

Of course, the similarity of trends in export values and prices for other categories of agricultural exports—especially the growing volume of highly processed exports—are not universally as strong as the trends in crop export value and crop price.

Still, it seems most likely that over the period of the next farm bill, the overall trend in the value of agricultural exports will point in the same direction as the overall trend in crop prices.