Category Archives: corn

Do Corn and Soybean Farmers Feel Like Hamsters on Wheels?


Flickr CC photo by Asad.

Though we always hear that there needs to be more investment in agricultural research, an agronomy student once told me that his professors are frustrated by the fact that nothing they can offer in the way of agricultural advice will be adopted by farmers unless it increases their profitability. And, usually that comes by way of reducing labor, increasing yields, or through policy.

We have a situation today where the efficiency of industrialized agricultural methods are being challenged because of ever rising input costs as well as ever growing global production competition as more and more of the developing nations adopt our industrial methods of production. Additionally, whereas the U.S. used to be the world’s corn exporting powerhouse, we’ve relinquished export market share since mandated ethanol policy went into effect.

In recent years, the agribusiness giants have done extremely well and many corn and soybean farmers have just ended a cycle of great crop incomes, too. We all know how well the S&P 500 has done in the past five years, but Deere has done even better:

In part recent farm-related profits have been due to government policies of direct farm payments and crop insurance, and in larger part, because of the biofuels mandates. But, it looks like that good time period is about to end. A recently released FAPRI study forecasts breakeven crop prices through 2023 for U.S. farmers.

Furthermore, during the five-year corn commodity price bull run we’ve just experienced, the profits went to the top half of producers, while the bottom half was left out; the top 10 percent of producers made 10 times the amount of profits than the bottom 10 percent.

Approximately 97 million acres of corn and 78 million acres of soybeans were planted in the U.S. in 2013. Let’s take a look at profitability from the farmer’s perspective by using data provided by Mike Duffy of the Iowa State Extension Service, who provides ongoing data updates for the input costs per acre to grow corn and soybean crops in Iowa. His data shows that the machinery costs for growing corn rose 420 percent in the 46 years between 1968 and 2014. The cost for seeds, chemicals, and fertilizers went up over 1000 percent. The yield in corn bushels per acre went up 77 percent for an overall cost per bushel increase of 347 percent over the past 46 years.

My chart below helps demonstrate the numbers:

And the following chart by Chad Hart of Iowa State helps us more in visualizing input costs versus returns of Iowa corn farmers (note the number of years that the average cost of production exceeds the corn price):

source: https://www.extension.iastate.edu/agdm/info/agcycles/hart.pdf

Hart included this commentary with the graph above, “When we examine the average return to a bushel of Iowa corn over the entire time period from 1972 to 2012, it is a positive 5 cents per bushel. However, if you looked at 1972 to 2011, the average return was negative.”

Whereas the input providers can set their prices, the farmer-producer is always at the mercy of the markets. What the farmer has the liberty to decide, however, is his/her choice of methods.

As for benefits, a major economic benefit for the corn and soybean farmer comes from taxpayer supported policy programs which help to ensure that production costs are met each year. The new farm bill offers even greater support to the farmer when prices fall, putting a high floor under prices. Unfortunately, today’s policy also encourages farming on marginal land because of a guaranteed profit to the landowner.

Then, there is also the labor saving benefit of today’s row-crop farmer. Compared to the old rotational grazing systems, the grain farmer’s time commitments have fallen dramatically, offering a better lifestyle and the opportunity to work off the farm for additional income.

What does this all mean and where is the corn and soybean farmer headed?

First, precision agriculture may be another method to increase production, but it comes with a large price both in dollars and in trust of the technology, creating a new set of risks and challenges. Second, integrating cover crops into cash crops can make row-crop farming more ecological and more productive in the long run. And, third, it is expected that by planting closer together, and by further improving genetics, crop yields per acre can continue to increase, but that, too, will come with higher input costs of seeds, fertilizer, and machinery for farmers – which brings us once again to the hamster on the wheel situation.

The farmer who can reduce his/her input costs and produce a product of value, such as providing organic products to answer consumer demand, may do well, and, the younger farmer demographic is looking into new alternatives and ideas which challenge the status quo. Perhaps this is all best summarized by a CNBC news headline that I spotted over the weekend, “There’s a growing discontent around farming in America.”

IEA: World Water Day Awareness of Water Use in Energy Production

“Water availability is a growing concern for energy, and assessing the energy sector’s use of water is important in an increasingly water-constrained world” —IEA Executive Director Maria van der Hoeven

Tomorrow is officially designated “World Water Day” and this week, the IEA has been trying to raise awareness about the amount of water used to produce energy – on Twitter. The chart below is from the IEA’s World Energy Outlook 2012 PDF “Water for Energy – Is Energy Becoming a Thirstier Resource?

Please take note of the fact that the bottom half of the chart relates to water requirements for producing biofuels, and also note the differences between the various biofuels water requirements. Especially, note the minimum for each biofuel, which is defined as “non-irrigated crops whose only water requirements are for processing into fuels.” (This chart should also help drive home the fact that using irrigated corn to produce ethanol is highly irrational and wastes a precious resource, something that should be corrected by policy – now.)

To follow, are some of the IEA’s tweets (and facts from the PDF linked above), (rewritten for clarity), that contain some very interesting statistics about water use in energy production:

It can take nearly 60 gallons of water to power a 60-Watt incandescent light bulb for 12 hours.

154.3 trillion gallons of freshwater are used in energy production per year.

Water requires energy, and energy requires water: Each kilowatt hour of electricity requires the withdrawal of approximately 25 gallons of water.

Energy depends on water for power generation, extraction, transport and processing of fossil fuels, and irrigation of biofuels feedstock crops.

Energy accounts for 15% of global water usage, and will consume ever more through 2035.

Global water withdrawals for energy production in 2010 were estimated at 583 billion cubic metres (bcm), or some 15% of the world’s total water withdrawals. Of that, water consumption – the volume withdrawn but not returned to its source – was 66 bcm. In the New Policies Scenario, withdrawals increase by about 20% between 2010 and 2035, but consumption rises by a more dramatic 85%. These trends are driven by a shift towards higher efficiency power plants with more advanced cooling systems (that reduce withdrawals but increase consumption per unit of electricity produced) and by expanding biofuels production. (source: PDF)

So, as we can see, the IEA’s anticipated increase in biofuels production between 2010 and 2035 accounts for a large share of the anticipated increased demand for water used to produce energy.

In the energy-food-water nexus, water is the member of that threesome that is increasingly grabbing the headlines. And, in my opinion, a more accurate description of the problem we face would be the energy-food-water-biofuels nexus.

(source)
(IEA’s Twitter Feed)

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.