Department of Agricultural Economics Purdue University

Long-Term World Acreage Response and Food Prices

Chris Hurt Purdue Extension Service

November 2012, hurtc@purdue.edu

Department of Agricultural Economics Purdue University

https://www.farmfoundation.org/searchresults.aspx?pno=1&st=food prices

WHAT IS DRIVING FOOD COMMODITY PRICES?

Purdue studies with Farm Foundation: 2008, 2009 and 2011

Department of Agricultural Economics Purdue University

Agricultural Booms are led by Unexpected Demand Surges that often have a Macro Economic influence, and come after a period of weak supply growth

Agricultural Bust are led by the failure of the demand surges to continue, by reversal of macro-economic factors, and by a surprisingly large supply response to high agricultural prices

Department of Agricultural Economics Purdue University

Department of Agricultural Economics Purdue University

Department of Agricultural Economics Purdue University

5.0 4.1

7.4 9.0

10.3

8.3 9.9

12.1

17.3 18.8

21.1 20.9 20.4

3.3 3.7

5.6 5.9 6.0

7.8

10.3

14.5

17.3

20.0

23.8 24.6

26.7

1.4 0.8

0

5

10

15

20

25

Mill

ion

Acre

s

Crop Year

Acres of U.S. Soybeans Exported to China; Acres of Corn to Ethanol(ddgs adjusted); Acres of Corn Exported to China

Bean Acres to ChinaCorn Acres to EthanolCorn Acres to China

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Biomass-based Diesel 0.5 0.65 0.8 1 1 1 1 1 1 1 1 1 1 1Non-celulosic Advanced 0.1 0.2 0.3 0.5 0.75 1 1.5 2 2.5 3 3.5 3.5 3.5 4Celulosic Advanced 0.1 0.25 0.5 1 1.75 3 4.25 5.5 7 8.5 10.5 13.5 16Conventional Biofuels 4 4.7 9 10.5 12 12.6 13.2 13.8 14.4 15 15 15 15 15 15 15 15

0

5

10

15

20

25

30

35

Bill

ions

of G

allo

ns

Renewable Fuel Standard (2007-2022)

Department of Agricultural Economics Purdue University

8.4 7.8

13.0 14.9 16.3 16.1

20.2

26.6

34.6

39.2

45.1 46.9 47.9

0

5

10

15

20

25

30

35

40

45

50M

illio

n Ac

res

U.S. Acres Required for Chinese Soybean Exports; Ethanol (ddgs adjusted); and Chinese Corn Purchases

1.9M acre/year

5.8M acre/year

1.4M acre/year

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7% 6%

10% 12%

14% 12%

13%

19%

23% 25%

28% 28% 27%

5% 5% 8% 8% 8%

10%

15% 17%

22%

25%

29.2% 29.3% 30%

0%

5%

10%

15%

20%

25%

30%

% of U.S. Harvested Acres: Corn to Ethanol and Beans to China

Department of Agricultural Economics Purdue University

Picture: Michigan State University

Department of Agricultural Economics Purdue University

1972/73= 1,872

1981/82= 2,115

1996/07= 2,104

2002= 2,033

1,600

1,700

1,800

1,900

2,000

2,100

2,200M

illio

n World Harvested ACRES 13 Major Crops Total: (Millions)

71 Million acres reduction in 6 years

Department of Agricultural Economics Purdue University

1972/73= 1,872

1981/82= 2,115

1996/07= 2,104

2002= 2,033

2005/06= 2,144

2012/13= 2,267

1,600

1,700

1,800

1,900

2,000

2,100

2,200

2,300

2,400M

illio

n World Harvested ACRES 13 Major Crops Total: (Millions)

123 Million acres added in 7 years

Department of Agricultural Economics Purdue University

Buying farmland abroad Outsourcing's third wave Rich food importers are acquiring vast tracts of poor countries' farmland. Is this beneficial foreign investment or neocolonialism? The Economist: May 21, 2009

Department of Agricultural Economics Purdue University

Department of Agricultural Economics Purdue University

71.0

33.7

14.7 14.6 8.1 6.2

0.8

-0.6 -2.1 -3.0 -3.1 -6.0 -11.0 -20

-10

0

10

20

30

40

50

60

70

80M

illio

n A

CR

ES

Change in World Harvested Area 2012/13 vs. 2005/06 (Million

Acres)

-123 million new World Harvested Acres -About ½ of the non-hay U.S. crop acres

Department of Agricultural Economics Purdue University

21.5

18.3 17.2

14.4

12.4

9.2 8.2

7.2 6.6

3.9 3.5 2.1 2.0 1.7 1.5 1.1 0.4

-0.2

-2.2

-2.2 -3.1 -5

0

5

10

15

20

25By Country: Change in World Area of 13 Major Crops: 2012/13 vs.

2005/06 (Million Acres)

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36.4

20.2 17.9 17.2 16.3

13.7

8.2 3.9

0.9

-2.5 -9.3

-20

-10

0

10

20

30

40M

illio

n Ac

res

Change by Region in Area Harvested in 13 major World crops 2012/13 vs. 2005/06 (Million Acres)Total +123 million acres

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India Ag Export Rank: #7 in Wheat #4 in Soybean Meal #2 in Rice #1 in Beef

Global Supply Response is both: -Extensive -Intensive

South America Dominates Soybean Production!

Department of Agricultural Economics Purdue University

5.5

2.6

0

1

2

3

4

5

6

Billi

on B

u.

South America

U.S.

Area Production

Argentina 13% 34%

Brazil 10% 22%

S. America 11% 29%

Change from 2011/12 Crop

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15.1%

14.6%

14.9%

18.9%

13.7%

10%12%14%16%18%20%22%24%26%28%30%32%34%36%

World Stocks to Use %: USDA May/Oct 2012 Wheat

Rice

Soybeans

Corn

Oct 12 May 2012

Department of Agricultural Economics Purdue University