Global demand requires that the world add more than 20 million acres to crop production over the next five years, leading agricultural economist Dan Basse told attendees of the American Seed Trade Association’s annual field crop convention in Orlando Wednesday.
In his talk and in a follow-up interview, Basse noted that “per capita global grain yields are stagnating.”
“I know we've got more acres in the world, and we can utilize them, but the speed that we have to put them into production is going to be important,” he said, pointing to Brazil as the likeliest country to provide more arable land.
Basse, who heads AgResource Co., a risk management and advisory firm in Chicago, has addressed the ASTA conference for 10 years.
“When we look at U.S. corn and soybean yields …we've not set a new corn or soybean yield [record] looking back to like 2016 or 2017. That's unusual, and it tells us that dry soils, that temperature, is having an impact.”
Yields haven’t been bad, but they have been going “sideways," he said.
“We're kind of plateauing, which means as demand continues to grow to feed an ever more populous world, [we] need to have those extra acres,” which he estimated as between 23 and 24 million.
“The United States is maxed out, the Europeans are maxed out, there's a war in the Black Sea – so it's got to come from Latin America.”
The most likely place for the new farmland would be in Brazil’s Cerrado region, he said. “We call it the pasture land south of the rainforest, where there's still an estimated 18 to 20 million acres there that can be brought under plow,” he said.
Basse emphasized impacts of climate change and warming oceans in his talk, while carefully sidestepping the question “whether it’s caused by man or God. We’ll leave that for you to decide.”
Ocean temperatures are setting records, he noted. “As sunshine comes into the planet from afar, it's being trapped in our oceans, it's not being trapped in our land masses,” he said. “And we're getting something called marine heatwaves."
“We need to have more thought process, if you will, in terms of growing crops under high temperatures,” Basse said.
Overall, Basse said farm income for next year looks to be about the same or somewhat better than this year, which will see a drop of $30 billion from last year’s record $183 billion, according to USDA’s Economic Research Service.
“I think farm income will be stable, maybe increase a little bit,” he said, adding that a “a lot depends on the weather,” particularly in South America, where rainfall in Brazil’s Mato Grosso region has been well below normal.
“Mato Grosso, a state that's bigger than Texas, normally gets about 12 inches of rain during the month of December. So far, they’ve got about 1.7,” he said. “They're dry, and it's still accentuating the drought that's there. And my climate forecaster would tell you that as you look at Brazil, he's still expecting it to stay warmer and drier than normal in the Amazonian areas for at least another couple of months.”
“This is what's affecting crop yields globally,” Basse said. “It's not that we're not working as hard or technology isn't helping us. Mother Nature's kind of been adverse.”
The bad weather in Brazil could be profitable for U.S. farmers. “There's almost a one-to-one relationship – as Brazil has weather problems, the U.S. farmer shares in the bounty,” he said.
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As he has before, Basse highlighted the importance of renewable diesel for the soybean industry, taking note of new crushing facilities coming online that will increase the U.S. crush capacity by 200 million bushels next year. In 2025, that number increases by an additional 240 million bushels.
“We're now entering the point where renewable diesel is really starting to kick in,” Basse said. “We still believe that there's nine to 11 million acres that need to be transported [from] other crops into soybeans by 2026.”
Basse also touched on the advent of artificial intelligence.
“I worry a little bit about the markets because as AI takes over, we now know that over 90% of the trades in the Chicago market are non-human,” he said.
“It's a different methodology of trading,” he said, comparing humans and machines.
“It's the groupthink, if you will, or this machine think, if I can say that,” he said. “That has the biggest impact, and it sends prices higher or lower than it might normally have happened, which again, provides opportunity but also causes angst within the agricultural industry.”
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