As the global population approaches its peak and populations begin to fall in key export markets, U.S. soybean and sorghum producers are particularly exposed to shrinking demand and export losses, according to a new analysis from Terrain.
Although the United Nations projects that global population will peak in 2084, Terrain estimates that peak population could occur as soon as 2065, topping out at 9.38 billion, nearly a billion people fewer than the UN estimates.
“While it may seem like a distant reality, U.S. farmers must take population decline seriously as they consider what their family farm operations look like now and in the future,” Terrain’s Matt Woolf and Don Close write in “The Big Shrink,” a new research series released Monday examining the impacts of global population slowdown on U.S. agriculture.
Terrain is the economic analysis arm of American AgCredit, Farm Credit Services of America and Frontier Farm Credit.
Matt Clark, Terrain’s senior rural economy analyst, argues in his analysis that the population slowdown could have significant impacts on the U.S. farm economy. Improvements in productivity in competitor nations, he writes, are set to inject fiercer competition in global markets just as demand begins to shrink. Further, population shrinkage could contribute to labor supply woes.
Soybean and sorghum are most vulnerable to trade shocks stemming from slowing population growth, Clark adds. Around 87% of U.S. sorghum exports last year went to countries that have already seen their populations peak – including China, Japan, South Korea and Russia. Similarly, some 58% of soybean exports went to countries past their population peaks.
Soybeans and sorghum export markets are also highly concentrated, Clark writes. In some years, U.S. soybean producers rely on China for more than half of all exports, while the sorghum industry consistently relies on Chinese buyers to take more than 80% of the domestic crop.
China’s population has fallen for the last three consecutive years, according to the country’s National Bureau of Statistics. Many economists attribute the reversal to structural forces that are not easily reversed.
“Without significant changes, both commodities may struggle to compete for acres in the long run,” Clark writes.
By contrast, U.S. corn and wheat producers are among the most insulated from population-related trade shocks, Clark adds. The U.S. primarily exports both crops to countries with populations that are still growing, giving the industries more time to adapt.
For corn, the bulk of the annual crop also remains in the U.S. for domestic consumption. Terrain estimates that the North American population should continue growing until 2055-2060. When producers export, the analysis finds that the recipient countries are more financially stable and more likely to be U.S. allies, both of which create more resilient export markets.
Wheat producers face some medium and long-term risks from unstable export markets, but Clark indicates that if the industry pivots to expanding exports of higher-value products, it can mitigate some of the trade risks.
While the impacts of population slowdowns in commodity markets may not materialize immediately, they are set to compound over the next decade, Clark argues. As population declines get underway in Europe – which may have already begun shrinking, according to Terrain – and Asia, which could begin as soon as 2045, commodities that bear the brunt of faltering demand could face falling prices.
“Commodity prices for soybeans and sorghum will likely reflect how declining populations start to take a toll on demand,” Clark writes. “Developing new markets takes time, so investment and focus are needed now.”
Terrain plans to develop a road map for expanding export markets in future analysis and examine the role of high-value products and biofuels for future farm revenues. But the issue of depopulation will force a reassessment of U.S. competition amidst shrinking demand, the economists charge.
“U.S. agriculture has faced down challenges before,” Woolf and Close write, adding that innovation is often born in challenging economic climates. “Farmers innovate out of necessity.”
