A little versus a lot
The agricultural market pages in this magazine and other news outlets have been downers lately. We enter the growing season knowing that prices have fallen dramatically from recent highs, and from the looks of it, there won’t be any near term traction for a climb back up.
You’ve seen the cycle before. World production has outpaced demand. There are enough carryover stocks to dampen prices. Currency value imbalances leave the U.S. dollar stronger than its competitors, spurring on more intense ag commodity competition from the likes of Brazil, Argentina and countries in the Black Sea region. Economic woes from big buyers like China have eroded the same demand that drove up prices earlier. It’s the vagaries of the market, as the econ wags like to say.
These world conditions come and go as cycles do. There are a couple things worth considering, though, that are more long-term and linear: the incremental yield gain of U.S. farmers compared to what could be wholesale gains in developing countries; and the hard-won competitive advantages of U.S. farming.
On page 12 of this magazine, Matt Stock talks about setting up MFA’s first multi-variety planter. The idea is to get corn varieties in the places they will do best on a farm regardless of field boundaries. It’s a relatively new technology, but one that promises incremental yield gains for the investment of equipment and data analysis.
There is no reason to believe that the technology won’t work. Precision agriculture has proven itself at delivering incremental yield gain and cost reductions over time. According to a Farm Bureau survey of farmers in 2014, respondents figured that precision technology had reduced input expenses for seed, fertilizer and pesticides by about 15 percent on average. Respondents in the survey also said they had seen an average yield increase of 13 percent.
The rate of precision technology adoption speaks for itself, and crop genetics have a long track record of year-over-year average yield increases. But in developing countries, where the adoption of technology means buying a farm’s first tractor or first improved seed, there is a potential for much more dramatic per-acre yield gain—and in a short amount of time. Foreign investment flowing into Africa’s arable regions is an example. In Ethiopia, investors from Saudi Arabia have made multi-billion dollar bets that large-scale farming will work in Africa.
The Chinese are investing, too, with enormous sums of money. These investments aren’t just in Africa. They are in other places where land is available (read: not farmed at the U.S. level of expertise or efficiency).
If these investments hold together, they could represent a sprint in yield increases compared to our incremental distance run. On the other hand, all that speculative money could go the way of foreign investment sunk into oil production in Venezuela—right down the dictatorial drain.
As farmers and agribusinesses, there isn’t much we can do to affect crop production elsewhere. What we can do is focus on our competitive advantages, including making sure we keep them.
For precision agriculture, that means getting broadband to more rural areas. Like rural electrification before it, the last-mile profitability barrier for service providers continues to plague farmers. To keep squeezing efficiency through technology and data, we need to build out our broadband infrastructure. According to analysis from the FCC this year, some 40 percent of rural Americans lack access to real broadband (compared to just 4 percent of urban residents).
Farms are getting bigger, and the incremental gains we make in yield smaller. In years like this one, that incremental gain is more important than ever. And in a world where crop production is likely to expand, it will remain so.
Rural broadband is just one item on a list agriculturalists need to promote among decision makers. Add it to transportation infrastructure, relief from overbearing regulations and access to export markets. Our competitive advantages aren’t set in stone.
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