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Farmland Forecast

RSS By: Marc Schober,

Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.

Future Agricultural Production Limited

May 19, 2011

The world’s gross agricultural output needs to increase by 3.4% to meet the growing demand primarily driven by emerging markets across the globe. The two primary ways to increase agricultural production are to either increase the amount of acres planted or increase productivity with technology.

Crop yields have been slowly increasing over time, with the largest increases due to the green revolution and the advancement of hybrid seed technology. Even with the past seed technology, crop yield increases are near 1.0% per year in the U.S while a considerable amount of farmland is being lost to development. Crop production must increase via either new technology or by expanding the amount of cropped land by bringing idle arable land into production.

Land to be Brought into Production

The ability to expand arable acres over the next 40 years will be difficult. The best areas for farming have already been identified and are being used for production. The incremental arable acres to be put into production will be on the periphery, with marginal growing conditions and transportation issues.

Presently, the growth of arable farmland has been flat as development of farmland in North America and Europe is offset by expansion in Africa and South America

There are roughly 1.5 billion hectares that are currently being farmed in the world. The FAO estimates that the world has a total of 2.5 billion hectares of “very suitable” or “suitable” for cultivation. 80% of the reserve land is located in Africa and South America.

Investment bank Credit Suisse estimates that only about 300,000 hectares of additional potential acreage, with the majority in Brazil and Indonesia. The table below summarizes the current and potential global arable hectares.

Farmland Forecast   Global Acreage Expansion marc schober 2011 conab

The primary expansion opportunity lies in Brazil, where the government organization Conab estimates there is an additional 106 million hectares available for agricultural development. The majority of this land is located in Brazil’s cerrado or high plains, a vast savannah in the central-western area of the country. The cerrado comprises of roughly a quarter of Brazil’s land.

Historically the soil was thought of as unfarmable due to the high acidity levels and lack of nutrients. New technologies that allowed farmers to improve soil fertility and a new type of soybean developed to grow in tropical climates allowed farmers to start producing crops in the early 1980s.

Today, the cerrado is Brazil’s most important soybean producing region and accounts for nearly all its growth in soybean production since 1980. Roughly half of the country’s corn and 90% of its cotton is also produced in the cerrado.

The primary issue expanding acreage in the cerrado is infrastructure as the majority of additional acres are located in Brazil’s cerrado, which is 1,500 kilometers from the nearest ports. Prices will need to rise substantially before the cerrado will be able add to global production.

Indonesia has substantial ability to expand acreage for palm oil cultivation. The Indonesian government estimates that it only using half of its land available for cultivation. In January, 2011, Indonesia targeted expanding the county’s agricultural land by two million hectares in the medium and long-term, although this plan his received much criticism as this would result in the removal of tropical forests.

Ukraine, Russia and Kazakhstan saw a substantial decline is arable hectares and crop yields following the decline in communism. The FAO estimates that arable hectares declined 11% between 2005 and 1992. Credit Suisse estimates that if arable hectares return to 1992 levels, this would add 1.9% to the total global arable acres.

Farmland set aside under the Conservation Reserve Program (CRP), could add to the amount of U.S. arable acres. At the end of 2010, 31.3 million acres were enrolled in the CRP in nearly 738,000 contracts according to the USDA. As the CRP contracts expire, much of this land may be put back into production, but a majority of this land is marginable at best, which is the primary reason it was put into the program in the first place.

Farmland Forecast   total us planted crp acres marc schober production 2011

Biotechnology Expansion

Although the amount of farmland is limited in the U.S. and in the world, farmland that is able to produce corn is expanding in the Midwest primarily due to biotech seeds. Several large seed and agrichemical companies such as Monsanto, Dupont (Pioneer), Dow Chemical, Syngenta, Bayer Crop Science, among others, have focused years of research and product development on higher performing varieties and hybrids of important food and feed crops.

While Genetically Modified Organisms (GMOs) are not without controversy and are essentially banned in Europe and Japan, in the U.S. better drought and cold tolerance has expanded the land area that can be used for cold sensitive crops. For instance, the land planted to both corn and soybeans over the past 15 years has expanded North (colder) and West (drier). The acreage allotted to corn and soybean production is expanding northwest to regions where growing degree days are in less numbers.

Farmland Forecast   Corn planted 1995 hybrid seed technology 2007 william wilson ndsu marc schober greyson colvin

Biotech seed manufactures are currently developing the next generation of biotech traits that focus on greater productivity, improved nutrient use, disease resistance, plant density, and continued drought and cold tolerance.

All farmland that is planted with GMO corn requires a set percentage of the field to be planted with non-GMO corn, called refuge acres. The theory is to prevent pests and disease from becoming immune to the GMO traits that were developed to deter the pests and disease in the first place. Historically refuge acres must make up 20% of planted corn in the Corn Belt, but Monsanto’s Genuity SmartStax (DeKalb Brand) and VT Double Pro Corn seed allows for only 5% of the acreage to be planted as refuge, according to Monsanto.

On average, GMO corn will have higher yields than refuge corn thus any decrease in refuge acres should increase yields and boost the total production. It is the goal of seed manufacturers to continue to decrease the amount of mandatory refuge acres as well as supply refuge seed alongside GMO seed inside the same bag. Refuge in a bag seed corn may become the new staple for the American farmer very soon.

Nitrogen fertilizer is the largest fertilizer expense for corn farmers. Roughly $8 billion is spent on nitrogen by corn farmers each year in order to obtain maximum yields. Seed manufacturers Monsanto and DuPont are working on developing seed traits that are much more efficient with nitrogen use. The theory of efficient nitrogen use among corn would substantially cut down on the need for nitrogen and also maximize corn yields with less input costs.

Precision Farming

Precision farming is drastically changing the efficiency of the entire farming operation through new technology in machinery. Through information technologies, farmers are able to use variable fertilizer and nutrient applications, variable-rate seed populations, minimal tillage methods, and the time saving auto steer capabilities in new tractors.

Real Time Kinematic (RTK) Global Positioning Systems (GPS) are being used in many farm operations across the world. When paired with information technology, RTK GPS allows farmers to save on fertilizer costs, and most importantly, time. Farmers can take on information such as Cat Ion Exchange (CEC) levels from the soil and apply variable amount of fertilizer to accommodate the soil.

Precision farming has made way for strip tillage methods. Strip tilling is when a farmer using RTK GPS and computers tracks their progress within an inch of accuracy. Each year the rows of corn are shifted to the left or right by a few inches to make use of a new area of soil. This new designated strip will then receive the fertilizer and house the feed furrows for the next crop. Auto steer technology must be used with strip tilling for farmers to stay on the narrow strips each year. RTK GPS auto steers the tractor while tilling, fertilizing, planting, and harvesting.

Farmers are able to now use satellite imagery to map out their farmland while matching up grid soil samples and combine yield data within one-inch accuracy to determine the precise amount of fertilizer needed to replenish the soil for the next crop. The calculations can be done within the on board computer system inside the tractor. Varied amounts of fertilizer can be applied to save on money and time while maximizing yields.

Farmland lighter, sandier, soils can greatly benefit from variable seeding rates. The goal of farmers is to maximize yields from the available nutrient base while keeping input costs down. By cutting seed populations down from 35,000 seeds per acre to 15,000 seeds per acre on lighter soils, these plants will make use of the nutrients more efficiently by having less competition from each other which will create larger yields. Too high of a seed population will hurt yields. When using variable-rate seeding, the end result is less seed cost and higher yields.


The U.N estimates that global agriculture will need to produce more food in the next 50 years than what was produced during the previous 10,000 years, putting more and more pressure on future farmers and the land they use to produce our food.

Traditional farming methods cannot keep up with growing food demand, but increased planted acres, biotech development, and precision farming will ease some of the demand. Rising commodity prices and growing demand for food will continue to drive innovation and new technologies, but farmers have an uphill battle to solve the world’s food supply.

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COMMENTS (1 Comments)

All of these aritlces have saved me a lot of headaches.
1:02 AM Nov 1st

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