Long-Term Grain Demand Looks Strong

April 1, 2009 07:00 PM

Charles Johnson, Top Producer National Editor
Population growth and increasing per capita consumption should push grain demand over the next decade and a half, says Rich Pottorff, Doane Agricultural Services chief economist.
That calls for higher yields, increased acreage, or a combination of the two, he says.
Pottorff forecasts population to increase by 80 million people annually. That alone will boost grain demand 400 million metric tons by 2023, he says. Per capita consumption is currently rising 5 lb. yearly. That adds another 270 million metric tons to grain demand by 2023, he says.
"We'll need to increase production 650 million metric tons by 2023,” Pottorff says.
If global grain yields don't significantly increase, that would require an additional 540 million acres. Foreign yields currently lag behind the growing pace of demand. If that continues, the gap has to be filled with U.S. grain, he says.
"The pace of demand growth appears to be accelerating due to improving diets in developing countries. In six of the last 10 years, consumption exceeded production. That's not sustainable. World production is struggling to keep pace with consumption. They've filled the gap by drawing down carryover stocks. Even the big 2008 crop only ticked things up a little bit,” Pottorff says.
"The race between demand and production is going to continue. Meat consumption is rising. We're going to have to add another Canadian wheat crop every year to keep up with population.”
Though world soybean acreage nearly doubled in the past two decades, consumption kept pace with production. Pottorff believes China's soybean deficit will reach 79 million metric tons by 2023, nearly equal to the entire U.S. production in 2008.
"The soybean yield trend is slowing down because of rust, especially in Brazil, and because soybeans are expanding to where the climate is not suited for soybeans,” he says.
"This means we'll need to add 25 million hectares of soybeans in order to meet that deficit. We have a real task ahead of us. Brazil and Argentina are slowing expansion and won't add more unless the economy is better,” Pottorff says.
Corn has a similar outlook, Pottorff thinks.
"The gap in foreign corn production and use, in theory, has to be filled by U.S. exports. If you extend the trends for 2009, the corn deficit goes back to 54 million metric tons,” he says.
Where will all this grain be produced?
"There isn't a whole lot of land we can add in the U.S. For the most part, we'll need to add area elsewhere. That could narrow the gap from the bottom up with rising land values in Brazil and Argentina. In Ukraine and Russia, there certainly is capacity for an increase in production. There is more potential for increased production there than almost any other part of the world,” Pottorff says.

You can e-mail Charles Johnson at cjohnson@farmjournal.com.

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