Many U.S. farmers might not be focused on building export demand as tight domestic crop supplies continue to drive prices higher.
But exports could be the key to building demand and maintaining profitable crop prices in the future, according to Rich Pottorff, chief economist for Doane Advisory Services.
Pottorff projected other major sources of grain and oilseed demand in the U.S. will either decline, which he projected for crop demand from the livestock industry in 2013, or level off, which could be the case in the ethanol industry by 2015
“Demand is really what has changed (the crop markets) so much. It’s growing so much faster now,” he said last week at the Doane Ag Outlook Conference in St. Louis. “Most of what’s been happening on the demand side has been driven by biofuels and China.”
Rich Pottorff, chief economist for Doane Advisory Services
World per capita consumption of grain increased 6 percent since the early 2000s. The ethanol industry during that time increased its consumption of corn from 1 billion to about 5 billion bushels, the economist noted.
But that trend likely won’t continue as ethanol production nears the blend wall.
“China is the key driving factor,” Pottorff said.
The economist believes China will continue to be a major buyer of soybeans and will increase corn purchases in the future. Corn demand in China is increasing at an annual clip of 5 percent compared to just a 1.5 percent increase in yields.
“Yields can’t keep up with demand growth in China (a former net exporter of corn) as it stands now,” Pottorff said. China brought 15 million more acres of land into crop production from 2000 to 2012.
“Long-term, (the Chinese) can’t continue to add acres like they have in the past,” Pottorff said.
The current soy deficit in China is about 2.2 billion bushels. He predicted China’s corn deficit could grow to 1.1 billion bushels by 2017.
There will be a lot of competition for that demand, though.
There could be anywhere from 200 million to 400 million more acres of land suitable for crop production in Brazil and there currently is about 100 million acres of idle land that was used for crop production in the former Soviet Union.
“It seems hard to me to say we’re running out of cropland,” Pottorff added. “We’re going to have to be competitive to not lose more of our share of the marketplace.”