Minding Ag's Business

Yes Virginia, They Can Make More Farmland

Total world harvested acres surged in the 1970s and again after 2006.

Farmers sometimes justify paying inflated values for the real estate, arguing the world doesn't make farmland anymore. A new analysis by Purdue University Economist Chris Hurt reminds us it's time to retire that myth for good.

Much higher grain and oilseed prices caused the world to "manufacture" more acreage twice in the last five decades. The first surge--from 1972/73 to the price peak in 1981/82--triggered a global supply response that lured 243 million new harvested acres into production for 13 major crops (see chart), according to Hurt's study. That's the equivalent of creating another megaproducer like the United States in less than a decade. It's also one reason--along with the collapse of grain export markets--that global surpluses dominated the 1980s headlines and kept commodity prices in check for years.

It's no surprise that between 2005/06 and 2014/15--when cash corn prices peaked near $8--the same phenomenon repeated itself. This time the supply surge attracted 157 million new harvested acres worldwide, Hurt notes, but there were some major differences. "In the early period the U.S. government had accumulated about 60 million acres in the Soil Bank program and Secretary Earl Butz released almost all of that land to go back into crops," Hurt says. In addition, another 30 million acres of pasture and other non-row crops were converted.

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This time, environmentally sensitive lands played a much smaller role in U.S. conversions. True, the Conservation Reserve Program shrank from 34.9 million acres in 2005 to 25.6 million for 2014 (and down another 1.4 million acres for 2015 crops), so some fragile reserves were tapped. However, sodbuster and swampbuster rules in place since 1985 muted the U.S. response.

But be ready for a few surprises when you analyze where our global competitors filled in the acreage gaps. South America added 45.9 million acres, sub-Saharan Africa 28.3 million, East Asia (mostly India) 22.8 million and the former Soviet Union 21.7 million acres. Contrast that with a gain of only 9.8 million "new" cropland acres in the U.S.

To meet the ethanol and China soybean demand surges, the U.S. shuffled plantings to add 21.3 million acres of corn and soybeans between 2005 and 2014, Hurt observes. "How did farmers do that? My rough estimate is that about 55% was by reducing acreage in other crops (hay, cotton, oats, etc.)--and around 45% came from more land (former CRP land and double-crop soybeans)."

Once in production, "new" farms don't vanish quickly. Surplus crops could overhang the market if biofuels use stalls or the Chinese economy falters. Long-term forecasts by USDA and the University of Missouri's Food and Agricultural Policy Research Institute expect the U.S. to be awash in grains for several years. By Hurt's count, that means Indiana grain farm incomes could tumble 30% in 2014 and another 35% in 2015, even including government payments under the new farm bill. He gauges the state's grain incomes at $1.1 billion for 2015, down from the recent high of $3.4 billion in 2011.

In other words, acreage surges show new cropland gets planted until demand catches up to supplies. One thing we know for sure is global farmland isn't finite.

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Comments

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Curt Zingula
12/9/2014 | 7:30 AM CST
If Hurt's numbers are correct, they lay to rest the doom and gloom of feeding the world in 2050! However, I find 157 million acres added world-wide in one decade a little too overwhelming to accept. 157 million acres is half of all planted acres in the U.S. In one decade! By countries that don't have the infrastructure to support that increase! I'm wondering if Hurt is depending on EWG and their satellite pixal surveys to say that every wetland in the world is being farmed?
Jay Mcginnis
12/8/2014 | 8:43 AM CST
Oh really? Unlimited supply of land? Just like unlimited supply of oil this concept is very short sighted. What kind of world happens once the entire Amazon is cut down, when fragile shallow soil land loses its top soil and cheap fertilizers can't replenish it? How about if infrastructure fails to get crops to market from deep in the interiors of land locked jungles and the plowed grasslands destroy the diversity of native wildlife? Millions of acres have been lost to suburban sprawl and as long as cheap oil increases yields we can marvel at infinite world farmland. The new surpluses are results of frack oil and tar sands coming to market, essentially scrapping the bottom of the oil barrel clean. Yes there are acres and acres of farmland being developed but how sustainable are they?