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DEMAND-DRIVEN AGRICULTURE ALTERS CROP PLANTING MIX
A combination of growing population and greater economic strength in many regions of the world is driving an increase in the demand for food. In many countries, economic growth is giving people an opportunity for the first time to raise their standard of living – starting with their diets. This trend is expected to continue. According to the IMF, global GDP is expected to grow by roughly 5 percent annually for the next several years.
Source: IMF October 2007
The current demand-driven agriculture cycle worldwide has farmers around the globe moving from more traditional crop mixes to planting what the market dictates.
In 2008, with a continued rise in world demand for food, feed, fiber and fuel, producers are responding to strong price signals from the market. Farmers everywhere are deviating from traditional cropping patterns and in some cases, converting lower-quality land to broad-acre crops.
"We are seeing this shift in cropping patterns from the US corn-soybean belt to Brazil's Mato Grosso region to the rice fields of Guyana and Suriname," said PotashCorp Director of International Sales Chris Reynolds. "With corn, soybean, wheat and rice prices at or near historic highs, the signal is there to the farmer to maximize production of these crops."
Switching crop mixes
In 2007, farmers all over the world jumped at the chance to cash in on high-priced corn. They planted in fields that once lay fallow, were typically used to grow other crops or were used for pastureland.
Legions of US wheat farmers planted corn on land once deemed most suitable for wheat, and corn-after-corn plantings replaced the more typical soybean-after-corn rotation. While corn plantings were estimated to be at all-time highs in the US, soybean plantings suffered.
Due to the high demand for soybeans in the world market, other countries stepped up soybean plantings. In Brazil, the trend toward increasing acreage of sugarcane to support ethanol production has slowed as some of these acres are converted back to grow more profitable soybeans.
This year corn plantings in the US could decrease somewhat from the record high of 93.6 million acres in 2007. Doane predicts that US farmers are likely to plant more wheat and soybeans and less corn. Based on crop futures, they are expected to plant 63.5 million acres to wheat, up 3.1 million acres, and 69.7 million acres to soybeans, up 3.1 million acres. Corn acres are expected to fall back to 90 million in 2008, down 3.6 million from last year, but up nearly 12 million acres from 78.3 million in 2006.
Meat consumption in the developing world remains well below the levels we are accustomed to in North America and much of Europe, although the gap is expected to narrow over time. In China, meat consumption has more than tripled in less than 20 years. As this growth continues, more animals must be produced, increasing the amount of grain needed for animal consumption.
Source: FAO
A surge in demand for rice, a staple in many diets, has prompted two net exporters of rice on the northeast coast of South America, Suriname and Guyana, to put back into production rice paddies that were not being cultivated two years ago.
Overall, fertilizer supplies are expected to again be very tight this year. Generally, higher crop prices inspire farmers, here and abroad, to apply adequate amounts of fertilizer. In developing countries, where fertilizer application has often been lacking, even more fertilizer is needed to restore the soils' nutrient levels.
Last year, global potash demand increased significantly, about 15 percent, requiring about 7 million additional tonnes of product.
In 2007, China imported about 9 million tonnes of potash: Chinese estimates anticipate potash consumption growth of 7 percent annually for at least the next five years. In Brazil, the rise in potash demand is fueled by the demand for more soybean production from soil that is very low in potassium. In 2008 and subsequent years, world demand growth is expected to average 3 to 5 percent annually – approximately 2 million additional tonnes of potash each year.
"The world's farmers are being challenged like never before to increase their production to record levels," said Reynolds. "With more people to feed, strong economic growth in developing countries providing more people with the chance for a better diet, and the boom in the ethanol industry, we expect fertilizer demand to stay very strong."
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