America’s position as “Breadbasket of the World”  is being eroded by the growing strength of rivals such as Canada, Australia, the former Soviet Union and China.  As yields continue to rise along with commodity prices, America’s position will continue to be undermined.  The best way to understand America’s place in global agriculture market is to examine the anticipated 2011 crop planting of the ten largest crops US farmers produce.

Prices of many of the world’s most widely planted crops have nearly doubled over the past year. Cotton prices have risen as high as 150% over that period.  The price of corn has risen 122%. The price of winter wheat is up 75%. These three crops and a few others are moving to dominate global agricultural production and the consumption of goods. Increased demand for them also is limiting the availability of the land which would otherwise be used for other crops. This largely determines the production of meat and the clothing demand of many of the world’s people. These crops also provide some of the crucial components of alternative energy. And, the world is running low on many of these critical commodities.

• Read The Ten Crops That Make America The World’s Breadbasket

The question of global warming aside, there have been great droughts in the farmlands of much of Russia and China, and heavy snow and flooding in Canada and parts of Australia. The weather has always been one of the most critical forces affecting agricultural production. Scientists and farmers say the changes in the weather, especially changes that have hurt crop yield, have generally taken a turn for the worse. Under-developed countries continue to have challenges to maintain the most modest yield from their farms. Much of that is due to poor land management, lack of irrigation, and spoilage as commodities are stored or moved to market. The weather and poverty have caused the world to lean more on the United States as a supplier of grains recently. This has put more upward pressure on prices.

American farmers are excellent businessmen. For example, they will sacrifice a large portion of their soybean harvest to make room to grow more corn, which is more profitable. This should push down the prices of expensive commodities as supply increases. While they do so as much as they are able, U.S. farmers cannot simply switch tens of millions of acres from one crop to another at the drop of a hat. American corn and wheat production represents an substantial portion of the world’s supply. However, crop production in the rest of the world has been hurt so badly in many regions that even increases in US output has not pushed global prices down.

In order to understand how American farmers are managing their land, we looked at the U.S. Department of Agriculture’s perspective planting report for 2011. This report lists how many acres of each farmers intend to plan this year  It allowed us to see which crops were increasing in popularity and which were decreasing. For the purposes of drawing a complete picture of the status of each of these crops, 24/7 used agricultural commodity data provided by Capital IQ, as well as import, export, and production values from the USDA’s Foreign Agriculture Service. 24/7 looked at the ten largest crops by acreage planted in the United States. These are, in order of increasing production: oats, barley, rice, sorghum, cotton, spring wheat, winter wheat, hay, soybeans, and corn.

Our conclusions are not going to give much solace to investors and consumers concerned about high prices.  Overall production of most crops is not likely to increase much based on world totals. Weather is too disruptive, production in Third World counties will stay anemic, and U.S. farmers are only willing to gamble so much of their fortunes on any one crop. The rise and fall in commodities prices has taught a lesson that forecasts are difficult and often useless.

The second is that food prices will continue to rise. The statement may seem obvious, but it is not. Some economists believe that a fall in demand will bring down the price of wheat and corn. That assumes the number of mouths to feed around the world will drop and so will the need for commodities to advance alternative fuels. The UN is worried that more and more people will be driven into poverty around the world because of the high price of food. It would be nice to think that the UN could be wrong, but the data examined by 24/7 says otherwise.

10. Oats
>Total Acreage to be Planted in 2011: 2,839,000
>Total one-year change in U.S. Acreage Planted (2010-2011): -299,000 acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): -9.53%
> State Where Most is Planted: Texas
> 1 year Price Change: $2.10/bushel to $3.99/bushel (+90%)

Oats have had one of the greatest price increases in the past year among major commodities, rising from just over $2.00 per bushel to nearly $4.00 per bushel. Part of the reason for this is a decline in expected production from Canada, the world’s largest oats exporter. According to Reuters, there is a high risk of flooding in the country’s bread basket province of Saskatechewan. Despite this, there has been a significant drop off in the oat that American farmers plan to grow in 2011. Farmers in North Dakota, which produces roughly 1/10th of U.S. oat yield, will cut planted acres by more than 30% this year. Wheat competes with oats as a cash crop, and farmers in the U.S. have decided to plant wheat instead of oats, likely because of a better crop yield per acre in 2010.

9. Barley
>Total Acreage to be Planted in 2011: 2,952,000 acres
>Total one-year change in U.S. Acreage Planted (2010-2011): +80,000 acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): +2.8%
> State Where Most is Planted: Montana
> 1 year Price Change: $154/Metric Ton to $213/Metric Ton (+38.3%)

In 2011, U.S. farmers plan on planting 615,000 fewer acres than they did in 2009. And the two-year drop is a very substantial 17.2% over a two-year period. Most of this decrease occurred between 2009 and 2010, after U.S. domestic consumption dropped 10%. Only a tiny fraction of the American barley crop is exported, and so major U.S. producers in North Dakota and Montana, which alone make up more than half of U.S. production, cut their crops by 600,000 acres, almost 20% of national production combined. While barley has recovered somewhat – planned acreage is up 2.8% for 2011. But, demand for other grains is pushing farmers out of barley and into more profitable crops like corn and cotton.  According to the WeeklyTimes Now: “On domestic markets, barley is not working for most end users as a cheaper alternative can be found in one of the wheat grades.”  The drop in production both in the U.S. and internationally has contributed to a 40% price increase since the beginning of April.

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8. Rice
>Total Acreage to be Planted in 2011: 3,018,000 acres
>Total one-year change in U.S. Acreage Planted (2010-2011): -618,000 acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): -17%
> State Where Most is Planted: Arkansas
> 1 year Price Change: $12.38/cwt (hundredweight) to $14.11/cwt. (+13.97%)

The U.S. share in the global rice market is relatively small. America produces significantly less than most southeast Asian counties such as China. As opposed to these nations, most of the grain produced in the US is rough rice, brown rice, or long-grain rice intended for export. Rice prices are mostly driven by Thailand, which exported more than 9 million metric tonnes in 2010. The country is increasing its yield per acre, and plans to use its dominance to set a benchmark price through an international market. This has caused American farmers to move away from rice production. They plan on planting 17% less acreage in 2011 than in 2010. Mississippi , one of the biggest rice-producing states, is decreasing its land devoted to rice by 105,000 acres – 34% of its 2010 crop.

7. Sorghum
>Total Acreage to be Planted in 2011: 5,645,000 acres
>Total one-year change in U.S. Acreage Planted (2010-2011): +241,000 acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): +4.5%
> State Where Most is Planted: Kansas
> 1 year Price Change: 176.5$/metric ton to $242.5/metric ton (+37.3%)

When oil prices peaked in summer of 2008, the economic incentives to develop ethanol as an alternative source of fuel rose significantly. Consequently, the two agricultural commodities associated with ethanol production, corn and sorghum, rose substantially in price and production. When energy prices fell at the end of that year, so did the value of sorghum. Production of the crop in the U.S. fell by nearly 20% between 2009 and 2010. Some of the largest-producing states of the crop had extreme dramatic declines in planting over this time. Texas, which grows nearly one-third of all American sorghum, cut production by 29%, amounting to 800,000 acres less than in 2009. As oil prices have recovered over the last year, so have the price of these components of ethanol. The price of sorghum is up 37% since April and planned U.S. production has risen 4.5%, or some 241,000 acres.

6. Cotton:
>Total Acreage to be Planted in 2011: 12,565,500 acres
>Total 1-year change in U.S. Acreage Planted (2010-2011): +1,795,500 acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): +16.7%
> State Where Most is Planted: Texas
> 1 year Price Change: $0.82/lb to $2.01/lb (+145.1%)

This fiber, used to produce clothing and other textiles has seen a 145% price increase in the past year as the global economy begins to recover and demand for consumer goods has strengthened. No single major U.S. agricultural commodity has had a more rapid rise in price and production in the past few years than cotton. U.S. exports, which account for more than 75% of use, rose significantly last year, and are nearly double what they were ten years ago. If projected planting for 2011 is accurate, then cotton farmers will have increased acreage by 16.7% this year, which makes for a 37% increase since 2009. With a 1.1 million acre increase since 2009, Texas, by far the largest cotton-growing state, is expected to produce 49% of the country’s cotton crop this year. Cotton crops are notoriously destructive on land, but the potential profit to be reaped here is too much for farmers to resist.

5. Durum Wheat and Spring Wheat
>Total Acreage to be Planted in 2011: 16,792,000 acres
>Total one-year change in U.S. Acreage Planted (2010-2011): +524,000 acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): +3.22%
> State Where Most is Planted: North Dakota
> 1 year Price Change of all wheat: $4.68/bushel to $8.22/bushel (+75.6%)

There are several types of wheat produced in the U.S., but they can be divided into two categories: winter wheat, which is planted before the first frost, and spring wheat, which is not planted until after the frozen soil has thawed. Spring wheat, which includes the hardest type of wheat, durum, is for specialty uses, such as baked goods, pasta, and cake flour. Spring-planted wheat acreage is projected to increase by more than 6% in the U.S. between 2009 and 2011. Most of the increase has occurred in states with the short planting seasons that are ideal for spring wheat. North Dakota, which alone produces more than half of all U.S. spring wheat, will plant 600,000 more acres than in 2009, a 6% increase.

4. Winter Wheat
>Total Acreage to be Planted in 2011: 41,229,000 acres
>Total one-year change in U.S. Acreage Planted (2010-2011): +3,894,000
> Percent one-year change in U.S. Acreage Planted (2010-2011): +10.4%
> State Where Most is Planted: Kansas
> 1 year Price Change: $4.68/bushel to $8.22/bushel (+75.6%)

Winter wheat accounts for more than 70% of all U.S. wheat production because of its use in all-purpose flour. According to the USDA Foreign Agriculture Service, exports took a hit during the recession, but planned crops have experienced a major recovery in 2010 as a result of flooding issues in Canada and drought in China. The price of wheat has increased more than 75% in the past year, and farmers are attempting to ride this by planning more than a 10% increase in forecast acreage next year. Major breadbasket states like Kansas are adding 400,000 acres while states such as Missouri, Illinois, and Arkansas are set to double their output.  According to Bloomberg Businessweek, however, one of the major causes of this demand and price increase, the Chinese drought, may be subsiding.

Also Read: Nokia: More Phones, Fewer Workers

3. Hay
>Total Acreage to be Planted in 2011: 58,973,000 acres
>Total 1-year change in U.S. Acreage Planted (2010-2011): -889,000 acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): -1.5%
> State Where Most is Planted: Texas
> 1 year Price Change: n/a

Unlike the other agricultural commodities on this list, hay is not a single crop, but a combination of several types of crops which are used for feed. While hay is sold and traded locally, there is no real international export market for the crop. According Ken Harnett, a University of Wisconsin commentator on U.S. hay supply and demand: “It seems like all we heard this winter was how many producers were going to be pulling hay acres out of production to plant corn and other grain crops to take advantage of higher grain prices.” That predicted trend seems to be a sure thing now, as planned acreage is down more than 1.5% in the past year, with states like Idaho, South Dakota, and Oklahoma cutting 100,000 acres or more each.

2. Soybean
>Total Acreage to be Planted in 2011: 76,609,000 acres
>Total one-year change in U.S. Acreage Planted (2010-2011): -795,000 acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): -1%
> State Where Most is Planted: Iowa
> 1 year Price Change: $9.36/bushel to $13.73/bushel (+46.6%)

The United States is the world’s largest producer of soy, providing 35% of the world’s supply.  Ninety-eight percent is used for livestock feed. Soybean crops are expected to drop by 1%, or 795,000 acres, in the US this year. As a result, soybean prices are trading higher, increasing from $9.36/bushel to $13.73/bushel.  Prices may increase even further due to speculation that cold weather will delay planting and cut future yields in the U.S.  As of March 31st, soy usage has not changed, despite the increased price, according to agricultural publication Feedstuffs.

1. Corn:
>Total Acreage to be Planted in 2011: 92,178,000 acres
>Total 1-year change in U.S. Acreage Planted (2010-2011): +3,986,000  acres
> Percent one-year change in U.S. Acreage Planted (2010-2011): +4.5%
> State Where Most is Planted: Iowa
> 1 Year Price Change: $3.44/bushel to $7.66/bushel (+122.6%)

The planned acreage of corn in the U.S. is set to increase this year by 4.5%, or nearly 4 million acres. This may have something to do with the fact that demand for the grain has exploded as the demand for ethanol is again on the rise and livestock production is increasing as well. According to Bloomberg Businessweek, U.S. stockpiles have decreased dramatically in the past year as Chinese imports have doubled and ethanol production has risen. The USDA reports that nearly 40% of this year’s harvest may be used to produce ethanol. The planned production increase has not made a dent in the skyrocketing price of corn, which has increased 122% since April, 2010, from $3.44/bushel to $7.66/bushel.

-Michael B. Sauter, Douglas A. McIntyre, Charles B. Stockdale

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