Additional Thoughts on the KC Fed AG Symposium
Continuing our post from yesterday:
- During the last 10 years, the world has planted an extra 184 million acres to the 10 ten major row crops. The Black Sea area has added 48, South America 42 and China 31 million acres. The US has only added 8 million acres.
- Total acres in production has increased from 1.959 million to 2.143 million acres.
- The demand for US ethanol has used increased from 6.6 million acres to 24.4 million or an increase of about 18 million acres.
- However, China’s demand for corn and beans has increased from the equivalent of 18.4 million to 52.7 million acres or an overall increase of 34 million acres. This increase is almost twice the ethanol increase.
- Brazil sugarcane has increased from about 13.3 to 22.6 million acres, almost on par with US ethanol acres.
Most of the growth in the future will continue from South America and the Black Sea area, although at some point, Africa will start to dramatically increase their acres (if they can solve their infrastructure and other issues).
When total corn ethanol acres is about 1% of total world crop acreage and Brazil sugarcane is about the same, I find it interesting to think that grain prices will drop dramatically simply if we eliminate the ethanol acreage. The total increase over the 10 year period is about the increase in world production for less than 6 months.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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