Extension and Outreach/Department of Economics Agriculture’s Realignment “Structural Transitions...

Extension and Outreach/Department of Economics

Agriculture’s Realignment

“Structural Transitions in Global Agriculture”2014 Agricultural Symposium

Kansas City, MissouriJuly 16, 2014

Chad HartAssociate Professor/Crop Markets Specialist

chart@iastate.edu515-294-9911

Extension and Outreach/Department of EconomicsSource: USDA-NASS

Iowa Crop Shifts

Extension and Outreach/Department of Economics

Producer AdjustmentsNet farm income projected to decline

significantlyBut remain above 10-year average

Crop returns had led the charge as livestock struggledNow livestock prices are leading the industry

Extension and Outreach/Department of Economics

Agribusiness AdjustmentsAgribusinesses have been caught in a

margin squeezeHigh crop prices don’t necessarily translate to

high agribusiness returns

Managing margins by controlling supply chains, tailoring products and messages to customers, boosting supplies, and focusing on international markets

Extension and Outreach/Department of Economics

Rural Community AdjustmentsMacke: “Rural communities either innovate

or decline.”

More reliance on non-ag enterprises

Push back against trends: brain and wealth drain, homogenization, and competitiveness

Extension and Outreach/Department of Economics

Ag Lending AdjustmentsMore cautious approach

Stronger combination of financial and risk management strategies

Broader perspective on:Risks – policy, logistics, tax, trade, etc.Opportunities – international, expansion, etc.

Extension and Outreach/Department of Economics

Population growth 2014 to 2050

Source: U.S. Census Bureau, International Data Base

Extension and Outreach/Department of Economics

GDP Growth

Source: USDA-ERS

Extension and Outreach/Department of Economics

Liquid Fuel Usage2007 2015 2020 2025 2030 2035

(Million Barrels Oil Equivalent per

Day) (Percent of 2007 Value)

United States 20.6 98% 100% 102% 104% 107%

Canada 2.3 96% 96% 96% 100% 104%

Mexico 2.1 105% 110% 114% 129% 138%

Europe 15.3 92% 88% 88% 89% 90%

Japan 5.0 84% 86% 86% 84% 82%

China 7.6 132% 153% 178% 201% 222%

India 2.8 114% 129% 139% 154% 168%

Africa 3.1 113% 116% 126% 135% 148%

Central and South America 6.0 110% 112% 117% 125% 133%

World 86.1 103% 107% 113% 121% 128%

Source: DOE-EIA

Extension and Outreach/Department of Economics

Chinese economic growth: 1990

Extension and Outreach/Department of Economics

Dongguan, Dec. 10, 2005: McDonald’s opens first drive-thru in China; half of the 100 restaurants plan to open each year will have drive-thrus

Chinese economic growth: 2005

AP photomcchronicles.blogspot.com photo

Extension and Outreach/Department of Economics

1000 more cars added to the streets of Beijing every day

Chinese economic growth: 2008

Extension and Outreach/Department of Economics

Open 24 hours Delivery 24 hoursMore than 1,800 McDonald’s in China, with 200 more on the way

Chinese economic growth: 2011

Extension and Outreach/Department of Economics

US agricultural trade with CanadaNAFTA

Two-way trade up 376% since NAFTA

Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

Extension and Outreach/Department of Economics

US agricultural trade with MexicoNAFTA

Two-way trade up 472% since NAFTA

Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

Extension and Outreach/Department of Economics

Land Values and Income

Source: Mike Duffy, ISU

Extension and Outreach/Department of Economics

Land Values and Income

Source: Mike Duffy, ISU

Extension and Outreach/Department of Economics

Arable Land

Extension and Outreach/Department of Economics

Thank you for your time!

Any questions?

My web site:http://www.econ.iastate.edu/~chart/

Iowa Farm Outlook:http://www.econ.iastate.edu/ifo/

Ag Decision Maker:http://www.extension.iastate.edu/agdm/