Most grain isn’t going to people
by Allen Williams
When you ask American farmers what they are doing on their farms, they will often tell you they are “feeding the world”.
This is stated with considerable pride. We feel we are doing the world a huge favor through the sacrifices we make as farmers. We are continuously told that by some not-too-distant date there will be 10 billion mouths to feed, so we have to ramp up production even more.
That perception drives us to keep making the same mistakes over and over, to the point where we are seeing record numbers of farm bankruptcies and record numbers of farmers taking their own lives through suicide. It has cultivated a “production over profit” mentality that is destroying America’s family farms and our rural communities.
So, let’s take a hard look at where we really are today with our farms and our farm profitability.
In 1969 about 38 cents of every food dollar went to the farmer. Today the farmer’s share hovers around 8 cents. So over the past 50 years, farmers have lost 30 cents from every food dollar spent by the consumer. During the same time frame, consolidation and constriction in the food processing sector have also taken a toll on farm incomes. In 1969 there were more than 400,000 food companies. Today there are fewer than 60,000.
In 1960 the farm population constituted 8.3% of the total U.S. population, with 3.7 million farms averaging 303 acres in size. By 1990 the farm population was down to 2.6 % of the total, with 2.1 million farms averaging 461 acres. In 1955, two families could be supported by 300-350 acres.
Today, the share of the U.S. population living on farms is below 1.5%, and for a typical row crop operation, 3,000 acres can barely support one family.
A report for 2018 showed that median net farm income in Minnesota was down 8%, with dairy farms and pork producers experiencing the most severe declines at 65% and 77%, respectively.
Now let’s take a look at our major row-cropping system, the corn-soybean rotation. In 1969 farmers planted 64.26 million acres in corn. In 2018 they planted 89.13 million acres, with the USDA estimating average yield at 190 bushels per acre — a record national yield.
The average cost to produce an acre of corn was $682, while the average value of that acre was $619. That is a real loss of $63 per acre.
This loss does not account for federal crop insurance and other government payments. However, it does mean that without those payments, the average farmer would be declaring bankruptcy.
Not to the people
Where does all this corn go? It varies from year to year, but between 35 and 40% of all corn produced in the U.S. is used for ethanol production. In the process of producing ethanol, every bushel of corn produces 17.4 lbs. of dried distiller’s grains that are then fed to livestock.
The vast majority of the remaining 60% of the corn grown in the U.S. is used for livestock feed both here and abroad (about 15% is exported) — not for direct human consumption. Less than 10% of our corn is used in foods such as cereal, corn meal, grits and sweeteners such as high fructose corn syrup.
With farmers losing $63/acre growing corn last year, what are planting intentions for 2019? USDA planting estimates indicate farmers are going to plant 92.8 million acres in 2019, up about 3.7 million acres (4%) from last year.
We lost money on corn in 2018, so we are going to plant even more in 2019. In what business model does that make sense?
And we already have 8.6 billion bushels of corn in storage. That equates to 481.6 billion lbs.
With just over 7 billion people in the world, those corn stocks are enough to provide 69 lbs. of corn for every man, woman and child without planting an acre of corn this year.
Food shortage? I don’t think so.
Now let’s address the other part of the rotation, the soybean. In 2018 U.S. farmers planted 87.9 million acres of soybeans and realized an average yield of 49 bushels per acre.
Total cost to produce each acre of soybeans was $443.50. The average per-acre value of those soybeans was $454.72. So last year the average soybean farmer made a whopping net profit of $11.22/acre.
Where do all of those soybeans go? Close to half of our production is exported in a normal year. Poultry and livestock feeds claim 97% of all soybean meal consumed domestically.
Approximately 68% of all soybean oil is used for frying and baking, vegetable oil, and salad dressings/margarines. About 25% of soybean oil is used for biodiesel fuels. Some 3% is used for protein-alternative foods including soy milk, soy sauce, cereals and protein bars.
Since U.S. farmers made $11.22/acre net profit on soybeans in 2018, what are their planting intentions for this year? USDA estimates there will be 84.6 million acres planted in 2019, a 5% reduction in soybean acres.
Currently we have 2.72 billion bushels of soybean stocks, equating to about 163 billion lbs. of soybeans. That is enough to supply every man, woman and child on Earth with the equivalent of 23 lbs. of soybeans.
Add it up, and we have enough corn and soybeans in storage to supply each of the 7 billion or so people with a total of 92 lbs. of corn and soybeans. That equals a quarter-pound per day of corn and soybeans for every person for an entire year.
Einstein said the definition of insanity is doing the same thing over and over again and expecting a different result. So, here’s the $64,000 question: Why do we feel that corn and bean prices will be better in 2019?
And why do we keep doing the same thing we did the year before, and the year before that, while anticipating different results?
Perhaps there are a few farmers out there who are happy with the current industrial agricultural model, but frankly I’ve yet to meet one.
A new model, a new hope
Isn’t it time we consider changing the current “production over profitability” business model, and seek to regain a healthier share of the consumer’s food dollar?
Isn’t it time to again grow healthier soil, food and profits? Isn’t it time to regenerate our farms, our families and our rural communities?
By ditching the industrial agricultural model and embracing regenerative agricultural principles and stacked business enterprises, I believe we can do this. I believe we must.
Dr. Allen Williams is president of Livestock Management Consultants, LLC, based in Starkville, Mississippi.