International agri benchmark Cash Crop Conference 2024
By:Barry Ward, Leader, Production Business Management Tuesday, July 30th, 2024
Featured Discussion on the Downward Trend in Global Profitability of Crop Farming and a Bearish Outlook for 2024
During its annual conference from June 10th to 14th, the agri benchmark Cash Crop Network discussed recent developments in global crop production. I was fortunate to recently attend the agri benchmark conference in Valladolid, Spain. The conference was hosted by the Spanish Ministry of Agriculture who together with its operating company Tragsa, established and manages a network of 37 typical crop farms. Approximately 55 international experts from all over the world discussed recent results and topical issues of global crop production.
The Ohio State University College of Food, Agricultural and Environmental Sciences is a member of the agri benchmark network and I serve as the network representative for the College. The following are a few selected highlights from the conference.
Last year (2023) was difficult for most typical agri benchmark farms when compared with previous, more profitable, years. Increasing machinery cost and lower output prices many farms experienced a massive downturn in return to land.
The projections for 2024 for the agri benchmark network, which is coordinated by the German Thünen Institute, are even more bearish. The likely relief provided by lower fertilizer prices will not fully compensate for the increase in machinery costs. In addition, based on global price projections, farm-gate production prices are likely to be lower in 2024 than in 2023. Many typical farms are likely to struggle with returns in 2024.
US renewable diesel boom – how US soybean production may increase
A number of U.S. states have implemented blending targets for renewable fuels. As a result, renewable diesel production has increased substantially. By 2029 this will lead to an annual demand of 8 million tons of soybean oil renewable diesel production (FAPRI-MU, 2024), a 3-million-ton increase in demand relative to 2020. The respective supply can be generated through more domestic crushing or an increase of soybean acreage; most likely, a combination of both options will be used. To satisfy this increased demand for soybean oil via expansion of soybean acreage, about 5.1 million ha (+15% of current soybean acreage) of additional farmland would be required. An increase in soybean acreage may come from either (a) shifting away from continuous corn rotations to corn-soy and (b) shifting corn-soy rotations toward corn-soy-soy. Based on agri benchmark data, Margaret Lippsmeyer from Purdue University showed that option (a) would require an increase in soybean prices of 6% and option (b) of 8% to make these rotations preferable over existing ones.
Ukraine grain exports: No specific effects on Central & Eastern European farm-gate prices
At the national level, agri benchmark farm-gate data did not yield an indication that growers in Central and Eastern Europe have been suffering from the inflow of Ukrainian grain. As the graph attached indicates, respective wheat margins between Western Europe and Central and Eastern Europe actually narrowed. However, agri benchmark partners mentioned that in regions close to the Ukrainian border lower than usual prices have been observed.
EU sugar production: Expanding and rather profitable in 2023
Due to high EU sugar prices in 2022, EU production increased by 7% in 2023. Therefore, the EU became a net exporter again. Since global sugar prices were still rather high, the negative impact on domestic prices was low. Thomas de Witte from Thünen Institute stated that profitability of sugar beet production was extraordinarily high – an advantage of 1.000 to even 2.000 €/ha over other crops could be observed. A possible future cut of 15 to 30 €/t in beet prices (or 20% to 40%) would still make beets competitive at wheat prices of 230 €/t.
Regenerative agriculture – a promising option to reduce environmental footprint?
The members of the agri benchmark Network discussed the concept and the environmental claims of regenerative agriculture. Many industry leaders and politicians are promoting this idea to address public concerns regarding agriculture; influential global consulting companies try to educate growers regarding the profitability of suggested measures such as cover crops and no-till. One discussion focused on the notion that proponents of regenerative agriculture oversell the potentials, in particular regarding greenhouse gas savings and economics. Furthermore, the two major sources for GHG emissions – nitrogen use and land use change – are not addressed. Considering these shortcomings, the network will be publishing a thesis paper on this topic and will suggest more meaningful indicators to define goals that effectively reduce GHG emissions and reduce pressure on biodiversity.
agri benchmark, a nonprofit, politically independent organization, provides comprehensive information and advice on crop production systems. With its proven and unique farm level data and a global network of on-the-ground experts, agri benchmark enables economic and environmentally sustainable decision-making by agricultural stakeholders worldwide.
Let’s grow together – Your strategic partner for tomorrow’s agriculture
For more information visit: agribenchmark.org
Evolution of average return to land* across all crops (USD/ha)
* Total revenue (incl. decoupled payments) minus total cost (excluding land cost);
weighted average per farm, simple average across all farms per region
Evolution of farm-gate wheat prices – regional agri benchmark averages (USD/t)
Source: agri benchmark Cash Crop (2024)
Group picture from the conference
Source: agri benchmark Cash Crop (2024)