GENEVA, SWITZERLAND – US grain producers are enjoying strong demand and high prices for their products, but prices work both ways and all their inputs are expensive. Around the world, their feed industry customers are looking for sustainability, but delegates at the recent Global Grain Conference in Geneva, Switzerland, heard that years of conservation programs have made the US sector confident it can lead on climate and environment.
Seth Meyer, chief economist at the US Department of Agriculture, explained to delegates that he was speaking “from the center of the United States where we have wrapped up soybean harvest, pretty much wrapped up corn harvest, and producers are making fall fertilizer applications or have made fall fertilizer applications.”
He pointed to the problem affecting farmers worldwide that “N, P and K (nitrogen, phosphorus and potassium) prices have risen substantially.”
“We have some things emerging in the soybean market, in particular, that change the dynamic about what we thought about exportable supplies from prior years,” he said. “Prior to August 2020, sentiment in the US market was actually pretty negative among producers. After August 2020, we had some corrections on the size of the US crop and at the same time we saw a big surge in demand, not just domestic but foreign demand.
“During this past summer we have started to see prices moderate a little bit. The things that were leading us higher were corn and soybeans in the United States, but also domestic and exportable wheat demand was a big player for the producers when it comes to farm income.”
That started 12 months of record US exports, with “a lot of that on a rebound in trade with China,” he said.
“That would suggest that the next 12 months will match that, and we’ll have a second really good year of exports,” Meyer said.
China is coming back strongly into the US market, something Meyer described as “absolutely important, and really driving the corn and soybean trade.”
At the same time, demand from other countries had been maintained, “so we have had pretty resilient demand from the rest of our trading partners as we have seen China come back into our export market,” he said.
Meyer discussed the balance sheet for the coming year.
“When I look at prices here, when folks look at this, they see universally a decline in prices,” he said. However, he explained that prices were “still substantially higher than they were in the 2015 to 2019 period in the United States,” putting what was being paid for grains at “almost back to where they were in the golden age of 2010 to 2014, when producers made a lot of money in the United States.”
On new crop futures he observed that “we are lower than we have been in a number of years, indicating strength in corn.”
Meyer also noted that corn is strong relative to soybeans.
“We have declining receipts for both corn and soybeans but also quickly rising non-farm and farmland costs in order to produce that crop,” he said. “When we look across the board at input costs in the United States, we see important costs like energy, LP gas, nitrogen and phosphate really showing big strength year-on-year in terms of price increases and certainly over pre-pandemic levels. The other thing we notice across the board is the simultaneous increase of almost everything when it comes to inputs for the farm sector.”
The run-up in prices is unusual, Meyer said.
“We might normally see some runs on individual inputs but not across the board, really putting upward pressure on input prices,” he said.
Meyer explained that the price of fertilizer follows that of natural gas.
“Right now, in the Midwest, if you are making corn planting decisions you might be applying fall fertilizers,” he said. “Some folks are saying, ‘Maybe I’ll wait to spring and maybe we’ll get some movement on fertilizer prices.’ But I think the way natural gas prices are forecast to evolve in the United States, there may not be an opportunity to push that decision off and apply in the spring.
“I am hearing quite a bit of strength of making fertilizer applications now instead of waiting until the spring. Folks (are) somewhat locking in that acreage to the more nitrogen-intensive corn crop.”
In a session on global feed markets, Asbjørn Børsting, director of Dakofo and president of FEFAC, which represents European compound feed manufacturers, said the industry around the world was aiming to achieve “more or less the same sustainability goals.”
FEFAC has a Feed Sustainability Charter 2030, divided into chapters based around the themes of the European Union’s farm-to-fork strategy and linked to the United Nations’ sustainability goals.
“We have specific rules on climate-neutral livestock production,” he said. “We have participated together with other regional feed associations in developing a climate tool. It is a base where we have a measurement for all kind of raw materials around the world in order to measure the impact those materials have on the climate in the feed production.
“We also have a goal where we’re talking about sustainable food systems through increased resource and nutrient efficiency.”
He stressed that farm animal health and welfare is becoming more important.
Brent Babb, regional director, Europe, Middle East and North Africa, for the US Soybean Export Council, said “our soybean farmers have been participating in sustainability — we use the term of conservation in the US — really since the 1930s. This is nothing new to our soybean farmers. In the 1980s, there was very strict protection on wetlands, and soil conservation and forests always have been a concern.”
The sector in the United States is ready to embrace the opportunity, Babb said.
“We are glad the market has been moving this way over the last eight years — more conservation, more sustainability,” he said. “We think we are ready for it in the US. We have had many decades of practice.”
Babb thanked FEFAC for initiating the GFLI (Global Feed LCA Institute) database.
“It gives people in the feed industry and through the value chain a way to measure nutrition cost and now sustainability,” he said. “We have always worried about the nutrition for animals and the cost of our products, but now this gives us a way to look at sustainability and how you are producing and being able to work with what the consumers need.”
Lennart Andersen, broker at Arcevil SA, addressed the issue of deforestation in South America as well as sustainability.
“The rules are there,” he said. “We don’t need new rules. Of course, these high prices of commodities invite (people) to plant in more areas, going into the forest. South America doesn’t need to go into that. They have already enough land to plant.”
Planting genetically modified corn and soybeans has lifted yields, which lessens the need to dramatically expand cropland, he said.
“Now we are in Argentina in the middle of a discussion of GMO for wheat,” he said. “We need to think about that when we need more wheat, corn or soybeans. We don’t need to touch new land.”
Hussein Mansour, chief executive officer of Egypt-based Aller Aqua, said his country is facing a great challenge regarding sustainability.
Mansour said his company was the “only feed mill in the world that proudly announces its (environmental) footprint on the bags,” he said.
“Sustainability is in our daily business,” he said. “We offer to our customers a solution for making it efficient to produce their fish.”
Rogier Kievit, head of grain procurement at De Heus, said the Netherlands-based feed manufacturer has been growing exponentially, and not just in terms of increasing production.
“During our growth, one of the main topics has been sustainability,” Kievit said. “We have the four pillars — the so-called global green goals that we put in place.
“The first one is about animal welfare, basically reduction of antibiotics. The second involves local communities where we give some farmer education so farmers can feed their livestock in a more sustainable way. Then the third is the carbon footprint… and then, of course, the responsible sourcing of the raw materials.
“It embraces a big part of the deforestation policies that we have. We want to make sure biodiversity is taking place.”
Kievit said De Heus also is investigating “creating feed sources from food waste and all this all kind of material.”
“We are a member of FEFAC, so in Europe we have adhered to those guidelines, not only in Europe but also in the rest of the world, basically because we really believe that sustainability is here to stay,” he said. “We have to work together to reduce emissions and work in a sustainable way.”
He said an important part of sustainability is product traceability.
“Consumers don’t just believe what you are saying,” he said. “They want you to show it, they want you to prove it.”