Our Changing Segmented Fluid Agricultural Markets

I farm in deep southwestern Ontario.  I say that often, mainly because in this area of Ontario we grow a wide variety of crops, which can only be grown here.  One such crop in sugar beets, not necessarily because of our climate advantage, but because of our proximity to Southeast Michigan where the sugar beets are processed.  Of course, the other reason we grow sugar beets in southwestern Ontario is because we are easily able to take advantage of an American sugar policy.  In my estimation, Canadian sugar beets are the only example I can think of where a Canadian commodity actually benefits directly from a US domestic agricultural policy.

So I read with interest the other day my DTN colleague Jerry Hagstrom in his column “Sugar Shift.”  He wrote about how food companies are switching from genetically modified beet sugar to non-GM cane sugar.  He said that beet sugar distribution has gone down 9.5% in the last few months, while cane sugar distribution has gone up.  We all know that change is our only constant in agriculture and I can see how that change in the sugar market will certainly be causing some problems for sugar producers.  It might also be doing that for Ontario growers.

Simply put, when sugar beets came back to Ontario it was a great new day even those it was based solely on an American domestic policy.  Ontario farmers had to learn to grow sugar beets again and weed issues were a very big issue.  The introduction of Roundup Ready sugar beets turn these fields from a weedy mess late in the season into beautiful tapestries of sweetness.  It made management of the sugar beets so much easier.  Of course, who could imagine that several years later food companies might be responding to consumer’s penchant for non-gmo sugar?

It came as a surprise to me, but its just another example how the consumer market is increasingly lashing back at having genetically modified crops imposed on them.  From my perspective, GM sugar is about the same as non-GMO sugar.  However, not everybody sees it that way and we’re actually seeing a decrease in beet sugar just because it’s genetically modified.

How is this going to work out?  Well, for DTN subscribers, I would ask you to read Jerry’s article, he does a good job talking about this sweet problem.  However, to me it is just another example about how our agricultural environment is so fluid and as farmers we need to change with it.

There are a myriad of other examples.  This morning I was looking at several graphs describing the declining share of US soybeans and wheat into world export markets since 1980.  What it shows is our American friends are increasingly getting a smaller proportion of their exports into global markets since 1980.  The reason for this of course is that for something like soybeans South America is so important versus what they were in 1980.  There is more wheat grown in the Black Sea region versus 1980.  Also too, demand has risen over that period of time and even though exports have decreased as a percentage, actual export numbers are still substantial.   However, when it comes to our American friends being able to influence the price of those commodities, is completely different.  The changing production areas around the world have changed the way price discovery works in those markets.  As farmers, we have to be continually aware of that.

Of course, these changes, this fluidity in agricultural markets is continual and maybe even more exponential in the future.  Production systems will likely improve but as we can see from the sugar example, genetic modification is segmenting markets like we could have never imagined.  These market segments are not small and it could lead to a more focused commodity trade at the micro level.  We will never get away from commodities having to be cheap but there could be markets emerge where premiums become more widespread.  The current sugar example might be an early example of that.

I have said many times, as a farmer, change is my only constant.  However, I haven’t even begun to talk about the technological change we are seeing in our farm equipment and our production systems.  That is for our agronomist friends to talk about.  I always tend to believe I can figure that out.  If it doesn’t work, I just tap the monitor with a hammer and sometimes I can get it to work.  However, the greater fluidity and agriculture may take place in greater segmentation in our agricultural markets of the future.

You might even have markets, which reflect crops changed through genetic markers.  Essentially, that is change, which is hard for me to imagine.  Needless to say, we’ll have to meet that challenge, just like all the other changes that greet us on any ordinary day.