The Vicious Cycle of Agricultural Productivity

It is the busiest time of the year for me, planting wheat, soybeans at the same time. So when I got a phone call this morning from a reporter asking for an interview I said I had few minutes. The reporter wanted to know my opinion about how scientific advancement in crop genetics might be impacting the world glut of grain. Now I just harvested my two worst fields of soybeans so a glut of grain wasn’t on my mind. A cold wet spring has come back to haunt me this fall.

It is an interesting concept to think about. For instance, we all know that the advancement of technology especially in crop genetics leads to a yield curve that is constantly going up. It is not as accentuated in soybeans and wheat as it is corn, where yield seems to be increasing exponentially year upon year. I have yet to stick my combine in my corn crop, but of course I’m hoping for over 200 bushels per acre just like everybody around here. However, I can remember the day when 150-bushel/acre corn was like Nirvana.

The reporter seemed to be adamant that this was a very new thing. For instance, with the advancements of genetics we are seeing widespread surpluses of wheat and corn around the world. I cautioned the reporter by saying that in the United States last year they grew the least amount of wheat since 1919. Wheat acreage in Canada has also been under threat. However, in places like Russia, we have seen an increase in wheat production over time and now are one of the world’s major exporters of wheat especially to places like North Africa. Science helps them too, maybe at our expense.

It is not clear-cut. Science is transferable and productivity gains are too. For instance, many of the advancements that we see in crop production here in North America are copied in other places and vice versa. Of course, this leads to productivity gains, which contributes to the global glut of grain.

I argued to the reporter that this wasn’t necessarily new, that it has been going on since a beginning of time and especially since the beginning of my career in agriculture over 35 years ago. Of course, some technology has made a large contribution to that. Other technologies have not done as well. I was reminded of that by longtime friend today who was instrumental in developing many pieces of tillage equipment now the rage across North America. He told me that agriculture continues to chase new technology but when we get up close we learned that most technology is a vacuum hose sucking money out of our pockets. I laughed out loud when I read his email.

I think we can all remember some new technology through the years that fit into that category. At the end of the day, the litmus test is always agricultural economics. If the marginal revenue from an additional increment in cost is not positive, then we don’t go there.

After my conversation with the reporter this morning I thought carefully about this comparison between increased science and technology causing an even bigger grain surplus in this world. My thoughts turned to the Ontario corn basis, which has a historical pattern to it. Through the years, typically Ontario would have too much corn at harvest time and be forced to ship it out to the United States. That’s like exporting snow to Canada in January. Typically, because we use more corn than we produce, we have to import some corn back into the province giving us our spring/summer import basis, which is much higher. Through the years people actually built bins to take advantage of the Ontario corn basis pattern. However, with Statistics Canada predicting an Ontario corn crop yielding 169.5 bushels per acre this year, it seems increasingly unlikely. In fact, Ontario corn yields have been rising so consistently that old basis patterns might disappear completely.

The challenge for Ontario corn producers is to build up more domestic demand. If we are going to see increasing yields that almost seem stratospheric compared to yesteryear, we need to think of ways to turn that crop into value-added opportunities. At the present time ethanol takes up about one third of all corn produced in Ontario, but as more corn is grown per acre in Ontario this year its likely to be less. Their needs to be another value added component built into the Ontario corn economy.

It is all-interesting to consider. However, what the reporter was really talking about was the vicious cycle of increased productivity that has dogged agriculture forever. This isn’t really new. What might be new is the rate of acceleration in this agricultural productivity. With that, we might be seeing more grain in the world. It’s a trend that is likely to continue.