Grant ag economist and farmer Brent Gloy feels the ag economy is beginning to stabilize after several rough years. (Johnson Publications photo)
Ag economist optimistic about future
Ag economist and farmer Brent Gloy of Grant thinks the downturn in the ag economy may soon be behind us.
Gloy spoke to people attending the open house for ASD Enterprises, a Channel seed dealer, in Imperial Tuesday, Aug. 15.
Gloy sees some positive things happening and feels the roller coaster ride farmers have been on the last 10 years is closer to stabilizing.
He noted farmers have never experienced the likes of high commodity prices they saw from 2006 to 2013. “There’s been no period like it in the last 100 years,” Gloy said, because he’s gone back and researched it.
But the boom time also increased land prices and cash rents on land, as well as the price for other inputs such as seed and fertilizer that followed along.
As commodity prices have dropped, so have these other costs, he said, bringing down the break even point for crop production.
With exceptional corn and soybean yields this year, along with a bump in commodity prices, farmers could actually make a little money this year, he predicted.
Bio fuels responsible for run
Gloy said the renewable fuels standards, which sought to increase bio fuel consumption, introduced by President George W. Bush prompted the big run-up in commodity prices.
And with that demand, more corn acres were planted, leading to surpluses and eventually lower prices.
Another occurrence played a big factor in prices going down—an increase in world acreage.
He said total world acreage has increased from 1.6 billion to 2.3 billion acres.
South America represented the biggest growth in acres over a 10-year period from 2004-2014, adding 86 million acres on top of what they already had in production.
Gloy said those 86 million acres represents all of the soybean acres in the U.S. for a year. So, it’s easy to understand how those new production acres have added to the supply and brought down prices.
With the profitability of wheat declining in 2016, the U.S. planted the fewest wheat acres ever in 2017 at 45.7 million, a drop of about 5 million acres.
Those acres went into corn and soybeans, putting more supply pressure on prices. He added the U.S. planted the most soybean and corn acres ever in 2016.
With the economics of wheat improving with a drop in acres, he expects the wheat acres to increase in 2018 by as much as 5 million acres. That also means less acres in corn and soybeans which could help reduce supply and prop up prices for those commodities.
China’s big potential
Throughout his career as an economist, Gloy has looked to China as the biggest potential for selling grain and beef.
It’s taken nearly 20 years but that potential is starting to become real as China continues to grow.
Even all the soybean production in South America can not meet the demand in China, which bodes well for American farmers and commodity prices.
“I’m very bullish on the future of agriculture, particularly in the United States and particularly row-crop agriculture, because of China,” he said.
He noted China will continue to grow in economic stature and as they grow they will eat better food, meaning more animal protein.
That makes him bullish on both row crops and beef production going forward.