What is in this article?:
- Commodity programs not needed if demand outpaces supply
- Falling rate of productivity increase
- Not much change
- Over the long-run will supply out-pace demand in the years ahead?
- Crop agriculture may once again face long periods of low prices.
- Times of excess production could result in low price problems.
Falling rate of productivity increase
“Of greater concern,” he writes, “is the falling percentage rate of increase in agricultural yield and productivity. Yields of cereals such as corn, wheat, and rice that supply two thirds of our calories increased at a trend rate of 3.2 percent per year in 1962 but by only a 1.2 percent per year trend rate in 2012!” Combining “world crop and livestock productivity,” Tweeten calculates a “trend rate of 2 percent per year in 1962, and 1 percent per year in 2012!”
Citing an International Monetary Fund study that catalogued more than 800 million acres of land worldwide that could be brought into production, Tweeten argues that “those acres will not go into gainful crops without substantial investment in roads, irrigation, fertilizers, drainage, property rights, law and order, etc. Those investments will not be forthcoming in the absence of higher crop prices. Meanwhile, about as much cropland will be lost to urban development, soil degradation, depleted water tables for irrigation, biofuel crops, etc. as is likely to be added each year.”
On the demand side, Tweeten, in acknowledging a slowing down in the rate of population, sees a 2012 trend rate in the growth of total food demand of 1.3 percent per year, 0.8 percent per year lower than it was in 1962 and higher than the 1 percent per year increase in world crop and livestock productivity.
He concludes: “In short, unless there is an unexpected increase in global cropland, future food demand is likely to grow faster than food supply—a considerable turnaround from 1962 when food supply growth sharply outstripped demand growth. Real prices of farm food ingredients projected to rise on average by1 percent per year in future decades contrast considerably with real farm prices decreasing 1percent per year on average in the 1960s. In conclusion, the above is no counsel of Malthusian despair—American consumers will hardly notice the trend reversal, but living standards will be retarded, especially in poor countries.”
If Tweeten’s analysis is correct, commodity programs designed to soften the price and income blows caused by supply generally out-stripping demand, would no longer be needed—the yield variability issue would remain, of course.