Grains & Oilseeds Production Industry Trends

Farm Income Rises

Farm Income Rises

Net farm income in grain and oilseed farming continues to rise, due largely to federal support for corn for ethanol. Many farms are growing grain corn instead of soybeans, vegetables, and other field crops, leading to price hikes as supply declines. The grain corn industry has doubled in value over the past five years as the price of corn has increased from under $2 a bushel to $4. The soybean industry has increased 50 percent in value despite a slight decline in acreage.

According to the USDA's Economic Research Service, net grain farm income is expected to increase 50 percent in 2008 from its historic 10-year average, due primarily to increased demand for corn for ethanol and sustained high corn prices. A continued rise in farm income for grain producers could encourage a growing number of soybean and vegetable farmers to abandon crops in favor of federally subsidized corn.

Fewer, Larger Farms

Grain Exports Rise

Farming continues to evolve from a lifestyle into a business: the 12,000 commercial crop farms with over $1 million in annual revenue account for almost half of US crop production. The average farm size has risen to 500 acres; the total number of farms has fallen below 2 million. Total US acreage devoted to farming has fallen steadily in the past 50 years.

US corn, wheat, and rice exports have increased 80 percent over the past five years. Egypt, Japan, and Nigeria, the top three wheat export markets, have nearly doubled in size over the past five years. Corn exports to Korea, the third-largest export market, are 15 times higher today than five years ago. A growing middle class in China and India has led to higher demand for US grain. The depreciation of the US dollar has made US corn and wheat much less expensive in the international market.

Operating Costs Rise

More Corn Used for Ethanol Production

Seed, fertilizer, electricity, fuel, and machinery are getting more expensive for US crop farms. Operating costs have risen 50 to 80 percent over the past three years. Many grain and oilseed farmers believe that the increased yield from genetically modified (GM) seed is negated by higher operating, overhead, and seed costs.

Ethanol now accounts for 30 percent of total domestic corn use, up from 5 percent 10 years ago. The US ethanol sector is adding over 6 billion gallons to its total capacity, mostly in Minnesota, Iowa, and Nebraska. Corn used for other food, seed, and industrial uses - namely corn syrup, starch, and sweetener - has remained flat. Lower-cost biomass ethanol from switchgrass or rice straw is years away from being commercially viable.

Corn Acreage Displacing Wheat, Soybeans

Operating Costs Rise

Farms on a traditional corn-soybean crop rotation are increasingly shifting to a corn-corn-soybean pattern. Some farms are abandoning crop rotation: the high payout from grain corn is worth the increased risk of disease or poor yield. Total acreage for corn has risen 20 percent over the past decade, while soybean and wheat acreage has dropped slightly.

Seed, fertilizer, electricity, fuel, and machinery are getting more expensive for US grain farmers. One-third of all grain producers lose an average of $20,000 per farm. Many farmers believe that the increased yield from genetically modified seed is essentially wiped out by higher operating and overhead costs. Operating costs, for items such as seed, fertilizer, and gas, have risen 50 to 80 percent over the past three years.

More Biotech Crops

Corn Acreage Displacing Wheat, Soybeans

Despite international trade bans and wary consumers, a record number of GM crops are being planted. GM seeds now account for 75 percent of all planted acres of corn and 90 percent of soybean and cotton. US farmers have so far avoided biotech sugar beets, potatoes, and sweet corn, because major food companies won't buy them.

Farms on a traditional corn-soybean crop rotation are increasingly shifting to a corn-corn-soybean pattern. Some farms are taking a chance on abandoning crop rotation, believing that higher payouts are worth the increased risk of disease or poor yield. A number of farms are abandoning wheat entirely in favor of federally subsidized corn. Because demand remains high for both soybeans and wheat, prices have risen for both commodities as farmers turn to corn.