Grain World: Farm consolidation key to increasing yields

Saskatoon | MarketsFarm — Consolidating farms — going from numerous small operations to fewer, but much larger, farms — is central to improving crop yields, according to grain industry observers Neil Townsend and Jason Newton.

Townsend is the chief market analyst for FarmLink Marketing Solutions, while Newton is the chief economist and head of marketing research for Nutrien. They discussed consolidation on Thursday during the Big Picture Outlook at the Grain World conference in Saskatoon.

“The reason why yields have grown and people focus on yields, it’s what you can control, depending on the weather,” Newton said.

“Get big or go home is definitely an attitude in a lot of industries. I think farmers are investing lots of money and prices haven’t co-operated,” Townsend said.

He cited one news report from Des Moines stating “44 per cent of Iowa farmers have significant debt concerns.”

Newton attributed that situation, which has burdened farmers across the U.S., to increasing land prices that have driven up debt levels.

Also, both speakers believe the U.S.-China trade war forced lower commodity prices on U.S. farmers. Another factor has been U.S. corn exports, which have dropped because major importers have turned to other sources, according to Townsend.

Townsend took note of improved yields in Ukraine and Russia. He said Ukraine’s corn yields are increasing four to five per cent per year and Russia’s wheat yield has climbed to 80 per cent of Canada’s.

Part of that, he said, was due to previous drought in the Black Sea region that resulted in the loss of numerous small to medium farms, which were consolidated into larger operations.

Also, Newton gave credit to the higher yields in both countries to efficient use of fertilizers, especially nitrogen.

China as well has seen a huge turnaround, Townsend commented. The country used to import 10 million to 25 million tonnes of wheat annually to feed its burgeoning population. Today, China still imports three million to six million tonnes, but to blend with other wheat to provide a taste that is otherwise absent in food production.

As for India, Newton said about 80 per cent of the farms there are less than five acres, with most passed down from generation to generation. That, together with farming and prices being highly regulated in India, consolidation will be a very long time coming.

“There’s reduced economic incentive to increase productivity,” Newton said of India, but stressed that consolidation in other countries has proven to be inevitable.

— Glen Hallick reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.