Acreage set-asides are being discussed as a farm price-support policy, yet reducing US production could lead to loss of world market share, said a group of agricultural economists from the University of Illinois and Ohio State University in a study published by Illinois farmdocdaily.
World production of corn and soybeans increased significantly in the past 30 years, and the US already has lost production and export share, the economists said. Removing US acres may encourage more production in the rest of the world, with Brazil being the most likely. This could reduce any upward price effect from US set asides and lead to additional loss of market share for US farmers.
WORLD PRODUCTION INCREASES
The US leads the world in corn production, but our share of world production has fallen to 33% in the last decade from more than 40% in the 90s, they said.
For soybeans, the US share of global production fell to 33% from 48%, with South America accounting for more than 53% of global production since 2010, the study said.
Improved yields and expanded soybean acreage increased US production, while other major world production areas increased yields and harvested area of both crops, and at faster rates than in the US.
WORLD EXPORTS UP
The US was the dominant corn exporter throughout the 90s, accounting for 70% of global trade, they said. But now the US accounts for slightly more than one third of the total.
In the 90s, the US held a 64% share of global soybean exports while South America accounted for 32%, the study said. Since 2010, South America has been the leading soybean exporter with 57% of global exports and the US accounting for 37%.
LOW COMMODITY PRICES
Low commodity prices since 2013, coupled with the added shock to prices since 2018 brought on by trade conflicts and the effects of COVID-19 have led to increased interest in the return to supply management policies, the economists said. These types of policy approaches have been used before but have largely been abandoned since the 1996 Farm Bill.
Changes in global markets resulted in the declining role of the US as a leading producer and exporter of corn and soybeans over the past 30 years, the economists said. US-only supply management policies, such as acreage set asides or land retirement programs, would be less effective now than when the US played a more dominant role in worldwide trade.
Any upward price effects achieved by US supply reductions likely would be short-lived as the other major production areas of the world likely would respond with increased production, the study said. The ability of production regions in the southern hemisphere to adjust production within the US marketing year highlights this issue.
Furthermore, the combination of reductions in U.S. acreage and production, and any resulting increased production in other parts of the world, would result in additional losses in global production and export shares for US producers, the economists said.
CATTLE, BEEF RECAP
Fed cattle trading was reported last week at $97 to $97.50 per cwt on a live basis, up $2 to down $2.50 from the previous week. Dressed-basis trading was at $160 per cwt, up $2.
The USDA choice cutout Monday was up $1.40 per cwt at $204.66, while select was up $0.51 at $190.40. The choice/select spread widened to $14.26 from $13.37 with 72 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday was not available. Monday’s Aug contract settlement was $144.87, up $0.20.