The best land for farming corn, wheat and soybeans looks remarkably the same around the world, though the results could hardly be more different.
From the Argentine pampas to western Ukraine to central Illinois, the topsoil is flat, dark and deep. It retains moisture but drains well. It can be tilled without forming a crust or blowing away on the breeze. More often than not, it gets favorable weather. And it recovers quickly from the abuses of mankind.
If the world is going to grow enough food to meet rising demand, these acres must produce more. Yet in many countries where the blessings of sky and earth combine, farmers labor under severe economic and political limitations. Crop yields vary drastically even with identical weather and soil conditions. So Ukrainian farmers produce a fraction of what their U.S. counterparts grow on comparable land.
In theory, today’s high prices should provide the incentive to pull out all the stops. Farmers should be planting fence row to fence row, investing in seed, fertilizer and new equipment to boost yields, and expanding their storage and transportation network for exports.
That’s the case in the United States. But expansion abroad is proceeding slowly, trailing the boom in demand from the developing world, where consumption of meat and cooking oil has soared. Short of money, held back by government policies, farmers must overcome steep barriers to feed a hungry planet.
The disparity in farm productivity is a major reason food supplies have tightened, causing pain around the world as the cost of bread, tortillas, rice and other staples rises. Corn at home is being siphoned off to become ethanol, pushing prices to records, and the rest of the world is struggling to fill that gap.
In the small Ukrainian village of Sherbanka, once the heart of Europe’s breadbasket, farmhands are hard at work scavenging parts from junked equipment to keep their decades-old tractors and combines running. Since the Soviet Union collapsed in 1991, this cash-strapped nation’s grain production has fallen by half.
On the Argentine pampas, heaps of soybeans rise beside roadblocks set up by angry farmers. A new export tax aimed at protecting domestic consumers has paralyzed the South American country’s lucrative agriculture sector, prompting a showdown with a socialist-minded government.
Then there is Downstate Wapella, where farmer Vic Riddle has all the advantages of high-tech seed, fertilizer and equipment, not to mention highways, rail lines and giant processing plants nearby. But he still had to fight wet weather to plant his crop this spring and now expects a much smaller harvest than last year’s.
Walking into a field behind his farmhouse between Bloomington and Decatur, Riddle digs into the black soil with a pocketknife and extracts a cream-colored soybean seed he had planted the day before, already swollen and ready to sprout. “It’s amazing what we can do on the farm with all this technology these days, but it needs to get up and growing,” he said. “There will be more people to feed.”
The key will be squeezing higher yields from land already under cultivation. The United Nations’ Food and Agriculture Organization estimates the world will need to boost its output 50 percent by 2030. New acreage brought into production will account for one-fifth of that gain, the FAO says. Higher productivity must account for the other 80 percent.
And while the need for food is greatest in sub-Sahara Africa and rural Asia, the biggest gains will come from the Vic Riddles of the world — farmers with the advantages to make the most of the opportunity that higher prices afford.
“The biggest leap forward will be attained in the U.S.,” said Josef Schmidhuber, FAO senior economist. “It’s happening even faster than we predicted a couple of years ago.”
Argentina and Brazil, Ukraine and the rest of the former Soviet Union also will produce “a lot more,” he said, because their potential is great and their obstacles reasonably surmountable.
As more intensive cultivation pays dividends, top producers will benefit most. St. Louis-based Monsanto, maker of genetically modified seed, is among a host of agribusiness giants that see profits rising as the rich get richer supplying the world’s food: “Acres are finite, so the challenge is how do you make a lot more with a lot less,” Monsanto Chief Executive Hugh Grant told investors recently. “The efficiency in production is going to be driven by innovations.”
For those who can afford it, and whose governments allow it, fortune beckons on the farm.
Hungry planet
50%
How much the world will need to boost its food output by 2030.
SOURCE: United Nations Food and Agriculture Organization
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Ukraine: In addition to old equipment, export limits have kept farmers from sharing in the global commodity boom
In Ukraine, aging, ramshackle fleets of farm equipment and stifling restrictions on grain exports keep farmers from harnessing the full potential of their rich, coal-black soil.
Farming has always formed the backbone of this Eastern European nation, where 70 percent of the territory is classified as agricultural land. While the Soviet Union existed, Ukraine’s farms flourished. But with the Soviet collapse in 1991, state farm subsidies vanished and Ukrainian farms struggled to survive. Fertilizer use fell 85 percent. Lacking funds, Ukrainian farmers took to their fields with inefficient Soviet-era machinery.
Ukrainian farms have never really recovered from the Soviet Union’s demise, and its farmers blame today’s government policies for aggravating their plight.
The most damaging of these policies, farmers say, has been the decision by Kiev in September 2006 to impose grain export restrictions. Those rules have prevented Ukrainian farmers from capitalizing on soaring global prices, costing the farm sector an estimated $2 billion.
In Sherbanka, a small village in the heart of Ukraine’s leading wheat-producing region, Odessa province, Suvorova Farm director Oleg Ponomarenko estimates that export restrictions on wheat cost him $620,000 in 2007 — revenue he desperately needs to buy fertilizer, build grain storehouses and shore up his rusting, dilapidated fleet of Soviet-era farm equipment.
With little revenue trickling in, buying new parts, let alone new vehicles, is out of the question. “The loss is massive,” Ponomarenko says of the grain export restrictions. “We don’t have enough money to fertilize, and when we don’t fertilize the harvest is twice as less.”
Ukrainian government leaders said the restrictions were needed to keep the country’s food prices in check by flooding domestic markets with grain. The government lifted the controversial rules in late May, but analysts say the damage to the farm sector already has been done.
“It’s the main reason why the country produces only 20 percent of the grain it’s capable of producing,” said Ivan Tomych, president of the Ukrainian Association of Farmers and Landowners.
Getting credit to buy new farm equipment and upgrade storage infrastructure also is a major problem for Ukrainian farms, despite recent interest from international hedge funds and other foreign investors. Ukrainian law bars farmers from using their land to guarantee loans. Instead, they put up their aging farm equipment, houses or future crops. Farmers frequently borrow from private sources on seasonal, 6- to 10-month terms at interest rates as high as 30 percent.
To grow wheat in the fall of 2007, Ponomarenko took out a $600,000 loan from local investors who demanded repayment immediately after the harvest. His grain sold for roughly the loan amount, leaving him “with a profit of zero,” he said.
“So the autumn harvest produced nothing,” he said. “It’s like you buy an egg for seven kopecks, boil the egg and sell it for seven kopecks. It’s a vicious circle, but what else can I do?”
A lack of storage at Ukrainian farms makes matters worse. Ukrainian farms either must ship grain to elevator companies that charge exorbitant rates, or sell it immediately after the harvest, when prices tend to be cheapest.
Ukrainian farms could produce a lot more with a little additional fertilizer, but the cost is prohibitive. The Yuzhnoye Farm in the southern Ukrainian village of Khlebodarskoye usually needs 800 tons of plant nutrients per season for its 6,100 acres, but it can afford only 100 tons, Deputy Director Svetlana Serbina said. Some 40 percent of the farm’s arable land lies fallow because no money is available for fertilizer and equipment.
“The income here is nearly zero,” Serbina said. “The government doesn’t help, and the banks don’t give us any credit. We’re barely surviving.”
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Illinois: The rumble of trucks and cranes fills the air where corn is king, as processing, fertilizer plants hustle to boost capacity
Vic Riddle’s farm in Wapella stretches along the four-lane U.S. Highway 51, between a Cargill soybean processing plant to the north, and the sprawling Archer Daniels Midland Co. complex to the south. Grain silos, barns and neatly kept houses dot the flat landscape. On a recent sunny day, neighbors on late-model tractors were pulling seeders and sprayers across their level fields.
A few miles down the road in the town of Farmer City, construction crews bustled around Monsanto’s commercial seed-corn factory, scrambling to triple its capacity in time for the harvest.
When it’s ready this fall, the plant’s 170-foot steel tower will dominate the landscape, its 9 acres of warehouse space almost enough to contain the adjacent downtown in this community of 2,000.
“We’re in prime corn country,” said Monsanto’s Colby Hoffman, the low-key son of a cabinet-maker who is helping to supervise the expansion. “The demand we’re anticipating in the future, that’s what’s fueling this growth. Years of research and development now is coming into play.”
Central Illinois towns like Wapella and Farmer City sit at the center of America’s agricultural universe, and it’s a catbird seat these days. Compared with their global competitors, they face the fewest constraints, and their entrepreneurial farm operators intend to ramp up production as much as they can.
More farmers than ever will be planting corn year after year on the same ground or double-cropping wheat in the winter and soybeans in the summer.
The federal government authorized the release of acreage from its Conservation Reserve Program, a move that upset environmentalists but provided relief to livestock producers and others.
“You’re going to see full production from U.S. agriculture,” the 60-year-old Riddle said. “These high grain prices will hurry things up.”
While laying plans for expanding in South America and Eastern Europe, agribusiness giant ADM will continue directing most of its capital spending to the U.S., said Todd Werpy, a vice president at the multinational food processor. “There’s a lot of untapped potential, even in the U.S,” he said. “You’ll see significant expansion.”
Fertilizer-makers, caught off guard by surging demand, are pushing hard to expand capacity too. And high commodity prices are bringing about a new commitment to research and development, discouraged by years of surplus crops and low prices. That stands to boost food production fairly quickly, if coming innovations such as drought-tolerant seed expand the range of key crops.
This year saw another example of U.S. farmers’ market power. Because of high prices, farmers expanded corn acreage more than the Agriculture Department had initially forecast. That turned out to be a plus after rain and floods washed out fields. The aggressive planting made up for much of the loss.
Heady times for the fortunate few raise difficult questions about helping the neediest. In poor, hungry regions of the world, even the simplest farm technology remains out of reach. Too often, the poor can’t afford food in a market economy when rising incomes of their countrymen send local prices higher.
If Riddle had his way, he would dismantle export bans, price controls and import restrictions, and reach international agreements on food safety, pollution, sustainability and a host of related matters.
But in the absence of a breakthrough, watch for farmers around the world to keep doing what they’ve done forever: produce as much as they can.
“That’s what we’ll continue to do,” said Riddle. “It’s what we always do.”
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Argentina: The government’s tax on soybean exports, meant to lower prices and boost food output domestically, has stirred up protests, hurt yields
By this time of year, the back roads around Totoras in northeastern Argentina should be a traffic jam of trucks taking soybeans to port 70 miles away. Instead, the roads are practically deserted; the trucks sit idly in a gas station parking lot.
Argentina’s government hiked taxes on soybean exports in March, hoping the farm sector would produce beef for hungry domestic markets. They didn’t expect a series of violent protests that have prevented the crop from moving off the farm.
Federico Boglione, the scion of one of Argentina’s largest soybean families, powers his SUV into one of his facilities that processes soybeans for animal feed. The warehouses are overflowing with bags of feed so he has told his workers not to process any more. Boglione has them painting the curbs yellow, to give them something to do.
“It’s such a great loss for so many people that I can hardly believe it,” he said sadly.
It isn’t that the soybean industry in Argentina will go away. The prices are too attractive and the infrastructure too developed for farmers to abandon soybean production en masse, farmers say.
But local experts expect soybean acreage to remain flat in the next harvest cycle, which begins in September. And a reluctance to invest in fertilizer and other costly inputs will dampen yields. So because of the tax, Argentina will grow less, they say.
This development is a tumble for a crop that took Argentina by storm. Nearly half of its arable land is used for soybeans, a big switch from the grazing that previously dominated, according to the Commerce Exchange.
Many soybean farmers got rich during one of Argentina’s worst crises. When the currency was devalued in 2002, ordinary farmers became magnates because they were buying raw materials with weak local pesos but selling their crops for U.S. dollars. The business consolidated into fewer producers with larger swaths of land, providing a ready target for populist President Cristina Fernandez, who has promised to redistribute wealth to the poor.
The ruling party has acknowledged that by reducing soybean exports, and thereby contributing to higher global prices, other developing countries will be hurt along with Argentina’s farming elite. But they insist tamping down domestic prices take priority.
“We have to harmonize Argentina’s interests with the world’s,” said Patricia Vaca Narvaja, a congressional leader from Fernandez’s party. “It isn’t worth producing for 400 million when 40 million Argentines cannot eat.”
The effects are subtle in the breadbasket of Santa Fe province, where John Deere billboards tower over golden fields and businessmen check commodity prices on their BlackBerries.
The floor of the Commerce Exchange in Rosario, a city not far from many of Santa Fe’s farms, usually would be bustling with runners and traders who gather under a row of giant monitors that track local prices and the latest numbers from Chicago’s commodity pits.
Under normal conditions, soybean farmers would be locking in deals with exporters for the 2009 harvest. But those sales agreements have been virtually non-existent due to uncertainties over future cash flow.
Meanwhile, costs have doubled for herbicide and tripled for fertilizer since last year. Soybeans can grow without chemical nutrients in Argentina’s fruitful soil, but yields will fall at least 20 percent.
Argentine farmers fear that prospective buyers will flock to more reliable competitors such as Brazil. So Roberto Costatini is bracing for the worst — again.
With the gravelly voice and hard look of a longshoreman, he recalls growing up in a family that cultivated potatoes at a tiny profit. Some years, the Costatinis went days without eating when the money wasn’t there.
Costatini grows soybeans now, but he is a relatively small producer with about 250 acres. In a sparse building along the railroad tracks in the town of Fighiera, he also oversees a co-op where other mom-and-pop growers come together.
Many of the newer farmers have only known the boom times, and Costatini wonders about their staying power now that a bedrock industry has become a wild card. If the crop can’t leave the country, they could lose big.
“We have prospered with soybeans because our soil is good soil and our people are good people,” Costatini said.
“But now, if I am going to harvest, it is like playing a roulette wheel. Maybe you’ll play a number that doesn’t come up. And then what?”
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About this report
These stories were reported by Alex Rodriguez in Ukraine, Oscar Avila in Argentina and Greg Burns in central Illinois, and written by Burns.
