April 2022

Global adjustments in agriculture

The war in Ukraine has impacts well beyond the Black Sea region. Agricultural markets worldwide have been adjusting ever since the Russian invasion began. But the war is not the only issue pressuring ag markets. In fact, the war’s impact is only amplifying some signals that were already affecting production and marketing decisions. The latest USDA reports, the March Prospective Plantings report, nass.usda.gov/Publications/Todays_Reports/reports/pspl0322.pdf, and the April World Ag Supplies and Demand Estimates (WASDE) report, usda.gov/oce/commodity/wasde, outline many of the ways global agriculture is shifting to factor in not only the war, but also the continuing problems with global supply chains and the higher costs of almost everything.

Arguably, the Prospective Plantings report was much more about the supply chain issues and higher input costs than about a farmer response to the war. While the war is a contributing factor to higher ag input costs, especially fertilizer, those input costs were already very high before the war. Global supplies of fertilizer were limited prior to the conflict and those supplies have become even more limited with the economic sanctions on Russia and Belarus (two of the world’s largest fertilizer exporters) and the decision by China to restrict fertilizer exports. The threat of higher production costs sent US farmers looking for lower cost crops to plant. As Figure 1 shows, many farmers turned to soybeans as the crop of choice. The left side of the figure shows the shift in crop area in the number of acres, while the right side of the figure shows the percentage change in crop area. In terms of total area, soybeans gained nearly 4 million acres, while corn lost roughly the same amount. Along with soybeans, cotton, winter wheat, barley, durum wheat, and sunflowers gained significant area. Meanwhile, sorghum, hay, and other types of spring wheat lost area.

figure 1

Looking across all of the major crops, the amount of land in crop production is remaining fairly steady as the gains and losses basically offset each other. This result was surprising given the strength of crop prices over the past few months. Historically, when crop prices are high, we see additional land come into crop production. For example, during the last run of crop prices like we are experiencing now (2011-2012), principal cropland area jumped from 314 million acres in 2011 to 324 million acres in 2012. This year, principal cropland area increased by just 200,000 acres. We are not likely to see more cropland added by the time the June acreage survey comes. Figure 2 shows the percent change in principal cropland between the two big USDA acreage surveys (March Prospective Plantings and June Acreage reports). As the data for the last 11 years indicates, when planting conditions are good, farmers plant a few more acres than originally intended, but the bigger adjustments tend to come when weather impacts planting progress and fewer acreage get planted. While the war has created additional pressure on global crop area and supplies, US area didn’t react as much as usual due to higher production costs.

figure 2

But acreage and supplies are not the only adjustments occurring in global agriculture. The war in Ukraine has also significantly impacted the flow of ag products across the globe. Countries that depend on the Black Sea region for their crop needs are now looking for other sources to fill those needs. For example, the countries in North Africa and the Middle East purchase a lot of the crop and oilseed production from southern Russia and Ukraine. The war has essentially shut off those trade flows and has sent those countries searching for different suppliers. The US is capturing some of those shifts. But the largest country to watch as the world adjusts to the war will be China. Prior to the outbreak of the war, Chinese purchases of many commodities from the US had been declining. However, over the past several weeks, Chinese interest in US crops has gained some steam. USDA’s projections for exports from the 2021 corn and soybean crops have been boosted in the last two WASDE reports. Figures 3 and 4 display the export patterns we have experienced over the past two and one-half years, along with a line for the five-year average level of crop exports. For corn, the 2020 marketing year set the record for export quantities. China led the charge, becoming our largest corn customer with significant purchases throughout the 2020 and 2021 calendar years, lining up the Phase 1 trade deal. However, as the specific targets under the Phase 1 trade deal ended with the calendar year, Chinese purchases fell and the export pace for corn fell below last year’s level. The gap between the years had been widening until the Russian invasion. Since then, the gap has shrunk slightly, but the expectation is that the gap will continue to shrink, with more purchases coming from China, North Africa, and the Middle East.

figures 3 and 4

While corn exports are slowly gaining, soybean exports have been more robust. Like with corn, the export pace before the war had cooled, with China being the major change agent. Over the past decade, China has been the largest market for US soybeans, representing roughly 60% of our exports over the past few years. The soybean market has worked through the dramatic swings in the US-China trade relationship. The trade/tariff war in 2018 and 2019 had cut soybean exports significantly. The signing of the Phase 1 trade deal allowed sales to rebound and reach new highs, with the 2020 marketing year being the top year for soybean export quantities. However, as was true with corn, the export pace early in the 2021 marketing year was lower, as China pulled back, putting export sales around the five-year average. But since the start of the war, soybean sales, especially to China, have ramped up. USDA has bumped its export projection up by 65 million bushels over the past couple of months.

As the world reacts to the events in Ukraine, the impacts on US agriculture have been mixed. The war has created issues that are forcing already high production costs higher. But the war is also providing reasons for strong crop prices to remain. Usually, the export markets are the first to decline when crop prices move higher. However, the concerns about limited ag production and export potential from the Black Sea region have global customers moving quickly to secure supplies. The higher prices have not yet discouraged international sales. A major concern for farmers has been whether prices would fall just as production costs have risen to meet them. The strength in the export markets suggests that the higher prices today will stick around for a while and cover those production cost increases as we work through the upcoming growing season.

Listen to the April 2022 Crop Market Outlook video for further insight on outlook for this month.


Chad E. Hart, extension economist, 515-294-9911, chart@iastate.edu


Chad E. Hart

extension economist
Iowa State University
468E Heady Hall
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