Sunday, June 22, 2008
News

Georgia and the world food crisis

When you start to see the prices of produce go up, you think the farmers are making more money, but we’re not

A soybean field in summer.
USDA

Where American soybeans end up

The United States is the world’s leading soybean producer and exporter. Farm value of U.S. soybean production in 2003/04 was $18 billion, the second-highest value among U.S.-produced crops, trailing only corn.

U.S. soybean exports by country, 2006/07

Top five destinations:
--China—408 million bushels
--Mexico—144 million bushels
--European Union—125 million bushels
--Japan—122 million bushels
--Taiwan—77 million bushels

U.S. Soybean Prices

Farm price for soybeans:
   2005 crop year average: $5.66 per bushel
   2006 crop year average: $6.43 per bushel
   2007 crop year average: $10.40 per bushel

Top 5 Soybean producers, 2007

   --Iowa - 439 million bushels
   --Illinois – 350 million bushels
   --Minnesota - 252 million bushels
   --Indiana - 211 million bushels
   --Ohio - 194 million bushels

Source for all three: USDA

By Megan Hodgkiss

After record-setting floods, the governor of Iowa recently declared most of his state a disaster area. There, many farmers are unable to plant their soybean crops—which is significant, because Iowa is the United States’ largest soybean producer, and the United States is the world’s largest soybean producer.
 
The downpour in the Midwest is pushing food prices higher. Already, the commodities exchanges are seeing record numbers. Some experts estimate that 2 million acres of soybeans have been lost to Iowa’s floods. Normally, states like Georgia, which harvested 275,000 acres of soybeans last year, would be called on to make up for the loss. That would be a boon for Georgia farmers, but the state has its own problem—a drought that has parched its fields for several years.

“Georgia is still hurting … we could use some of that water from the Midwest. A good rain would help crops,” says Georgia Department of Agriculture Commissioner Tommy Irvin.

Georgia’s drought also contributes to America’s growing grocery bill.

“Any time you have extreme drought, heat or flooding, you are going to drive up …the price of crops,” says Jimmy Williams who farms near Camilla in southwest Georgia.

With soybean supplies at their lowest levels in decades, the global food crisis has become all the more real. The need for soybeans and corn in producing biofuels like ethanol has meant greater demand for the crops. With oil prices soaring, the 2005 U.S. Energy Policy Act established tht 7.5 billion gallons of renewable fuels, like biofuel, must be used annually by the year 2012. As that deadline approaches, farmers face yet another obstacle. The demand for soy-based biofuel is drawing away land that would traditionally be used to cultivate food crops for humans and livestock.

“We can only grow so much [soy],” says Williams.

Thanks to more demand for soybeans and corn for biofuels, the cost of livestock has climbed dramatically. Production costs eat away at the profits farmers might reap from record-high prices.

For every dollar consumers spend on produce and meat, the farmers say they see about 20 cents. The other 80 cents goes to off-farm costs, such as processing, distributing and retailing.
“The price of diesel is killing us!” says Charles Kight, a farmer who lives near Vidalia.

And high oil prices have not only pushed up the cost of driving a tractor, they’ve also increased the price of fertilizer. The American Farm Bureau reports the price of fertilizer has increased 156 percent in the last two years, and diesel is up 135 percent.

The miserable configuration is clear: Farmers have to pay more to fuel their farm vehicles, so every acre costs them more to cultivate. They pass that cost onto the processors and distributors who pass it onto consumers. So by the time a soybean product gets to your table—in whatever form it may be (soy is found in a lot of products)—you might as well be eating pate de foie gras.

According to the U.S. Department of Agriculture, about 40 percent of America’s soybeans were exported across the globe to countries including China, Mexico and members of the European Union. The top three American soybean producers are Iowa, Illinois and Minnesota. However, as reported in its 2002 state agriculture census, there are more than 1,100 farms in Georgia that harvest approximately 3 million bushels of soybeans annually.

“We grow a good many bushels of soy here. Soybeans used to be priced between four and six dollars a bushel, but now it is 15,” says Commissioner Irvin.
 
Which looks like good news for farmers.

“When you start to see the prices of produce go up, you think the farmers are making more money, but we’re not,” says Williams. “Our costs are following the prices. It might be even higher.”

Ironically, when staples such as soybeans command a higher price, it encourages farmers to increase their production, which can make the crop price plummet.

“We have a bumper crop this year,” says Kight, “[but] the prices start out high at the beginning of the year, then drop right down.”

The bottom line for consumers is that higher production costs mean higher prices at the grocery store. But as some longtime Georgia farmers explain, the overall rise in cost is just a sign of the times.

“People need to understand that prices have to go up,” says Mike West, whose farm is near Omega, in south Georgia. “The [cost] to grow is going up. The price to [transport] the crops is going up. The price you pay is going up.” SP