Global crop yields have not kept up with increasing demand 

Glacier FarmMedia—Rising demand and below-trend yields is leading to a tightness in global supply of the major crops, says one of the world’s largest crop input suppliers.

The global stocks-to-use ratio for the major crops, excluding China, has been trending down since 2018, Jason Newton, Nutrien’s chief economist, told delegates attending the 24th International Farm Management Association Congress in Saskatoon.

Global crop consumption has been growing by 2.2 per cent per year since 2020, but yields have not kept pace.

“We’ve had four consecutive years of below trend yields globally,” he said.

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That is due to adverse weather conditions and high input costs, which led to low fertilizer applications rates.

Global crop area has also plateaued, which hasn’t helped matters.

“As a result, global grain supply and demand has been tight,” he said.

China is a big reason behind the steady increase in consumption. The country’s corn and wheat yields have fallen below trend line in recent years, and it has run out of arable land.

The result is that a country that produced a 34 million tonne surplus of major grains 10 years ago is expected to have a 49 million tonne deficit in 2024.

“That has been a major factor that has contributed to support for crop prices,” said Newton.

Another factor is the explosive growth in biofuel demand.

U.S. renewable diesel production is forecast to grow to 7.4 billion gallons post-2025, up from 4.1 billion gallons in 2023, although that now appears to be wishful thinking.

“That is likely not going to happen because the crush capacity for that is not there,” he said.

U.S. sustainable aviation fuel production is forecast at three billion gallons by 2030, up from 25 million gallons in 2023.

North America’s crops are off to a good start because of plentiful early-season rainfall. Crops are green and lush, and crop condition ratings are higher than average for this time of year.

“As a result, we have seen pretty significant declines in crop prices over the last month or so,” he said.

The next month or two will make or break the Northern Hemisphere crops.

Ukraine and Russia are two interesting markets to watch.

Ukraine’s production has fallen 30 per cent from pre-war levels, while its exports have only dropped four per cent by comparison.

“Obviously that’s not sustainable,” said Newton.

Ukraine has drawn down its inventories to critically low levels, which will eventually have to be reflected in the country’s export numbers.

Russia’s exports kept a lid on wheat prices in 2023-24, despite tight global supplies of the crop. However, record heat combined with dry conditions will decrease winter and spring wheat production in that country in 2024-25.

Brazil is the key driver of corn and soybean markets. It is the one major source of cropland growth in the world, with cultivated area increasing four per cent per year over the last decade.

Global crop prices have dropped, but they are still in line with the 10-year average, which has led to a rebound in fertilizer demand.

Ammonia production costs spiked in the European Union in 2021 due to high natural gas prices. Costs have since come down, but 20 per cent of the EU’s production capacity has been idled and is unlikely to return.

China has been restricting exports of urea and phosphate fertilizers as it attempts to become self-sufficient in crop production.

The other big factor in the phosphate market is low U.S. inventories.

Distributors reduced stocks in anticipation of a flood of Moroccan imports due to what was expected to be drastically reduced duties on the product in early 2024. That did not happen, and they were caught off guard.