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Global Crop Markets with Implications for Alfalfa Western Alfalfa & Forage Symposium December 12, 2011 Las Vegas, Nevada Daniel A. Sumner University of California Agricultural Issues Center
Global Crop Markets with Implications
for Alfalfa
Western Alfalfa & Forage Symposium
December 12, 2011
Las Vegas, Nevada
Daniel A. Sumner
University of California Agricultural Issues Center
Main Points • Crop prices have been very high
• Both supply and demand conditions have
contributed to tight markets
• Most projections indicate continued high
prices
• There is always uncertainty about the future
• Alfalfa is linked to other crops and dairy
markets
• For now, prospects are for relatively high
prices for much of the next decade with
normal amount of flux
U.S., China and India population, 1980-2010 with projections until 2030
World population is now 6.9 billion and will reach 8.2 billion by 2030
0
200
400
600
800
1,000
1,200
1,400
1,600
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
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2028
2030
Popu
lati
on in
mill
ions
China
India
United States
World map weighted by population in 1960
and by estimated population in 2050
Real Gross Domestic Product (GDP), with projections
$0
$10
$20
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$40
$50
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$10019
80
1982
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2010
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2030
$ tr
illio
ns
World
Developed economies less USA
United States
Developing economies
World map weighted by GDP in 1960 and by
estimated GDP in 2015
U.S. and world real per capita Gross Domestic Product
(GDP) in 2005 dollars, 1980-2010 with projections until 2030
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
United States
World
China
2009 Crude protein tonnage in world harvested crop
production, top 8 crops
Crop
Production Effective crude
protein content Crude protein
Share of crude
protein available in
top 15 harvested
crops
(million tonnes) (percent) (million tonnes) (percent)
Wheat 682 12.8 87 21.6
Soybeans 222 34.8 77 19.1
Corn 817 8.3 68 16.7
Rice, paddy 679 7.3 50 12.2
Barley 150 11.6 17 4.3
Rapeseed 62 28.3 17 4.3
Oil palm 207 8.0 17 4.1
Cottonseed 64 19.9 13 3.1
World production of soybeans and corn, 1980-2011 with projections
0
100
200
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900
1,000
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Mil
lio
n m
etr
ic t
on
s
Soybeans
Corn
2009 Crude protein tonnage in U.S. harvested crop production,
top 10 crops
Crop
Production Effective crude
protein content Crude protein
Share of crude
protein available in
top 15 harvested
crops
(million tonnes) (percent) (million tonnes) (percent)
Soybeans 91 34.8 32 33.8
Corn 333 8.3 28 29.4
Alfalfa 71 18.7 12 12.8
Wheat 60 12.8 8 8.2
Corn (silage) 98 7.0 7 7.3
Other hay 70 4.0 3 1.3
Cottonseed 6 19.9 1 1.3
Sorghum 10 12.6 1 0.8
Rice, paddy 10 7.3 0.7 0.6
Barley 5 11.6 0.6 0.5
U.S. production of alfalfa hay, other hay, and corn for silage,
1980-2010
40
50
60
70
80
90
100
1101
98
0
19
81
19
82
19
83
19
84
19
85
19
86
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89
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09
20
10
Mil
lio
n m
etr
ic t
on
s
Corn for silage
Alfalfa Hay
Other Hay
World milk, pork, poultry and beef production, with projections
15
35
55
75
95
1151
98
0
19
82
19
84
19
86
19
88
19
90
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92
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Mil
lio
n m
etr
ic t
on
s
Pork
Poultry
Beef
Milk (12.5% solid, dry weight)
U.S. production of fluid milk, 1980-2010 with projections
55
65
75
85
95
1051
98
0
19
82
19
84
19
86
19
88
19
90
19
92
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98
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24
Mil
lio
n m
etr
ic t
on
s
FAPRI
USDA
U.S. Milk powder exports to China, Hong Kong, Japan and South Korea
0
5
10
15
20
25
30
20
04
20
05
20
06
20
07
20
08
20
09
20
10
tho
usa
nd
me
tric
to
ns
Hong Kong
China
Korea
Japan
U.S. hay exports to China, Japan and South Korea
0.0
0.5
1.0
1.5
2.0
2.5
3.0
20
00
20
01
20
02
20
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mil
lio
n m
etr
ic t
on
s
China Korea Japan
Alfalfa Hay Exports from California Ports
Year Value Volume
Share of
U.S. total
volume
( $ millions) (1000 metric tons) (percent)
2008 226 1,070 36
2009 328 1,510 40
2010 397 1,800 46
2010 (through Sept.) 277 1,270 47
2011 (through Sept.) 272 1,160 41
Total Dairy Exports from California Ports
Year
Value of
California exports
California share of
U.S. value
(millions) (percent)
2008 1,055 33
2009 530 30
2010 1,319 42
2010 (through Sept.) 986 42
2011 (through Sept.) 1,290 42
Index of trade-weighted exchange rate for California
alfalfa exports
80
85
90
95
100
105
110
115
120
125Ja
n-0
0A
pr-
00
Jul-
00
Oct
-00
Jan
-01
Ap
r-0
1Ju
l-0
1O
ct-0
1Ja
n-0
2A
pr-
02
Jul-
02
Oct
-02
Jan
-03
Ap
r-0
3Ju
l-0
3O
ct-0
3Ja
n-0
4A
pr-
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Jul-
04
Oct
-04
Jan
-05
Ap
r-0
5Ju
l-0
5O
ct-0
5Ja
n-0
6A
pr-
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Jul-
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Oct
-06
Jan
-07
Ap
r-0
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l-0
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ct-0
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n-0
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pr-
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Jul-
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-08
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-09
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l-0
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ct-0
9Ja
n-1
0A
pr-
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Jul-
10
Oct
-10
Jan
-11
Ap
r-1
1Ju
l-1
1O
ct-1
1
Index of real corn and wheat prices, 1866-2011
0
50
100
150
200
18
66
18
71
18
76
18
81
18
86
18
91
18
96
19
01
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06
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11
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21
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96
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11
19
48
=1
00
Corn
Wheat
U.S. indexed real corn prices, 1972-77 and 2006-2011
50
100
150
200
250
300Ja
n
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan. 1972- Oct. 1977
Jan. 2006 - Oct. 2011
U.S. indexed real milk prices, 1972-77 and 2006-2011
85
95
105
115
125
135
145
155
165
175
185Ja
n
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan. 1972- Oct. 1977
Jan. 2006 - Oct. 2011
U.S. indexed real alfalfa prices, 1972-77 and 2006-2011
80
90
100
110
120
130
140
150
160
170
180Ja
n
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan. 1972- Oct. 1977
Jan. 2006 - Oct. 2011
Real prices for alfalfa hay, corn and all milk with USDA projections
for corn and milk
10
12
14
16
18
20
22
24
26
28
50
100
150
200
250
300
350
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
$ p
er cw
t for all m
ilk$
pe
r m
etr
ic t
on
for
corn
an
d a
lfal
fa h
ay
Corn
Alfalfa hay
Milk
U.S. price for all milk, 1980-2010 with projections
250
270
290
310
330
350
370
390
410
430
450
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
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18
20
20
Do
llar
s p
er
me
tric
to
n FAPRI Winter 2011
USDA Winter 2011
FAPRI August 2011 Baseline Update
November 2011 USDA WASDE (2012 midpoint)
Real Price of California Alfalfa: Data, Fitted Values and Projections
(2005 dollars)
90
110
130
150
170
190
210
2301
97
0
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
$ p
er
ton PA= a+bPC+dPM+Gyear, R
2= 0.82
data points
Projection with linear trend
Policy affects the market for all commodities
and therefore alfalfa
• Free Trade Agreement with South Korea
– May encourage milk and hay exports and stimulated demand for alfalfa
• Regulatory policy regarding animal agriculture
– Emissions, and animal housing restrictions affect location of production and regional hay markets
• Upcoming Farm Bill
– Grain and oilseed subsidies reduce downside revenue risks and stimulate production of these crops relative to alfalfa
• Ethanol subsidies, trade barriers and mandates keep corn prices high, but may be on their way out.
Global demand growth for farm commodities
• Continued demand growth for protein commodities, including alfalfa, derives primarily from continued increases in population and income which has been underway for decades and centuries
• At high incomes, income growth matters less for demand for food commodities, but protein, especially animal protein, continues to have significant income effects, even at higher incomes
• Demand growth for fruits, vegetables and tree nuts implied competition with hay and other field crops for acreage and water
• Strong demand expansion assumes that incomes of the world’s poor will continue to grow at rapid rates!
Global supply growth for farm commodities
• Supply growth derives mainly from:
– Opening new lands for crop and livestock production
– Additions to availability of irrigation water
– Increased availability or lower prices of inputs such as improved seed, fertilizer, pesticides and equipment
– Improvements in management on farms as weaker farmers leave and better farmers manage larger farms
– Improved handling and reduced losses along the marketing chain
– New and newly adapted and adopted technology and practices
The supply and demand balance for global markets
for farm commodities
• The balance of supply growth and demand growth determine trends in market prices.
• Over the long haul real (inflation adjusted) farm commodity prices have declined from decade to decade. Some current evidence and analysis suggests that these trends have ended and prices will remain high or even increase in coming years.
• But, one must pause before assuming that very long term supply and demand patterns have reversed.
Thank you.
Dan Sumner
www.aic.ucdavis.edu
