5 July 2024

4 minute read

By: Global Ag Media

Europe

During its annual conference from June–14, the agri benchmark Cash Crop Network discussed recent developments in global crop production.

The conference, which was hosted by the Spanish Ministry of Agriculture, took place in Valladolid. The ministry, together with its operating company Tragsa, established and manages an outstanding network of 37 typical crop farms. About 55 international experts from all over the world discussed resent results and topical issues of global crop production.

In terms of economics, 2023 was difficult for most typical agri benchmark farms when compared with previous, admittedly very profitable, years. Due to high fertiliser prices at the farm gate – despite the downward trend in global markets -, increasing machinery cost and lower output prices many farms experienced a massive downturn in return to land.

The projections for 2024 of the agri benchmark network, which is coordinated by the German Thünen Institute, are even more bearish. The likely relief provided by lower fertilizer prices will not fully compensate the increase from machinery cost. In addition, based on global price projections, farm-gate production prices are likely to be lower in 2024 than in 2023. The consequence: Many typical farms are likely to struggle to remunerate land according to current land rents.

Subsequently, the reader may find some other highlights from a few selected topics that have been discussed.

US renewable diesel boom – how US soybean production may increase

A number of US states have implemented blending targets for renewable fuels. As a result, renewable diesel production has increased substantially. By 2029 this will lead to an annual demand of 8 million tons of soybean oil for renewable diesel production (FAPRI-MU, 2024), a 3-million-ton increase in demand relative to 2020. The added supply could be generated through more domestic crushing or an increase of soybean acreage; most likely, a combination of both options will be used. 

To satisfy this increased demand for soybean oil via expansion of soybean acreage, about 5.1 million ha (+15% of current soybean acreage) of additional farmland would be required. An increase in soybean acreage may come from either (a) shifting away from continuous corn rotations to corn-soy and (b) shifting corn-soy rotations toward corn-soy-soy. Based on agri benchmark data, Margaret Lippsmeyer from Purdue University showed that option (a) would require an increase in soybean prices of 6% and option (b) of 8% to make these rotations preferable over existing ones.

Ukraine grain exports: No specific effects on Central & Eastern European farm-gate prices

At the national level, agri benchmark farm-gate data did not yield an indication that growers in Central and Eastern Europe have been suffering from the inflow of Ukrainian grain. As the graph attached indicates, respective wheat margins between Western Europe and Central and Eastern Europe actually narrowed. However, agri benchmark partners mentioned that in regions close to the Ukrainian border, lower than usual prices have been observed.

EU sugar production: Expanding and rather profitable in 2023

Due to high EU sugar prices in 2022, EU production increased by 7% in 2023. Therefore, the EU became a net exporter again. Since global sugar prices were still rather high, the negative impact on domestic prices was low. Thomas de Witte from Thünen Institute stated that profitability of sugar beet production was extraordinarily high – an advantage of 1,000 to even 2,000 €/ha over other crops could be observed. A possible future cut of 15 to 30 €/t in beet prices (or 20% to 40%) would still allow beets to be competitive against wheat prices of 230 €/t.

Regenerative agriculture – a promising option to reduce environmental footprint?

The members of the agri benchmark Network intensively discussed the concept and the environmental claims of regenerative agriculture. Many industry leaders and politicians are promoting this idea to address public concerns regarding agriculture; influential global consulting companies try to educate growers regarding the profitability of suggested measures such as cover crops and no-till. It turned out that proponents seem to oversell the potentials substantially, in particular regarding greenhouse gas savings and economics. Furthermore, the two major sources for GHG emissions – nitrogen use and land use change – are not addressed. Considering these shortcomings, the network will be publishing a thesis paper on this topic and will suggest more meaningful indicators to define goals that effectively reduce GHG emissions and reduce pressure on biodiversity.