Switching Some Fields from Crop to Energy Production may Boost Crop Yields on Other Fields
Researchers have previously shown that taking prairie farmland out of production and introducing deep-rooted prairie vegetation that can provide habitat for wild insect pollinators may boost overall crop yields on nearby fields. The vegetation also decreases runoff and increases soil and nutrient retention. Now researchers at Yale University have concluded that the higher yields are not significantly affected if solar panels are placed over the vegetation planted in the pollinator fields. Farmers who capitalize on increasing demand for renewable energy by installing solar panels or leasing fields for panel installation may benefit from additional revenue from energy sales in addition to boosting crop yields and improving soil quality.
Industry Trends
CONTRACT FARMING MORE POPULAR
Contract farming is gaining in popularity among producers. It is the process by which a buyer, typically a food processor or supermarket chain, establishes an agreement with a farm to produce a certain quantity and quality of a given crop in exchange for an agreed upon price and a given delivery date. The two main types of contracts are marketing and production. Under a marketing contract, the farm owns and controls the crop until delivery. They continue to provide for all inputs and expenses with little to no intervention from the buyer. Contracts are typically finalized right before harvest. Under a production contract, the buyer owns the crop and the farmer receives a fee for service. The buyer will provide for certain inputs and services and gives guidance to the farmer on production.
CONSOLIDATION OF FARM OPERATIONS
The low per-acre value of crops, coupled with more rapidly rising expenses, has forced a number of small farms out of business. Efficiency tends to increase with volume, given the high capital cost of equipment, maintenance and other inputs to production. As the number of farms producing a crop has decreased, the percentage of that crop produced by the largest farms has risen dramatically. These large farms are buying and or renting land from smaller farms and are expanding their existing farms.
GENETICALLY ENGINEERED CROPS
Extensive work is being conducted by a number of companies to genetically engineer seeds with specific characteristics that can increase crop yields and quality. Biotechnology is being used to develop seeds with higher tolerances to herbicides and other pesticides. Others are being engineered for higher resistance to specific plant diseases or insects, thereby reducing the need for pesticides. Developers are using biotechnology to try to reduce allergens and increase disease-fighting nutrients in foods. They are also researching ways to use genetically engineered crops in the production of new medicines, which may lead to a new plant-made pharmaceutical industry. Genetically engineered plants are also being developed to provide “phytoremediation,” in which the plant detoxifies or absorbs pollutants from the soil and is then disposed of safely.
ORGANIC FARMING
Countering the trend toward genetically engineered crops is the growing demand for organic foods. Organic food purchases grew nearly 16% in 2016 to $50 billion and account for over 5% of U.S. food purchases. Originally concentrated to a small conscientious group, now 82% of Americans buy organic foods from time to time. Certified organic farming is gaining the attention of producers who are looking to participate in this higher-value market that commands premium prices. Organic foods are sold through natural food stores, three out of four conventional grocery stores, and farmer’s markets.
LOCAL FOOD MOVEMENT
Interest by consumers and restaurants in locally grown food is growing. Local food is perceived to be fresher and better for the environment, as it reduces transportation costs and fuel consumption. The growth in local food creates opportunities for small crop farms to sell products directly to consumers via farmers’ markets and Community Supported Agriculture (CSA) programs, where consumers pre-pay to receive a set quantity of produce each week. Small farms can also sell directly to local restaurants and grocery stores.
Crop Pricing Trends
CROP PRICES FALL FASTER THAN EXPENSES
Farm expenses and receipts have decreased in recent years, but not at comparable rates. Even as the economy strengthens, farmers are receiving lower prices for their crops but expenses are decreasing at a much slower rate. Between 2013 and 2017, the Prices Received Index decreased 19%, while the Prices Paid Index fell just 3%. Lower crop prices are hurting revenue as the cost of expenses such as seed, fertilizer, equipment, and taxes remains historically high.
CROP PRICES MIXED IN FEBRUARY
The all crop index for prices received by farmers fell 3.5% in February compared to a year ago, according to the USDA. Prices fell for oilseeds and fruits and nuts, but rose for feed grains, food grains, and vegetables and melons. The February index increased 8.5% from the previous month.
Source: VerticalIQ, Inc.