Economic Tidbits

Future of Nebraska Agriculture

Tidbits last week discussed factors which will influence the transition of current agriculture to the long-term. This week Tidbits will explore a few trends, certainly not all, which will have a significant influence on the future of Nebraska agriculture.

Growing Meat Consumption—Population growth in Asia and Africa along with rising incomes will result in increasing meat consumption worldwide. The Food and Agricultural Organization projects meat consumption by 2050 will increase 27 percent over that consumed in 2005-2007. Nebraska is the largest red meat producing and beef exporting state in the nation. It also ranks near the top in cattle on feed and total beef cattle. The pork and poultry sectors have been expanding in recent years as well. As such, Nebraska should be well positioned to supply the growing worldwide meat consumption. Nebraska has the feeding and processing infrastructure, location, and access to feed grains and water to be a competitive supplier. Slower global economic growth, local opposition to livestock expansion, or a greater consumer acceptance of meat substitutes than expected, could all thwart Nebraska’s ability to capture these markets.

Increasing Reliance on International Trade—Demographic and economic changes in the U.S. and world mean crop and livestock producers in the future will be increasingly reliant on international markets for their livelihoods. This means greater market volatility as markets respond to international weather events, disputes, and the whims of politician both here and abroad. Recent trade disputes have created doubt on whether U.S. agriculture and Nebraska can be reliable suppliers. As a result, countries will look elsewhere for their food and commodity purchases and it could take years to win these markets back. So, while tremendous opportunity exists in international markets, Nebraska producers may lose access to some of these markets in the near term.

Stagnating Domestic Ethanol Consumption—Increasing vehicle fuel efficiency, growing consumer acceptance of electric vehicles, and growing efforts to reduce the country’s reliance on fossil fuels mean U.S. gasoline consumption will stagnate then decline. The Energy Information Administration (EIA) projects gasoline consumption will be 18 percent less in 2030 than 2019. Even with the expansion of E15, ethanol consumed in the U.S. is likely to fall over time too. Nebraska, with 25 ethanol facilities, is the second-largest ethanol producing state in the nation. Roughly 40 percent of the state’s corn production is used in ethanol production. And byproducts from ethanol processing are an important feed ingredient for the state’s livestock industry. Growing ethanol exports and other alternative uses will be necessary to mitigate the reduction in domestic demand.

Competing Foreign Production—The U.S. share of world production of corn, soybeans, and wheat has been trending downward. In contrast, the production share of countries in South America and the Black Sea region is rising. Data has shown it costs less to produce a crop in many of these areas, due largely to higher land costs in the U.S. However, lower transportation and transaction costs keep U.S. production competitive in world markets. Nebraska’s largest crops are corn and soybeans. Combined, receipts from the two crops account for 40 percent of the total agriculture receipts. Foreign competition will pressure commodity prices and Nebraska’s commodity producers. Nebraska producers will need to vigilantly watch costs or find alternative means to add value to their production. Foreign competition also means the U.S. must continuously upgrade and improve its infrastructure to maintain its competitive advantage.

Improving Technology—The adoption of new technologies in production agriculture has exploded in the last decade. The future is likely to include even more technological change regarding data collection and use, driverless vehicles, biologicals and microbials, genetics in livestock, and more. Nebraska is positioned to be a leader in technology adoption in agriculture. As a major livestock producer and large producer of corn and soybeans, coupled with a large irrigation base and ongoing labor shortages, means Nebraska agriculture can benefit from increased use of technology and will likely do so.  

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