Feeding the World – Worldwide Grain Market

 

By Dave Cooley, GHPB

Introduction
Feeding the world can be a challenge, especially when the population continues to increase and expanding economic well-being elevates the status of people everywhere. In response, the worldwide agricultural community, through a combination of education, efficiency, and technological advances as well as developing and applying new trends in crop application and management, has consistently risen to meet this challenge.

Population
Feeding the world is indeed a challenge. Since 1960, the world population has grown from about 3 billion people to over 7.5 billion people who are alive in the world today. This equates to an average annual increase of 77 million people each year, which is the equivalent of adding the current population of two “California’s” every year for 58 years. (See Figure 1).

Economic Well-Being
In addition to a growing population, the economic well-being of humanity is also a key driver of food consumption. Since 1960, worldwide Constant Dollar GDP has risen from $11 trillion a year to just over $75 trillion a year as of the end of 2015 (last year data is available). (See Figure 2).

During this 57-year period, the rate of growth in world GDP was generally more pronounced in those countries classified as being low and middle-income countries as opposed to those countries that are considered more well-developed. As a result, as more people benefit from worldwide economic growth, which creates rising incomes, more money is available for spending on food. Specifically, for people in the low and middle-income countries, the propensity to spend additional money on food is significantly higher when compared to the propensity to spend additional money on food by people living in the more developed world, consequently, raising the overall demand for food.

The World Grain Market
Responding to both population and economic growth, the world agricultural community, by implementing new techniques in crop management, developing specialized seeds, utilizing improved fertilizer, applying targeted pest-control, and employing technologically advanced machinery, all combined to increase world grain exports from 75 million metric tons in 1960 to over 400 million metric tons at the end of 2016. (See Figure 3). Fortuitously, the growth rate of these agricultural grain exports closely tracks the growth rate of the population and overall economic activity, which has allowed the worldwide agricultural community to continue to “feed the world”. (See Figure 4).

Over the last 58 years, total world grain exports were 12,146 million metric tons or an average export quantity of 209 million metric tons each year. The majority of grain exports over this period originated from six areas: Argentina, Australia, Canada, the European Union, Russia, Ukraine, Kazakhstan, and the United States. Grain exports from these areas totaled 9,898 million metric tons or an average of 170 million metric tons a year and resulted in a market share of 81%.

For the current crop year 2017/2018, exports from these six areas is expected reach 304 million metric tons which would represent a 75% share of the worldwide grain trade. Based on this expected export tonnage, the current year’s quantity would be 134 million metric tons above the 58-year average of 170 million metric tons, but the market share would be 6 points below the 58-year average of 81% as other countries gain agricultural proficiency and participate in the world-wide grain trade (notice the growth of the “Other” category). (See Figure 5).

This success has been accomplished even though the available acreage for row crop agriculture cultivated today is only slightly higher than the crop acreage cultivated and harvested in 1960. Specifically, the acreage harvested in 1960 was just under 600 million hectares. Just over 660 million hectares is expected to be harvested during the 2017/2018 crop year. By applying technological innovations and current farm management techniques, grain yield per hectare grew from between 1 to 2 metric tons per hectare in 1960, regardless of the type of grain, to an expected level for the 2017/2018 crop year of almost 6 metric tons per hectare for corn, 4 metric tons per hectare for rice, over 3 metric tons per hectare for wheat and between 1.5 and 3 metric tons a year for the remaining grains, rye, barley, oats, and sorghum. (See Figures 6 and 7 ,)

World Grain Production - Consumption
To support rising grain exports, worldwide grain production rose over the last 58 years from 795 million metric tons for 1960/1961 crop year to an expected value for the current 2017/2018 crop year of over 2,845 million metric tons. This growth was accomplished through the application of various improvements in farm technology and crop management, which were generally adopted by the worldwide agricultural community and significantly contributed to “feeding the world.”

The difference between the beginning and ending production quantities reflects a change of 1,690 million metric tons for an average annual compound growth rate of 2.02%. Two grains, oats and rye, experienced a negative growth of 1.5% and 1.7%, respectively; two grains, barley and sorghum, remained about even throughout the 58-year period; and 3 grains, corn, rice, and wheat, grew at 2.93%, 2.06%, and 2.04%, respectively. (See Figure 8).

The population’s demand for grains includes a determination of both direct and indirect demand-consumption patterns. A certain amount of grain is consumed directly by humans. Since raw grains are generally not only inedible, but also offer minimum nutrition, certain processing is necessary to ensure the grains are fit for human consumption. Several examples include cutting, steaming, rolling, and puffing, which generally creates various types of cereals; grinding to make flour for breads and cakes; or applying various heating applications such as roasting or boiling to tenderize the grain, such as applied to an ear of corn or to grains of hulled rice. Two examples of indirect human utilization of grains include the human consumption of meat, which was fattened at the feedlot using a high concentration of various grains included in the feed mix and humans purchasing motor fuels that contain ethanol.

Indirect Grain Demand - Animal Feed
Various studies conducted over the last century regarding the optimum use of grains as animal feed led to a preference for using corn, primarily in the U.S., and wheat, primarily in the EU. These studies noted that the starch content and the digestible energy value for corn and wheat have the highest values of the five grains (sorghum and rice excluded) that make gains quite useful as animal feed and are additional key drivers for the growth in the grain production-consumption function; especially for corn and wheat. Feedlot operators and others involved in fattening animals prior to slaughter use about 75% of all grains produced (especially corn and wheat) as animal feed. (See Table 1).

1 --Abridged from Nutrition and Management section of the Alberta Feedlot Management Guide; ,Second Edition published September 2000.
2 – Corn’s relatively low value for crude protein is more than offset by the starch and digestible energy content

Indirect Grain Demand - Corn and Ethanol Manufacture
The U.S. is the primary producer of ethanol from corn and utilizes about 28% of the annual corn crop or around 100 million metric tons, representing about 10% of the world’s corn production3. Ethanol is used as an oxygenate which is added to the fuel used in internal combustion engines. It enhances the burning of that fuel by reducing carbon monoxide and soot – leading contributors to smog. In the U.S., ethanol is added to motor gasoline and is usually blended in a ratio of 10% ethanol and 90% gasoline. While the oxygenate abilities of ethanol improves the combustion process for internal combustion engines, its energy content is less than that of gasoline, which detracts proportionally from mileage efficiency. Worldwide, about 25 million billion gallons of ethanol was produced during 2015, with the U.S. producing 14 billion gallons, or 58% of the world total with corn as the feedstock.

Meeting the direct demand for food based on the growing world population coupled with the indirect demand of grains for use as animal feed and in the manufacture of alternative motor fuels (ethanol), are key elements that explain the growth in the worldwide production and export of grains; especially rice, corn, and wheat.

3 – World of Corn – 2017; National Corn Growers Association; Chesterfield, Mo.

U.S. and World Grain Production-Consumption
The United States has been, is, and will probably continue to be a significant player in the worldwide grain market. In 1960, the U.S. supplied 29 million metric tons or 39% of the worldwide exports of grains. This rose to over 57% or 110 million metric tons in 1979. The U.S. share of the grain export market slowly declined over the next 40 years to an expected export tonnage of about 83 million metric tons or a 20% market share for the 2017/2018 crop year. This percentage decline in U.S. export tonnage is primarily related to increased domestic ethanol production. The declining exports of U.S. sourced grains, is generally offset by increases in grain export tonnage by Russia and Ukraine.

Waterborne Foreign Trade of the U.S.
The waterborne foreign exports of the U.S., a sub-set total U.S. Exports, are those goods moving in deepdraft ships in the foreign trade of the U.S. Since 2003, waterborne foreign exports increased from 330 million metric tons to over 610 million metric tons; an increase of 280 million metric tons. During this same period, the waterborne foreign trade of the grains, except for a drop of about 20 million metric tons due to dry conditions in the corn belt during 2012 and 2013, remained relatively steady over the last 14 years (2003-2016) with annual exports averaging around 75 million metric tons a year (ranging between 70-90 million metric tons). With total waterborne foreign trade of the U.S. rising over the period and the grains remaining relatively constant, the market share of grains declined from about 20% in 2003 to about 13% at the end of 2016. (See Figure 9). The waterborne foreign exports of grains represent about 88% of the total U.S. grain exports, with the difference being exports to Canada and Mexico shipped overland.

The primary waterborne foreign exports of grains from the U.S. by type of grain include corn and wheat; along with lesser quantities of rice and sorghum, followed by very small quantities of barley, oats, and rye. Over the last 14 years, the combined exports of corn and wheat have averaged 90% of total U.S. waterborne foreign exports of grains. (See Figure 10).

Grain Trade - Houston
Between 2003 and 2016, Houston’s waterborne foreign exports of gains, which centered on wheat and sorghum along with small quantities of corn and rice, grew from 4.6 million metric tons in 2003 to 6.6 million metric tons in 2016. During the in-between years, Houston’s grain exports cycled four times from a low quantity of 3 million metric tons to a high quantity of 6.6 million metric tons at year-end 2016. (See Figure 11).

During this same time period, Houston’s total waterborne foreign exports trebled, increasing from 30 million metric tons to over 90 million metric tons at the end of 2016. This dramatic increase in export tonnage is primarily the result of skyrocketing exports of crude oil and petroleum products. As a result, the export market share of the grains was halved; declining from 14% in 2003 to 7.5% at the end of 2016. (See Figure 12).

Waterborne foreign exports of grains emanating from Houston are predominantly destined for countries in Africa and Asia, with about 2 million metric tons moving to each area. In addition, another 2 million metric tons are exported to Mexico, Canada, and various countries in Central and South America. (See Figure 13).

GRAIN TRADE – GALVESTON
Between 2003 and 2016, Galveston’s waterborne foreign exports of gains, which centered on wheat and corn, were relatively robust at 2-3 million metric tons a year through 2011. From 2012 through 2016, Galveston’s grain export tonnage dropped by about 50%, and the export mix changed to a smaller volume of wheat and varying quantities of sorghum. (See Figure 14).

Waterborne foreign grain exports were the mainstay of Galveston’s total waterborne foreign trade from 2003 through 2011, with a market share of 81% in 2003 slightly declining to 66% in 2011. For the next two years, Galveston’s export trade dropped from about 5 million metric tons a year during 2010 and 2011 to 3.3 million tons in 2012 and to 2.5 million metric tons in 2013. Similarly, the grain trade dropped as well during 2012 and 2013 to 900 thousand metric tons and 600 thousand metric tons, respectively. During the last three years, 2014 through 2016, both grain and total exports recovered, led in part by an uptick in waterborne exports of sorghum. (See Figure 15).

Destinations for Galveston’s waterborne foreign exports of grains, that generally average 2 million metric tons a year, include countries in Africa, Asia, and Central and South America. (See Figure 16).

Conclusion
In terms of tonnage, the U.S. is a consistent and reliable exporter of grains. By applying the latest in technological advances to not only the manufacture of “smart” farm machinery, but also to seed research and development, the U.S. is well poised to continue as a leader within the worldwide agricultural community. Similarly, the ports of Houston and Galveston, historically a hub for the agricultural trade that supports Texas agriculture, will also continue to have an important role to play going forward in “feeding the world.”

Editor’s Note: Graphs showing worldwide production-consumption and yield per hectare for the seven grains can be found on the Port Bureau’s web-site under the title “Feeding the World.”
Sources: Figure 1: World Bank; Figure 2: World Bank; Figure 3: USDA; Figure 4: USDA and World Bank; Figure 5: USDA; Figure 6: USDA; Figure 7: USDA; Figure 8: USDA; Figure 9: USDOC-Census Bureau; Figure 10: USDOC-Census Bureau; Figure 11: USDOC-Census Bureau; Figure 12: USDOC-Census Bureau; Figure 13: USDOC-Census Bureau; Figure 14: USDOC-Census Bureau; Figure 15: USDOC-Census Bureau; Figure 16: USDOC-Census Bureau;

 

 

 

 

 

 

 

 

 

 

 

 

  • Date September 6, 2017
  • Tags Aug.-Sept. 2017