The planet reached a population milestone on November 15, surpassing 8 billion people for the first time in history, according to the United Nations. Growth is expected to continue, reaching 8.5 billion people by 2030 and 9.7 billion by 2050.
That’s a lot of hungry mouths depending on the productivity of America’s farmers and ranchers to be fed. And all that increased demand should be good news for farmland values, especially considering that the supply of arable land is getting scarcer at the same time.
Yet population milestones are just one part of the demand story.
Most of the population growth is occurring in less developed countries. In those countries, increased wealth, changing eating habits, and reliance on food imports are also benefitting U.S. agriculture.
Green Street Advisory Group did a deep dive into the subject in its 2021 U.S. Farmland Sector Primer.
“Coexisting with [population growth] projections are the consumption growth per capita (i.e., caloric intake) of the same countries that are seeing the largest population growth,” they wrote. “The concurrence of these two factors should substantially bolster grain consumption.”
Bolstering grain consumption is key to the success of U.S. farmers, who rank first in global corn production and fourth in wheat.
Green Street explained that increased consumption of grains is partly a reflection of increased demand for meat, as any incremental demand for meat has a compounding effect on grain needs. In other words, to produce more meat you need more animal feed like grain and soybeans – a crop that America ranks second globally in growing.
Meat demand typically rises when global wealth increases because consumers have the buying power to prioritize more expensive proteins. Such wealth growth has averaged roughly 5% per year over the past century, Green Street noted.
The Food and Agriculture Organization of the United Nations projected that global meat consumption would continue to climb, increasing 14% by 2030. And their 2021 report also showed that consumption growth in low-income countries would lead the way with a more than 35% increase.
But developing countries are not able to meet these increased demands alone. Feeding their wealthier, expanding populations has necessitated additional imports, which is where U.S. farmers come into play.
“The less developed countries are growing more dependent on global trade to support their food needs, which consist primarily of different grains,” the Green Street report explained. “In 2001, they imported 21% of the products they ultimately consumed. By 2021, this has steadily climbed to almost one-third of domestic consumption.”
What has that meant for U.S. farmers?
It’s one reason why U.S. agricultural exports reached $177 billion in 2021, up from $57 billion in 2001, according to the U.S. Department of Agriculture. Volume of exports has risen over that time, too. More than 146 million metric tons of corn, wheat, and soybeans were shipped abroad in 2021, compared to 102 million metric tons in 2001.
USDA estimates for the value of ag exports the coming fiscal year are even higher at $190 billion.
More exports can help generate higher commodity prices and healthier farm incomes – all of which have a positive impact on farmland values and the likelihood of future farmland appreciation.
Note: This article contains Forward Looking Statements.