What crop supply response looks like

Stealing the link and title wholesale from Michael Roberts:

When prices for corn and soybeans surged last fall, Bill Hammitt, a farmer in the fertile hill country of western Iowa, began to see the bulldozers come out, clearing steep hillsides of trees and pastureland to make way for more acres of the state’s staple crops. Now, as spring planting begins, with the chance of drenching rains, Mr. Hammitt worries that such steep ground is at high risk for soil erosion — a farmland scourge that feels as distant to most Americans as tales of the Dust Bowl and Woody Guthrie ballads.

Heat and crop yields in 2010

This may be premature, but I'm very tempted to award a gold star for clairvoyance to Michael Roberts, whose research on the effect of heat on crop yields I've blogged here and here. Here he is on August 12:

[Current temperatures] are still rising fast. If this keeps up for a few more days I'd say yields will get hammered.

(to give credit where credit is due, the market may have seen the same thing)

Anyway, fast forward to last week, the October forecasts for wheat, corn and soy are all well below the September forecasts (although USDA puts a bizarrely positive spin on it). As Michael's chart below shows, the September forecast is almost always very good, and revisions are generally upward, not downward, so something funny happened this year, and late heat seems to be a very strong hypothesis.
Michael is investigating the more detailed data and I hope will post any findings as they arise. As I mentioned before, if it was the heat, it will be very valuable to prove and communicate this to stakeholders in agriculture, some of whom have taken very skeptical views toward climate change and its impact on them specifically.

Market believes heat hurts crop yields

The market believes what Michael Roberts' popular paper showed about crop yields - higher temperatures really hurt.

Corn futures rose the most in almost two weeks and soybeans gained on speculation that the recent Midwest heat wave will mean smaller production than the record crops predicted today by the government.

August has gotten off to the second-warmest start since 1960, T-Storm Weather LLC said today in a report. Another forecaster, Commodity Weather Group LLC, said about 25 percent of the U.S. soybean-growing area won’t get enough rain for proper plant development over the next two weeks, and that the dryness could harm a third of the Midwest should rain miss sections of Illinois this weekend, as expected.

“The crops are going downhill rapidly in parts of the Midwest and South,” said Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis. “Our farmers are already preparing for corn yields that may fall 5 percent to as much as 10 percent from earlier field samples.”

Looking for the silver lining, might this influence the farm lobby's stance on climate change?

Via Michael at Greed, Green and Grains.


Update: I'm struggling a bit to square this with USDA predictions of record U.S. corn production... I wonder if those forecasts were based on outdated inputs (like, perhaps, "earlier field samples").

Monsanto's patent expiration dance

Via Parke Wilde at U.S. Food Policy, an interesting NYT article on the dynamics of patent expiration on Monsanto's widely-used Roundup Ready 1 soybeans, which occurs in 2014.

In letters to seed companies and farm groups this week, Monsanto said that it would allow farmers to continue to grow its hugely popular Roundup Ready 1 soybeans even after the patent protecting the technology expires in 2014.

The letter countered a widespread impression in the agriculture business that Monsanto planned to force farmers and seed companies to migrate to a successor product called Roundup Ready 2 Yield, which will remain under patent and is more expensive.

Monsanto is trying to position this as a clarification rather than a retreat:

Gerald A. Steiner, executive vice president for corporate affairs at Monsanto, said Thursday that Monsanto was not changing its policy on how it would handle the soybean patent expiration, but was merely clarifying its intentions.

“What’s different,” he said, “is we have made a very comprehensive communication of what we are going to do.”

But the widespread impression in the seed business was that Monsanto was backing away from a previous policy.

Monsanto appears to have strong legal protections in their existing contracts, but it doesn't look like those will stand up to the weight of public criticism:

Some seed industry executives and academic soybean specialists say that Monsanto was not planning to renew licenses for that Roundup Ready 1 trait that expired before 2014, so that seed companies would have no choice but to move to Roundup Ready 2.

But in its letters this week, Monsanto said it would now extend all contracts for Roundup Ready 1 until the patent’s expiration date. It also said it would not enforce language in some contracts that would have required seed companies to destroy or return Roundup Ready seed when the patent expired.

But Monsanto may have another out a few years down the road:

Still, it is uncertain how long Roundup Ready 1 would survive in generic form. Some nations require licenses for the import of genetically engineered crops to be periodically renewed. Monsanto said it would maintain those licenses through 2017. But if they expired after that, American farmers would not be permitted to export the Roundup Ready 1 generic soybeans to certain countries, which would discourage them from growing those crops.

One final thought - Monsanto is much-demonized as a monopolist and worst, but it is hard to get textbook industry structure and competition in industries which require massive R&D investments. Those investments simply don't get made privately without patent protection, which looks suspiciously like a monopoly after the fact.

Stylized biofuels fact of the day

From a recent speech by BP Biofuels CEO Philip New (couldn't find a link):

The Brazilian government points out that 99.7% of the country’s
sugarcane plantations are as far from the Amazon as the Vatican is from the Kremlin.

And even better news is that the government plans to keep it that way.

Update: A reader asks, "The Amazon river or the edge of the Amazon rain forest?" It's not specified in the speech (found a link), but I believe he means the forest - the river wouldn't make much sense.

Heat and ag yield, cont.

Michael Roberts' great paper with Wolfram Schlenker on the effect of detrimental increased heat on crop yields (which I first excitedly blogged here) is getting a lot of (well-deserved) attention.

First, Ezra Klein cites the work in the Washington Post, and, despite a few minor inaccuracies by Klein, Michael is deservedly proud of having cracked into the mainstream media.

Second, the paper was noticed as far away as Brazil, whence came a letter to the editor challenging that Brazil (being warmer and high-yielding) refutes the Schlenker/Roberts conclusion, or at least casts into doubt its generalizability. But their quick-and-dirty analysis seems to corroborate their original findings:

First, they cherry picked the state and the year from Brazil. Mato Grasso is the highest yielding state in Brazil and 2008 was a remarkably good year for them, due to unusually good weather. Other states in Brazil have average yields that are about half those of Mato Grasso.

Second, Mato Grasso yields were higher than average yields in the U.S. as a whole, but not higher than the best yielding states in the U.S.

Third, if we narrow our comparison by looking a particular state—Illinois, the number two yielding soybean state in the U.S.—and also look more closely at the data, Mato Grasso doesn’t look much warmer. In fact, the southern half of Illinois, which has average yields comparable to those in Mato Grasso, also has comparable exposure to extreme heat. (Northern Illinois is cooler and higher yielding than both Mato Grasso and Illinois). This can be seen from careful inspection of the maps below (click the figure for more detail). It turns out that there aren’t any soybeans grown in the hottest part of Mato Grasso. It’s not clear whether the commenters took into account the locations in Mato Grasso where soybeans are actually grown.

Look for more back-and-forth discussion on this interesting area, and the Schlenker/Roberts contribution in particular.

Research: Higher temperatures TERRIBLE for staple crops

I knew Michael Roberts had a good blog; I didn't know he was working on monumentally important and relevant research on the impact of temperature on staple crop yields:

We set out to develop a better statistical model linking weather and U.S. crop yields for corn, soybeans and cotton, the largest three crops in the U.S. in production value. Our major new finding is that (by far) the best predictor of yield is a measure of extreme heat: how much temperatures exceed about 29C (84F) during the growing season. The threshold varies somewhat by crop--29C is the threshold for corn. Below this threshold, warmer temperatures are more beneficial for yields, but the damaging effects of temperatures much above 29C are staggeringly large.

They introduce a measure I had not seen before, but makes a lot of sense - "degree days above 29C".

A good measure extreme heat is degree days above 29C. This is calculated as (Degrees Above 29C x Days) summed up for all time (including fractions of days) at each temperature above 29C. The more degree days above 29C, the lower are corn yields. Historically, average degree days above 29C during the growing season were about 57. Under the slow warming scenario (we cut emissions to 50 percent of 1991 levels by 2050) this number is projected to rise to 194 by 2070-2099 and corn yields are estimated to decline by 46 percent [emphasis mine]. Under the fast-warming (business as usual) scenario, degree days above 29C are projected to increase to about 413, and estimated corn yields decline 82 percent [emphasis mine].

Their findings on adaptation are particularly troubling:

Somewhat surprisingly, we find no evidence that farmers in the warmer south have been successful in adapting to the higher frequency of temperatures above 29C. This is troublesome as we hoped to learn from warmer regions how farmers might adapt to more frequent temperature extremes.

What are the implications?

These big estimated impacts are important because the U.S. is by far the largest producer and exporter of agricultural commodities. This is especially true for corn and soybeans, which are two out of the world's four most important staples (the other two are wheat and rice). If U.S. yields go down a lot, it drives up prices of staple food commodities all around the world. Almost surely the poor in other parts of the world, particularly developing countries that import food, would suffer far more than the U.S. would.

And the caveats?

There are three major caveats: (1) CO2 fertilization may offset some of these negative effects--something still under significant debate; (2) Seed companies (Monsanto) might develop more heat tolerant crops in the future (but we find little evidence of adaptation in the past); and (3) Farmers will be able to offset some of the losses by shifting where they grow different kinds of crops.

There are more detailed findings in his post. I'll say again that this appears to be critical research that highlights the consequences of climate change for both the broad world food system and U.S. farmers in particular. In fact, it would be great if this were publicized more broadly and were able to shift the opinions of some obstinate agricultural states on the importance of addressing climate change.

Update: He answers my question on longer growing seasons:

R: Great research - love your approach and the conclusions are frightening (but better that we know, and have our eyes wide open).

One other mitigating factor I can imagine is longer growing seasons - any idea how much this could counterbalance the fall in yields? (probably not much, just curious)

Michael: R,

Thanks for your comment and good questions.

We did investigate adjusting growing seasons by moving everything back one month (see the supplement). This does offset damages a little (I recall about about 10 percentage points in the long-run worst-case scenario, but see the supplement for a precise number). We were wary about moving things much earlier since the sunlight and sun orientation would shift so much and the the model implicitly holds these fixed.

Traces of GMO halt US-EU soy trade

It doesn't take export bans to throw a wrench in the smooth workings of the world food market:

European trade sources said US soya shipments to Spain and Germany were found to have traces of GMO maize varieties which are prohibited in the EU.

Mattias Sundholm told the Reuters news agency: "The shipments have been rejected at the EU borders, and have been consigned and recalled when already on the market within the EU, unless they have already been consumed."

The US Grain and Feed Trade Association estimates that 200,000 tonnes of US soya had been denied entry to the EU, by mid-July. Given the uncertainty, international traders have ceased all further shipments.

This has raised concerns about supplies of key feed ingredients for European livestock.

A simple mistake (or was it?) has the potential to disrupt the flow in a way that has systemic consequences, which is worth bearing in mind when thinking about the future of where food will be produced vs. consumed. It's easy to dismiss food self-sufficiency schemes in a globalized world, but the past two years have shown us how rapidly trade can break down, and that caution is warranted.