Wednesday, June 29, 2016

Growing population - Growing Farmland Productivity

The idea that world population is steadily growing is often cited as a reason to be long (bullish) agriculture technology / farmland / anything food & protein related. While I may not necessarily disagree with this logic (although, as someone who's seen a number of farm cycles up close and personal, I think some skepticism is warranted), the idea of food scarcity is often treated as self evident - excusing the need to cite hard evidence and facts. This has created a lot of distortion around the issue.

One of the biggest misnomers I see is that farmland productivity is a new issue. As I'll show below, the number of farmable acres per person has been steadily declining since at least 1960 (as far back as data went back). And if you want to go back further, the Reverend Malthus did his writings in 1798 (218 years ago, but who's counting?).

So, here is a quick overview of the world's food/farming situation in 5 quick graphs. All data was sourced from

1. World population is growing - as it has been for centuries. As of 2015, global population had broken above 7.3 billion. Many analysts estimate there will be 9.5 billion men, women, and children on the planet by 2050, and more than 10.3 billion by 2100. That is a lot of mouths to feed. So where will all that food come from?

2. Arable acres (i.e. land suitable for agricultural production) peaked in 1992, and despite a recent uptick from 2011-2013, has held fairly steady for the past 24 years. It hasn't been more acres farmed feeding all those people . . .

3. As a result of rising population and slow (1960-1992) to flat (1992-2014) growth in worldwide farmable acreage, arable acres per person has been declining. In 1961, there were 1.2 arable acres for each person on this plant. Today, there are just 0.6 arable acres per person.

4. However, yield per acre has been steadily rising. Now this isn't a direct proxy, but looking at yield per acre for cereal grains gives us a good indication in the improvement in farmland productivity. Since 1961, yield per acre has jumped 173%. Acreage has been flat, but rising productivity per acre has kept the masses fed.

5. This all leads to looking at productivity (yield * arable acres) per person. Again, I'm using cereal grain yields as a proxy for the improvements in all of agriculture. What we see is that productivity per person has been rangebound since the early 1980s. In other words, the amount of "product" that an acre of farmland produces per global population member hasn't been declining - it has been in a fairly steady range for 36 years. Not the ominous downtrend (population outpacing productivity) that many would have you believe.

I'm not arguing that all is well in agriculture and we can just sit back and relax. Nor am I addressing some of the uses of ag commodities (i.e. ethanol) that are large beneficiaries of farmland productivity.

What I am saying is that yes, yields will need to be improved, but unless your investment time frame is 30-40 years (many will say yes, few will follow through on that commitment), be prepared for a wild ride along the way as the ag boom/bust cycle can be particularity viscous.

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1 comment:

Anonymous said...

fascinating - thanks