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The Ninth District Navigates Another Tough Year

Will New Markets Become Available?

The ninth agricultural district comprises parts of Montana, Minnesota, North Dakota, South Dakota, Wisconsin and Michigan. While all of the United States agricultural sector is experiencing challenges amid sharp declines in exports, the ninth district has been hit especially hard. 

Exports of corn and soybeans, the most traded commodities around the globe, fell in the U.S. by 25% in 2023; roughly the equivalent of $30 billion. Of that 25%, the ninth district represented half of the production and experienced a $14 billion decrease in ag exports. Wheat and beef have also been in decline putting increased pressure on these northern states in the current year.

Competition for Commodity Production

 Corn and soybean production boomed from 2021 through 2022. War in Ukraine and pandemic related shutdowns perfectly positioned America’s ninth district as a primary supplier of these commodities to large markets. Anticipating another productive year for corn exports, many farmers kept surplus crops in storage hoping to cash in on high prices in the future. But, production of the commodity has ramped up in other parts of the world creating a more competitive playing field. Ninth district farmers are coming ever closer to selling corn crops at a loss.

Soybean production experienced a similar situation. The industry took a hit last year because of drought.  Winter snow fell early in many of these states creating October harvest issues. Meanwhile, other nations across the globe increased production. The combination of weather related challenges and global competition has made profit margins quite slim, and in some cases nonexistent, for many ninth district farmers.

Brazil continues to be a major agricultural player. In recent years the country has invested heavily in the strength of their agricultural production and supply chains. Through research and financial incentives, Brazil has increased crop yields. Using more resilient varieties and a double crop method supply has increased.  Their investments in technology and sustainability have lowered production costs, as has significant work on roadways. Lower prices make them an appealing supplier for large markets like China.

Russia has also been working to expand wheat production; another commodity grown in the U.S.’s ninth district. In the last decade, Russia has added over 17 million acres worth of wheat crops and boosted exports to African nations. Like Brazil, they have been able to offer lower price points than the U.S. In 2010 the U.S. was the top exporter for wheat, corn and soybeans. Last year, those top positions were claimed by Russia and Brazil. 

Canada too has steadily decreased their imports of corn from the ninth district specifically. The country on our northern border has also invested in producing much of their own corn supplies. In the past, proximity between producers and consumers has made this trade relationship profitable since it can be transported by truck alone. Canada is among many countries looking to secure a place among sustainable producers of highly traded commodities.

Is this a New Normal for U.S. Agriculture?

Agricultural experts have proposed that the decline in exports feels very severe only because the previous two years experienced such a boom. A two year boom followed by a bust year is its own normal cycle. 

Everything was working well for the 9th district, supply was abundant and buyers were plentiful.  Now competition is back with global ag powerhouses like Brazil, Russia and Canada. Competition is a sign of healthy industries and tends to drive ingenuity. Supply is good in all of these countries and their ability to get their products to market has been equally strong.

The pandemic ushered in a unique scenario. However, supply and demand of commodities has always been subject to variables like wet and dry seasons, global conflicts, and cutting edge methods and technologies. The year ahead is unwritten and there is always potential for dynamics to shift quickly.

While current commodity trading could be a return to normal, ninth district farmers are still searching for ways to increase profits and will likely seek out new market options.

Potential New Commodity Markets

Farmers are hopeful that corn and soybean related products could expand into new markets. 

Should corn or soybeans be approved for biofuel use,  it would certainly alleviate pressure for the ninth district by allowing for profitable sales of surplus crops. Whether or not this will happen remains to be seen. But farmers are working to reduce greenhouse gas emissions in the hopes that this will become a new market for crops.

Another potential market is India. As China turns to Brazil for corn and soybeans, and Africa continues to import wheat from Russia, the U.S. will likely look to other large and small markets. After nearly 16 years of trade talks, India has officially signed a free trade agreement with the European Free Trade Association (EFTA). While this might not have an immediate impact regarding U.S. imports, it does kickstart a new trade dynamic.  A free trade agreement is a good sign that India could be open to partnership in the future.

The new trade agreement hopes to generate more jobs in India and increase prosperity in both India and EFTA countries. The changing microeconomic structure of India over the next few years could be the new market the U.S. needs. Rising household incomes means more people will have more access to more things. Demand for corn related products is expected to increase. 

Increasing exports to Southeast Asian nations like Vietnam is a promising option. Mexico is another promising market with the potential for expansion. While Russia and Brazil accommodate other large countries, the door may swing open for the United States to secure trade agreements with smaller countries. It certainly is a worthwhile pursuit if the U.S. aims to bolster ninth district agriculture.

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