A dramatic jump in demand for corn, which began in late 2006, has resulted in sharply higher prices for all crops in the U.S. A simple average across the eight major cultivated crops shows that 2012 crop year prices are expected to be 165 percent higher than in 2005. This has provoked intense competition among crops for land resources with crop market prices doing short term battle each year for acreage to plant. The epicenter of this crop frenzy is naturally in the Midwest and is reflected in the phenomenal jump in land values and rental rates in the region.
Longer term impacts on land use are also expected as a result of this new agricultural environment. Though data is limited, there are strong indications that these long term changes have begun and they have significant implications for the beef cattle industry. The 2007 Natural Resources Inventory (NRI) showed that in addition to 305 million acres of cultivated cropland, an additional 119 million acres are used for pasture along with 52 million acres of non-cultivated cropland (mostly permanent hay). These 171 million acres of pasture and “hay” land are arable, meaning they can be farmed. A majority of these acres occur in an around the major cropping areas and generally in the eastern half of the country. These acres do not include another 400 million acres of rangeland (plus forest and federal lands) that are not arable. Rangeland is mostly located in the drier central and western regions of the U.S.
Though converting perennial pasture and hay crops to cultivated crops is not an easy or quick process, high crop prices will logically attract some of these acres for cultivated crop production over time. At this point there is little data to confirm how much pasture and hay land is being converted to crop production. The 2012 NRI and Agricultural Census data (which will be available in several months) are expected provide the first documentation of a process that is likely to continue for many more years.
In the absence of land use data, changes in cattle inventories across states already indicates some of the anticipated regional impacts of high crop values. From January 1, 2007 to 2012, the U.S. beef cow herd decreased by 2.76 million head or 8.5 percent. The decrease is much more pronounced in the Midwest and surrounding regions, including the states of Illinois, Indiana, Iowa, Minnesota, Missouri, Kentucky and Tennessee. In these states, the five year decrease in beef cow inventory ranged from 11.4 percent to over 22 percent with an average of a 14.2 percent decrease. By contrast 12 states in the Great Plains and Rocky Mountain regions experienced beef cow herd changes that ranged from an increase of five-plus percent to a 7.5 percent decrease with an average of 2.6 percent decrease across the region. Texas and Oklahoma experienced sharp decreases from 2011 to 2012 due to drought but had a similar 3.1 percent decrease in the 2007-2011 period. This indicates that the beef cow herd is decreasing more rapidly in regions where competition with crops is greater. As a result, an increasing share of the total beef cow herd will be located in drier regions of the country in the future. Interestingly, this same phenomenon is occurring in other major beef producing countries such as Brazil, Argentina, Uruguay and Paraguay and for the same reasons.