Incentive for farmers to plant more wheat

by Morton Sosland
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For flour millers who typically measure their economic progress in part by examining productivity gains in the quantity of flour produced from a given amount of wheat, it probably would be startling to be told that wheat farmers believe their productivity gains largely have benefited millers and consumers, not growers. It is an economist on the staff of France’s Association Generale des Producteurs de Ble (wheat growers’ association) who declared this year that wheat farmers have not benefited from improved mechanization and related productivity gains. “In general, productivity gains in agriculture are passed on to processors and consumers,” the economist says. In making this amazing statement, the economist cites the way that falling inflation-adjusted wheat prices during the past 25 years have prompted farmers to intensify searching for steps to reduce their costs.

Without arguing about the means by which cost savings may be captured by producers of wheat, of flour or of anything else, it seems extremely odd to assert that little advantage lies in improving productivity. Wheat millers in many parts of the world, including France, who have expressed serious concerns about the stagnant course of investing to produce more of the bread grain, believe that productivity gains should stimulate planting. Blaming that problem on the failure of farmers to realize the benefits of improving productivity, as the French economist hints, has the marks of fuzzy thinking that may accentuate these difficulties.

It seems much wiser to trace the lagging investment by farmers to boost wheat acreage to productivity shortfalls as compared with other crops where genetic modifications have contributed to sharply increased yields in contrast with wheat’s path. These modified crops require heavy investment by farmers in inputs that bolster yields. These are costs for equipment, for fertilizer and many chemicals that would not be undertaken without improving results.

All that is needed to understand what is happening are data on relative yields of wheat and modified maize. Thanks to the International Grains Council, data are available that underscore this point. In the first decade of the 21st century, world yield of wheat, according to the I.G.C., increased 10%, from a global average of 2.72 to 2.98 tonnes per hectare. In the same time, the maize yield rose 15%, from 4.40 to 5.07 tonnes per hectare. The maize advantage above 2 tonnes per hectare is more than sufficient to make up for wheat’s per-tonne price, starkly explaining why wheat is losing to modified grains.

If anything has compensated wheat farmers for their relatively smaller yields as well as for the lesser gains, it is the performance of prices in recent years. Record high wheat returns, rivaling maize and other improved crops, were attained in many parts of the world. In turn, these encouraged investments that mainly focused on acquiring acreage rather than aiming for productivity gains. One result of this single-minded attention to boosting farm size, in North America and Europe primarily and also in many developing regions, was that attention to boosting yields of wheat captured the attention of only a few bold commercial seed companies as well as research units at state and federal government institutions.

Such an outcome must not, in these times of government austerity and budgets cuts, become the excuse for reducing investment in improving the wheat plant, not only to boost yield but to address quality advances that will capture the favor and demand of consumers. In addressing the doubts of a French economist about what encourages farmers to produce wheat, attention also must be turned to finding ways of boosting the attraction of wheat to farmers as well as to consumers. Flour millers, standing in a central role between growers and consumers, have a huge stake in helping to resolve these differences. This must be done in ways assuring that the future of wheat-based foods will outstrip its past by a margin exceeding anything reached before.
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