Will U.S. Farmers Meet the Tremendous Food Challenge Ahead?

American farmers are growing more crops than they were three decades ago. It’s a trend likely to continue over the next few decades.

Jan 19, 2014 at 2:32PM

Photo credit: Flickr/Dodo-Bird

Love 'em or hate 'em, Monsanto Company (NYSE:MON) produces some really compelling information about the state of the American farmer. The company has a pretty neat infographic that shows just how much farming has improved over the past 30 years. For example, in 1983, the average U.S. farmer fed 115 Americans. Last year, the average farmer fed 155 Americans.

That's just one example of how farmers have grown more productive over the past 30 years. Overall, the numbers are pretty staggering. In 1983, U.S. farmers produced 4.2 billion bushels of corn and 1.6 billion bushels of soybeans. Today, American farmers are producing 13.8 billion bushels of corn and 3.15 billion bushels of soybeans. That's a lot of growth for both farmers and for the companies that supply them.

Feeding the masses
Looking ahead, farmers around the world have an even more daunting task. Over the next 50 years, farmers must produce more food than they have in the past 10,000 years in order to meet demand. A combination of growing global population and a rising middle class must be fed by growing food on a shrinking supply of arable land.

Quite honestly, American farmers have no choice but to boost productivity in the years ahead. With global population expected to grow by 2.6 billion by 2050, farmers need to increase the rate of food production in order to keep up with rising demand. With some of the best farmers in the world, America will likely need to lead that growth.

Breeding productivity growth
To meet this challenge, American farmers will need to continue to improve the crop yields. This is where companies like Monsanto step in. The company's goal is to double the yield of its core crops by 2030. It plans to accomplish this through advanced plant breeding, biotechnology, and improved farm management practices. Further, the company hopes to double crop yields by doing so while with one-third fewer resources such as land, water, and energy.

The problem with Monsanto's approach that many people have a tough time with is the idea of advanced plant breeding and the use of biotechnology. That has forced companies to cut GMOs out of products as others are getting booted off the shelf. That will likely force many farmers to look elsewhere in an effort to boost plant productivity.

Fertilizing productivity growth
One approach we'll see is farmers using more fertilizers like potash and nitrogen. That'll boost the bottom lines of companies like Potash Corp. of Saskatchewan (NYSE:POT) as well as CF Industries Holdings (NYSE:CF). Both companies have been investing heavily to meet future fertilizer demand.

Potash is a key crop nutrient as it help plants develop strong root systems and retain water. It also enhances crop yields and promotes greater resistance to disease and insects. These key traits will have a growing importance to farmers. This is why PotashCorp is investing to grow its capacity so it can supply this important product to farmers around the word.

CF Industries, on the other hand, is a company that will really benefit American farmers first and foremost. Thanks to low natural gas prices -- a key feedstock in the nitrogen it produces -- CF Industries is investing $3.8 billion to boost its nitrogen capacity. That's important for American farmers as they currently import about 50% of the nitrogen used as fertilizer. Producing more nitrogen here in the U.S. will enable farmers to save money by purchasing a product made with cheaper American natural gas.

Final thoughts
American farmers will have no choice but to become even more productive in the years ahead. We need to feed more people on less land. The good news is, thanks to cheap natural gas, American farmers now have one key ingredient that could fuel their success. America's natural gas boom will reduce our reliance on nitrogen imports, which will lower costs for farmers. That's an important step in helping farmers do more with less. 

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Matt DiLallo has the following options: long January 2015 $70 calls on Monsanto, short January 2015 $70 puts on Monsanto, and short July 2014 $105 calls on Monsanto. The Motley Fool owns shares of CF Industries Holdings and PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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