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
Corn

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. 

The one stock to buy in 2014
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers