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Economist: Growing population doesn’t necessarily mean higher commodity prices

As global population continues to increase, so will the demand for food. But Wells Fargo ag economist Mike Swanson says that doesn’t necessarily mean higher commodity prices.

Swanson thinks agriculture’s ability to respond to the growing population challenge is underestimated.

“We’re not going to get bailed out by higher prices,” Swanson says. “I see great demand coming, the same as everybody else. You know, nine billion people to feed, higher incomes around the world, good demand for food. But I think we sometimes miss the supply piece—how strong technology can respond to that opportunity.”

And Swanson says there’s also a lot of new technology working its way through agriculture’s R & D pipeline.

“Plus, a lot of the world is well behind us in terms of applying even today’s technology,” he says. “So I think we have to balance and temper that optimism with supply and demand at the same time.”

If prices remain at or near current levels, Swanson says, farmers will have to do a better job of managing input costs in order to survive.

“Farming has become more and more about purchase managing, because you’re spending about 80 percent of the corn yield or soybean yield on cash rent, seed technology, crop chemical, machinery and nutrients,” Swanson says. “So if you’re not really good at buying the right products at the right price, and then applying them at the best possible usage, you just can’t be a top performer—because you can’t market your way out of the problem.”

Swanson spoke with Brownfield at last week’s Nebraska Soybean Expo, where he was one of the featured speakers.

AUDIO: Mike Swanson, questioned by Brownfield’s Ken Anderson and Chad Moyer of KTIC Radio