Average yields have slipped from their traditional annual increase in recent years.

When you ask a group of economists a question, you typically get a boatload of different opinions. But ask, "Has U.S. ag production maxed out?" and you get one simple answer: No. 

Dig a little deeper, however, and new questions arise. 

But first, the production question. Agricultural economists measure production output in terms of volume, or tonnage. "Total U.S. agricultural output has increased at an average annual rate of 1.88 percent over the period of 1948 to 1999," said Mark Edelman, professor of economics and public policy at Iowa State University in Ames.

Most economists prefer to measure productivity, rather than just production output. Productivity, measured by weighing input against output, continues to rise in the ag sector, outpacing growth in non-farm business productivity over the past 50 years.  

"The real value of (farm) inputs has changed very little since 1948, so all of the growth in output has been due to gains in total factor productivity," Edelman added. "We've added new technology and capital such as higher-powered seed, energy and pesticides . . . and used less land and labor." 

Still, Robbin Shoemaker, associate director of the Resource Economics Division for USDA's Economic Research Service, recently warned that ag productivity growth may be declining slightly.

"For most of the past five decades, U.S. agricultural productivity growth averaged just under 2 percent a year," he wrote in the June issue of USDA's Amber Waves newsletter. "That growth means that the U.S. is producing over 250 percent more food—with fewer inputs—than it did 50-some years ago. But some signs point to a recent slowdown in agricultural productivity growth. From 1996 to 2002, productivity grew at a modest 0.6 percent per year." 

Economists in Missouri and Kansas consider this recent drop in productivity as a narrow look at a big picture, and express little concern for the long term. 

"Looking at the USDA data, while productivity averaged 1.8 percent over five decades, there were several periods when the average increase was in the range we have seen the last few years," said Troy Dumler, extension agricultural economist at Kansas State University. "It may be a little premature to suggest that ag productivity has maxed." He added that drought has lowered production over the last few years in several states, including Kansas.

Pat Westhoff, an associate professor at the University of Missouri in Columbia, agreed. "I don't think there's any reason to worry," he said. "You can't tell from just one or two years of detail. 2002 was a lousy year for corn, and in 2004 we broke records. It's hard to separate the statistics out over time."  Westhoff is an economist with the Food and Agriculture Policy Research Institute.

Public research investment plummets

If production growth is declining, what's causing it? Changing weather patterns, urban encroachment and government programs like the CRP might explain part of it. USDA's Eldon Ball speculates on another cause. 

"A key source of productivity growth has historically been public investments in research," Eldon Ball wrote in the June Amber Waves. "But those investments have been flat in real terms since the 1980s, raising questions about prospects for continued agricultural productivity growth in the future." 

Federal and state budgets for many land grant universities that conduct ag research have been cut in recent years. Take Kansas State, for example. "My department currently has five extension positions open, with plans to fill only one of those positions soon," said Dumler. "That means that the rest of us have to work to cover those holes or simply not provide that particular expertise anymore. Over the long term, we will have to do more with less and/or have to pursue alternative funding sources to maintain current research and extension programs."

Grower groups project bright future

While leaders of corn and soybean associations in Missouri support more dollars for public research, they refuse to despair. They believe biotechnology advances spell a bright future for productivity growth—made possible through both public and private research.

"Productivity is getting ready to skyrocket," said Gary Marshall, CEO of the Missouri Corn Growers Association in Jefferson City. Last year proved to be the state's best year ever for corn production, averaging 160 bushels an acre, he added. "In Missouri, we're used to being called a fringe state for corn. But this fringe state could become part of the Corn Belt."

Marshall credits genetic research for fueling corn production. Scientists recently mapped the genome for rice and have nearly competed the corn genome. Already, seed companies have introduced drought-resistant corn varieties—plants that are more robust during dry-weather pollination and ear fill.

"It won't allow corn to grow in the desert, but the plant can wait for rain for up to a month," Marshall said. This year, with yields projected at just 100 bushels an acre due to the drought, this technology would have been useful. 

Genetic research holds the key

Marshall shares a belief with Dale Ludwig, executive director of the Missouri Soybean Association, also in Jefferson City, that genetic research provides solutions. Already, about 70 percent of U.S. corn is genetically modified, and 83 percent of soybeans. Further out, they predict, scientists from both public and private institutions will develop plants that take up nutrients more efficiently and improve photosynthesis.

The two admit that private companies fund much of the research on corn and soybeans. Corn grows from hybrid seed, while biotech soybean varieties are usually patented. With these crops, farmers reward seed companies for their innovation when they buy new varieties.

Missouri's U.S. senators have been instrumental in supporting public funding for research, Marshall said, through the Danforth Plant Science Institute in Missouri and the National Science Foundation, not just through USDA. Several new public/private partnerships are springing up, including one where the Plant Science Institute and three land grant universities collaborate with Monsanto on research. "That's the innovative approach we need," Marshall said. 

We need profitability, not just yields

Not all research bodes well for U.S. producers. Some corn varieties now attach a "freeze" gene to the plant, allowing corn to grow in regions with shorter growing seasons. "Within a few years, we'll face new competition in Europe, Asia and South America, and it could change the way we do business," Marshall said. 

For U.S. farmers, the prospect of growing more corn may seem like a bad idea. If we raise more, the price may drop. But Marshall sees two possible scenarios. "Currently we're selling 150-bushel-an-acre corn at say $3 a bushel," he said. "What if we could raise 300-bushel corn at $1.50? Is one way better than the other?"

Biotechnology can help U.S. farmers manage the bottom line, Marshall contends. "It's more than yields—it's profitability," he said. While technology spreads quickly to other parts of the world, "We have more dollars to invest in research, the best soils in the world, and our farmers have the know-how and the access to capital."

Count value, not beans

In addition to improving yields, the Missouri Soybean Association focuses research dollars on adding value to beans. "Places like South America are likely to continue thinking about volume," said Ludwig. "We will differentiate our product so we won't compete with them." 

In the future, research will generate new health benefits for humans. "Soybeans will no longer be a commodity," he added. "We may grow soybeans in Missouri for 10 different purposes, including reducing metabolic disease such as cancer or heart disease."

Missouri produces about five million acres of soybeans, making it one of the top seven states in terms of soybean production and Missouri's largest cash crop. Perhaps its importance played a role in Ludwig's group successfully negotiating an innovative contract with the University of Missouri that allows growers to share in intellectual property created through research.

"In the past, researchers just wanted us to send money," Ludwig said. "We want to find a way that the farmers can own the technology."

The association also trains its members in how to better segregate, track and trace beans—important as beans become more differentiated.

Who will buy our products?

Already, biotechnology hugely impacts production, according to Paul Westhoff of the University of Missouri. "It's astounding how dominant Roundup Ready soybeans have become here and around the world," he said. He predicts that precision farming may increase production.

If you take the view that production growth will increase, will the demand be there to buy our products?  

Westhoff specializes in analyzing crops and ag policy in the United States and Europe, and he follows trends across the globe. As he looks at future demand, he contends that population growth is not what it once was. "World population has doubled since the 1950s, but nobody's projecting anything like that for the future," he said, adding that predictions top out at nine or 10 billion people in coming decades, compared to 6.4 billion today.

"A 1 percent yield growth may be enough to meet demand if diets stayed the same around the world," said Westhoff. "Over time, many countries are moving to a U.S.-style diet including more meat. In 20 to 50 years we can start to talk about that being possible." 

Parts of Africa and Asia may represent exceptions, he said, as these areas generate a greater share of population growth yet have failed to boost production. "They continue to face serious challenges with water volume and quality," he said. In other words, when they do climb out of drought, the water is often too salty to grow much. On the other hand, he added, formerly starving countries like Bangladesh have become self-sufficient, despite a lack of mechanization.

Marshall of the Corn Growers contributes his views on demand. "The issue isn't food supply," he said. "We can feed the world now. The problem is distribution. We can't get the food to places like Africa."

Beyond food, Marshall believes that new ethanol and biofuels markets offer hope for corn and soybean growers. "Ethanol's a great example of productivity increasing," he said, explaining that in the past, the average yield for ethanol was 2.1 or 2.2 gallons per bushel. That jumped to 2.8 or 2.9 today.  "This year, the nation will use 1.5 billion bushels of corn for ethanol," he said, working his calculator. With new legislation requiring ethanol both at the federal level and in states like Missouri, he predicts use will double by 2012.

No maxing out here

Whether we raise food or fuel, will agricultural production continue at the pace of the past five decades?

Iowa's Edelman pointed out that the issue raises its head every decade or so. "This debate occurs between those concerned about global food scarcity and those who have faith that if scarcity occurs, market and economic incentives will bring forth additional production and encourage the next rounds of technology advancement. So far, I don't believe that we have seen any indicators to suggest that we are changing the productivity trend that we have been on for the past 50 plus years."