November 12, 2004
Economist: Soybean rust could carry hefty price tag
WEST LAFAYETTE, Ind. A devastating soybean disease has arrived in the United States, bringing with it a potentially high price tag for American farmers.
Phakopsora pachyrhizi commonly known as Asian soybean rust can decimate untreated soybean fields. The disease could hit farmers' pocketbooks hard and have repercussions for livestock producers and consumers, as well, said Chris Hurt, Purdue University agricultural economist.
Soybean growers forced to spray infected crops with fungicides would see dramatic increases in their production costs, Hurt said. The higher costs, coupled with slim profit margins, could drive some farmers out of the soybean business, he said.
"Among the economic impacts, we think first of the ability to control the disease," Hurt said. "We would anticipate that there would be fungicides available to treat the disease, but those treatment costs, from numbers we've seen, range from $25 to $35 per acre. That will depend on a whole host of factors. We don't yet know what all of those are, how many treatments will be needed, etcetera. But this is a very substantial increase in the cost of raising soybeans.
"Over time, what that suggests is we would plant somewhat fewer soybeans. There are alternatives to soybeans in the Midwest. Obviously, corn is the one that comes to mind most often, but wheat also is an alternative."
Cash prices for corn usually are lower than for soybeans, but because corn yields are so much greater than soybean yields, many farmers consider corn a more profitable crop. The threat of soybean rust might be enough to motivate farmers to commit more acres to corn, Hurt said.
Planting corn on ground that grew corn the year before presents its own economic challenges, Hurt said.
"In Indiana, we've adopted a 50-50 rotation of corn and soybeans. We have about equal acreage in both crops," he said. "If producers push more heavily toward corn, what happens to our rotations and how does that affect corn yields? That raises questions of the possible increased incidence of diseases, insect infestations and weeds in corn."
Any reduction in soybean production likely would be felt in the livestock and commercial food industries, Hurt said. Eventually, consumers would pay more for products produced with, or containing, soy.
"Soybean meal, which is fed to animals for high-protein supplements, could increase in cost," Hurt said. "If those livestock feed costs increase, that will tend to reduce somewhat the production of livestock and raise animal prices.
"On the soybean oil side, margarine for human food consumption, cooking oils and the whole range of products, such as salad dressings that contain soybean oil, also would be impacted. Higher prices for those products would directly affect consumers."
An upside to decreased domestic soybean production if there is one is the likelihood of higher prices for soybeans, Hurt said.
Cash prices were about 13 cents a bushel higher and 2005 soybean futures up around 20 cents a bushel on Wednesday (Nov. 10), the day the U.S. Department of Agriculture announced the first case of soybean rust had been found in Louisiana, Hurt said.
Hurt emphasized it is too early to predict the economic damage soybean rust could inflict on the nation's agricultural industry next year. He doubted the disease would make a significant difference in the entire food system, however.
"This is not the end of food production in the United States," he said. "Some of the estimates that USDA has made indicate this disease could cause economic losses as little as $250 million a year, up to a couple billion dollars a year. That's a pretty wide range.
"But when you think about an agricultural production system of well over $100 billion a year in just crops, we're looking at something that's maybe 1 percent or 2 percent of our total cropping output. So it's a tremendously large food system. It affects some individuals but, overall, we have a great adaptability in our agricultural system."
Writer: Steve Leer, (765) 494-8415, firstname.lastname@example.org
Source: Chris Hurt, (765) 494-4273, email@example.com
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