Future of American agriculture a 'wild ride,' analyst says

This morning geopolitical strategist Peter Zeihan delivered a keynote address at the 2023 Land Investment Expo in Des Moines, Iowa. 

Zeihan has worked for the U.S. State Department in Australia, the D.C. think tank community, and helped develop the analytical models for Stratfor, one of the world’s premier private intelligence companies. Today, through his firm Zeihan on Geopolitics, he works with clients representing several economic sectors, including agriculture. 

• READ MORE: Lessons from the war in Ukraine

During his address Zeihan focused on the future of global agriculture as several countries around the world struggle with declining working populations and a breakdown of global trade. 

“It’s going to be a wild ride but you’re going to get there and a lot of your competition isn’t," he says. "So buckle up.” 

Zeihan says America's strength will come from its vast domestic resource to maintain crop production and a Millennial generation to replace retiring Baby Boomers in the workforce. 

“The overall story is the greatest growth story in the history of agriculture,” he says.  

Zeihan sat down with Successful Farming prior to the Land Investment Expo to discuss his message today.  

SF: The title for your address is “Getting Through the End of the World.” What does that mean?

PZ: The world that we all know began at the end of World War II when the Americans created global trade. The economic growth that we’ve all become used to, it really only dates back to 1992 because there were huge chunks of the world that were folded into this globalized system. This is the entirety of the story of the Russian, Chinese, and Brazilian booms.

We’ve got two problems now. Number one, the Americans have gotten tired of globalization. We didn't just create globalization because we thought trade was fun. We did it because that’s how we paid countries to be part of our security program during the Cold War, and we have — to be perfectly blunt — lost interest.

The second problem is demographic. Before 1945, most people lived on farms and kids are free labor. But when you move into the city to take an industrial job, kids go from an economic necessity to basically becoming luxury goods. And so you have fewer of them.

And 75 years on, it’s not that the world is running out of children, that happened 30 and 40 years ago, we’re now running out of working age adults in a lot of countries. If there’s no consumption, there’s no trade. So, this whole system is now unwinding violently and it’s all going to happen in this decade. 

That is the environment that agriculture has to operate in. It’s going to be a very rocky road, but by 2030, American agriculture will be in a much better place because not only are we seeing consumption falling, we’re seeing the capacity of countries to participate in manufacturing and agricultural input supply chains collapsing.

But in the U.S., it’s more or less okay. We’re going to see most of the competition for the sorts of things Iowa produces just vanish over the course of the next few years. Not all at once, not all at the same pace. It's not a straight line from here to there. But on the other side of this, the things that Iowa produces are going to be in hugely short supply on a global basis. 

SF: Given this economic environment you say the world is headed for, what takeaways do you want to leave farmers with next week? 

PZ: The first is finance. As people move into retirement, they change the way they invest, they become more conservative. We're looking at the world’s Baby Boomers moving into mass retirement right now. In fact, we're already past the halfway point. So, they are all liquidating their investment, and that means less capital available for everything. Most farmers around the world are far more dependent on finance than Americans are because we've got good soil and it rains. So that's strike one.

Strike two: between events in China and events in the Ukraine War, we are looking at considerable shortages in all three types of fertilizer nutrients. It will take years at best to rebuild the supply chains. In that sort of environment, the worse your soil is, the more you suffer. So again, for American farmers where these nutrients are produced locally, and where the soils have a higher fertility, this is a minor issue, relatively speaking. But if you're in Brazil where it’s all imported, without fertilizer you can grow nothing. This is the end of the road. So, a lot of the competition is simply going to go away. Especially the competition that has risen up since 1992.

And then third, the Chinese have the fastest collapsing demography in human history. From their own admissions, they’ve over counted their population by about 120 million people, all of which were age 40 and under, and they already had the world’s fastest aging demography. So, we are looking at a complete demographic collapse of China before 2030. 

SF: Essentially there will be less global consumption and production? 

PZ: Consumption is going to drop, there’s no way to avoid that. But production’s going to drop a lot more. Farmers in the United States are going to stress over trying to feed the world and they’re going to fail, and they’re going to feel really bad about it. Then they’re going to look at their bank accounts and they’re probably going to get over it.

As a rule, if you are in agriculture, you’re going to be selling to a hungry world. The net story is very positive.

SF: With next week’s event being focused on land investment, what specifically do you want to get across when it comes to land in this changing economic landscape? 

PZ: I think finance and fertilizer are the two things that are really going to matter here. Right now, we’re at the very beginning of a decade-long financial drought. There’s no way that's not going to impact land in a very big way.