Farming Through Baby Boom and Baby Bust
Agriculture thrived in an era of growth. Can it do the same when the world starts to shrink?
The following is a guest article from Matt Woolf, Ph. D., an analyst with Terrain, a team of ag economists who provide expert analysis and confident forecasting to the customers of participating Farm Credit associations.
The global population is set to peak sometime this century, and that changes everything, including how we grow our food. For U.S. agriculture, long-term planning has always assumed steady population growth. Now, that assumption is crumbling.
Farmers and ranchers are already making decisions that will shape their ability to adapt. What they plant, how they manage their land, and who they’re producing for will all need to evolve. In a future defined by fewer people and shifting demand, innovation and diversification are essential tools for the future.
For many decades, U.S. agriculture has made “Feed the World” its guiding slogan. As fertility rates boomed at the end of World War II, concern swept economists and policymakers about the number of mouths that agriculture would need to feed. Some even predicted mass famine as early as the 1980s.
Thankfully, U.S. agriculture was able to meet the moment by increasing productivity on the supply side and developing trade relationships with countries around the world. Global poverty rates fell. And here in the U.S., the agriculture industry benefited from appreciating land values and steady growth in exports.
If the Baby Boom was the defining demographic event of the 20th century, a Baby Bust is the defining one of the 21st century. Fertility rates have dropped to the point where every continent – except for Africa – is at or below the replacement rate. In fact, they’ve declined so far that the population is now expected to peak this century and has already begun to age rapidly.
Given our new demographic reality, agriculture will have to adapt. While the industry has succeeded in building new and growing markets at home and abroad, this may not be an adequate strategy for moving our abundant production going forward. Though this presents a challenge, it also introduces new opportunities for an entirely new industry paradigm.
The Demographic Dilemma
For several years, the United Nations has revised its population estimates downward. Since 2022, the U.N. has projected a population peaking sometime this century, with its most recent forecast pointing to 10.3 billion people by 2084. While the U.N.’s number is the one most often cited, many other projections also point to a peak this century.
Terrain’s own population forecast, for instance, estimates the global population will peak in 2065 at approximately 9.4 billion people. Our estimates also anticipate the global population to age at a much higher clip from here until 2100. Today, there are six working-age people for every one retired-age person. By the end of this century, that ratio will be down to just 2-to-1, according to our numbers.
It's difficult to overstate the importance of these trends to the world economy. Historically, plagues and wars caused acute dips in global population, but this is the occurrence of prolonged, chronic shrinkage. The economic consequences may seem remote now, but we cannot escape economic reality for long: countries depend on having more working-age people than retirees for economic growth and public services.
Changing demographics will also impact U.S. agriculture, which has benefited from its ability to help feed growing populations. Key trade partners like Japan, Europe, South Korea and China already are experiencing population decline, with others nearing their peaks. This trend poses export and demand risks for crops like cotton, tree nuts and sorghum that rely heavily on international markets.
Population aging will also impact agricultural demand and precede population decline. Data from the Bureau of Labor Statistics Consumer Expenditure Survey indicate that older households consistently spend less across all food categories. This is likely due to reduced metabolic rates, less active lifestyles, and lower income levels.
It may seem that these trends will impact us only in the distant future. However, when we consider decisions made today about a 30-year farmland mortgage, it becomes apparent that they could influence immediate or near-term choices. As economist Rudi Dornbusch stated, "In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could."
It’s Not Doom and Gloom
Luckily, there are several ways the U.S. farming industry can navigate the future for continued success in rural America. First, by focusing on those export markets that have a positive income and demographic story, the industry can continue to build demand. While it’s true that few countries appear to be immune from these challenges, some have much better trajectories than others.
Second, as competition for export markets intensifies, product innovation is likely to become more important. The corn industry provides a useful case study. Whereas corn was once overwhelmingly exported in bulk, this has changed over the past two decades. Today, an increasing share of export value is exported in the form of value-added products like ethanol, ethanol coproducts like distillers’ grains that can be fed to livestock, and more. By continuing to innovate, markets can also refocus on new sources of demand domestically.
Finally, farmers can diversify with high-value crops on their prime acres and alternative income sources like solar energy or agritourism on their marginal acres. Such diversification will help farming operations handle market fluctuations. As demographic change comes our way, we could begin to see a shift from farmland as an asset to grow crops to farmland as a commodity to grow revenue.
Though it’s true that sustained population decline will be a first for the world, navigating challenges won’t be a first for agriculture. As always, it will be the innovators and adapters who will see their operations grow even as the world shrinks.
Read more about “The Big Shrink” and U.S. agriculture.
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👉 Learn more about tomorrow’s demographics and our rapidly aging population by purchasing your copy of Bradley’s book, The Super Age: Decoding Our Demographic Destiny (HarperBusiness).