A number of factors are significantly reshaping crop production agriculture in the United States. Consider the following:

• Concentration has been on a steady rise for several decades. Today, 75 percent of the value of primary field crop production — corn, soybeans, wheat, cotton, rice, sorghum, and barley oats — is produced by 40 percent of U.S. farms (USDA-NASS, Census of Agriculture, 2007).

• Productivity increases have been significant. Corn yields increased from an average of 55 bushels per acre in 1960 to 165 bushels in 2009 — a 300 percent increase in 50 years. Wheat and soybean yields have seen 215 percent and 169 percent increases, respectively, over the same period. Meanwhile, according to the cost and returns survey of USDA's Economic Research Service, variable costs of corn production have declined on a real basis from $0.94 per bushel in 1975 to an estimated $0.63 per bushel in 2005.

• Producers are adopting larger pieces of equipment and more sophisticated technologies. Some estimate the time to plant and harvest the crop, two of the most time consuming operations, has been cut in half in the last decade, allowing producers to effectively manage more acres within one operation.

Crop agriculture is clearly no stranger to change. This article examines the key forces affecting change in U.S. crop production. We describe some of the major industry drivers of change and use Porter’s Five Forces analysis to examine the economic conditions, opportunities, and threats facing this industry (Porter, 1979). Through this discussion, we describe how major crop production businesses are adapting to a changing competitive landscape. We begin with an overview of the drivers of change for the industry and then discuss the factors influencing profitability and the implications for the future.

Drivers of Change for the Industry

There are several key factors shaping the economic conditions of the crop agriculture industry. Four dominant forces are currently at work—Growing and Diversified Demand; Technology; Resource Availability; and Societal Influences. Each in isolation, and also in combination, has implications for the structure of crop production, including farm size, the business models used, and relationships to other parts of the industry.

Growing and Diversified Demand

The food, feed, and fiber industries are being challenged to meet a growing and diversified demand. According to the Population Reference Bureau’s 2010 Population Data Sheet, the global population is expected to reach almost 9.5 billion by mid-2050, with the majority of the additional 2.6 billion people located in developing countries where the need for affordable, abundant supplies of basic plant and animal based nutrients is greatest.

In addition to growing demands for food, feed and fiber, industrial applications for agricultural production are emerging as well. The energy, polymers, chemicals, and pharmaceuticals industries are increasingly looking to the agricultural sector to supply renewable raw materials for their processes.

Technology

Monitoring and information technology, biotechnology, and a variety of other technologies are converging in agriculture to fundamentally change the way crops are grown. Today, yield monitors and GPS, global information systems (GIS), satellite or aerial photography and imagery, weather monitoring and measuring systems, and plant and soil sensing systems are commonly used tools.

Biotechnology applications shorten the cycle time to develop new hybrids and varieties with higher yield potential and stronger resistance to pests and environmental conditions. By combining biotechnology with mechanical and other technologies to control the growth environment—moisture, pest and disease infestation, etc.—the process control approach that defines the traditional mechanical manufacturing assembly line also transforms agriculture into a biological manufacturing industry.

Resource Availability

The availability and cost of natural resources for the agricultural sector has a significant impact on its capacity to respond to growing demand. In some cases, higher prices will be required to bring additional supplies onto the market or to use existing resources more intensively. This is the case for resources such as land, fertilizer, and irrigation. In contrast, supplies of phosphorus and potash are nonrenewable. As agricultural product demand increases, the owners of land, water, and fertilizer resources will benefit.