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Published September 08 2012

Variability of weather in North Dakota makes for trickle-down economics

WEST FARGO - Kevin Heiden can pick the right seeds, use the right technology, apply the right pesticides and otherwise manage his wheat, corn and soybean fields to perfection.

But at the end of the day, he still needs a little help from above.

“I’m pretty much at the mercy of the weather,” he said. “You just have to take what you can get.”

Heiden, who farms just more than 4,000 acres outside of West Fargo, isn’t alone. North Dakota’s 32,000 farmers and $3.4 billion agriculture industry are all beholden to Mother Nature.

In this state, money doesn’t grow on trees: It falls from the skies.

The difference the weather makes in farm earnings from year to year “can be very big,” said Andy Swenson, a farm management specialist with North Dakota State University’s extension service.

Favorable conditions can boost earnings two or three times over, while bad ones might cut them in half. In 2008, net farm income among farms tracked by the North Dakota Farm Business Management Education program was $115,000. The following year, it fell to $48,000. The year after that, it skyrocketed to $174,000.

Those swings don’t just affect farmers.

Agriculture, the state’s largest industry, accounts for about 8 percent of the state’s gross domestic product and about a quarter of the state’s total economic activity, according to a study earlier this year from NDSU’s agribusiness and economics department.

Swenson said every dollar of total agriculture revenue generates $3 to $3.50 of economic activity. When the weather is good and farmers are flush, the rest of the state benefits. When the weather isn’t, the state feels the pinch.

The complexities of the global agriculture market mean it takes more than rain to fill farmers’ pockets. Commodity prices, market supply and regional variations all play a role.

While widespread drought has made 2012 a bad year for farmers in many places, for instance, North Dakota didn’t see the same extreme dry spells that afflicted many regions.

So even though local midsummer heat waves hurt crops like corn, yields here outpaced dismal production elsewhere – and the diminished supply drove up prices.

“Almost every farmer will say, ‘I don’t want someone else’s disaster to be my profitability,’ but that’s the reality,” said Dwight Aakre, another NDSU Extension specialist.

Aakre said North Dakota farmers also benefitted this year from a mild winter and an early, dry spring. When crops are planted in dry ground, their roots grow deep to seek moisture, making them more resilient during dry spells.

“What you’d like to have is slightly drier than normal in the spring, rain throughout the growing season, dry at harvest time,” Aakre said.

The hot summer probably cut down on disease for small-grain crops, and the ground still had moisture stored up from a series of wet years.

Woody Barth, president of the North Dakota Farmer’s Union, said the drought has driven prices up between 25 and 35 percent.

He said while most parts of North Dakota “are definitely on the drier side,” the state made out better than most.

“A good spring helped us quite a bit,” he said.

Swenson said farmers are also bolstered by a string of high prices in recent years that set a high baseline for supports like crop insurance. But big yields are still better for ancillary agriculture industries like grain elevators and transportation companies because they get more business.

Heiden, the West Fargo farmer, said his ideal weather year would be a moderate one – not too wet, not too dry.

“The extremes are bad on both ends,” he said.

Before this year, he would’ve said too much rain is worse than not enough. Now, he’s not so sure.

But in a state that can swing from one extreme to the other with little or no warning, he’s learned to roll with the clouds.

“If I could control the weather,” he said, “I wouldn’t have to farm.”

Readers can reach Forum reporter Marino Eccher at (701) 241-5502