Drought's toll likely billions of dollars for ND economy
North Dakota's harvest will be significantly less than last year's because of the ongoing drought, and though it's still early, the state's lead agriculturalist believes the economic impact could be worth billions of dollars.
"Overall in our economy, I'm going to say ... at a minimum, I think we are going to have $1.12 billion of direct economic impact to our farming and ranching community," North Dakota Agriculture Commissioner Doug Goehring said of the drought's impact on the grain harvest. "We could be looking at a $4 billion impact on Main Street, which means tax revenue that is lost, jobs that aren't being supported."
Spring wheat production in North Dakota is forecast to be 186 million bushels, down 31 percent from last year, according to numbers released Thursday, Aug. 10, by the U.S. Department of Agriculture's National Agricultural Statistics Service. Durum wheat is expected to be down 56 percent from 2016, and winter wheat, seeing the heaviest impact, will be down 74 percent, according to the report.
Overall, yields for all crops are expected to be down from last year, according to the report.
The loss likely will be felt by the state's economy and anyone doing business with farmers, said Frayne Olson, an associate professor and crop economist with North Dakota State University.
"Farming income has been soft for a couple years, so farmers have been more cautious about purchasing machinery or replacing machinery," he said.
Goehring said the estimated economic impact is based on where production is now and the fact that ag commodity prices haven't recovered in recent years. It's harder to pinpoint the impact on ranchers, who had to cut back on their herds.
However, he suggested the drought's effects could undercut forecasts for North Dakota tax revenue. Drops in revenue from slumping oil and ag commodity prices already have forced the state to make budget cuts.
Goehring was hesitant to say if and when budget cuts would be needed because of the drought's impact and low revenues from depressed oil prices. But if revenues continue to fall, it could mean more cuts before the next biennium.
"I hate to get out in front of this too far," he said. "If we are that short going into that next spring, you could see another allotment coming along, because we are required by law to have a balanced budget.
"That would mean the governor would stipulate that we are short and that there would have to be more cuts made by agencies to balance the budget," he added.
Generations of work
Crops were hit hard by a lack of rain all summer, especially in western North Dakota. Virtually every part of the state was at least abnormally dry, with more than 80 percent being classified in drought categories, affecting more than 447,000 residents, the USDA's Drought Mitigation Center said in its Thursday report. Around 43 percent of the state had extreme or exceptional drought.
Farmers who have crop insurance or receive federal assistance may come out better than cattle producers, who have had to cut deeper into their herds to sell cattle and make ends meet, Olson said.
It's harder to assess the impact to ranchers, Goehring said, but the implications of the drought may be felt for years. The drought spanned the spring and summer, leaving little grass for forage. That means some ranchers either had to buy hay, move cattle out of state or sell them off.
"The thing about livestock, it has a much higher multiplier on Main Street," he said. "That is the ramifications down the road. We are worried about that foundation herd shrinking out on the landscape."
That means herds that took generations to build through selective breeding may have been cut, and those animals that could have produced 10 years of calves are taken out of North Dakota's economy.
There was a 17 percent increase of animals sold across the state, though some areas have sold more, said Julie Ellingson, executive vice president for the North Dakota Stockmen's Association.
"In Rugby, that was a 48 percent increase," she said. "We saw significant increases in the marketings, and that continued through the month of July."
It's possible some cattle stayed in North Dakota, but other parts of the country that have experienced drought in previous years are restocking, she said. Ranchers from out of state likely bought cattle from North Dakota producers.
Ranchers typically sell cattle every year to replace older animals with calves, but this year ranchers may have to dig deeper into the herd to make ends meet.
"The drought plays a significant role in the long-term outlook for the beef industry in terms of numbers and the genetic progress," Ellingson said. "You have to get rid of animals that represent generations of hard work and genetic focus. That is a heartbreaking decision for many families."
Too early to tell
Later crops like soybeans, corn and sunflowers will depend on much-needed rain, Olson said. North Dakota's top crops are wheat, soybeans and corn.
"Two of the three—corn and soybeans—we don't have really any information on what the yields are going to be," he said. "We are in some really key biological stages for those crops. We'll have to wait until we are close to harvest to get a good read on that."
The harvest in eastern North Dakota, which as of Thursday was mostly just abnormally dry, should have near-normal production, Goehring said. Farmers across the state are forecast to harvest 236 million bushels of soybeans, down 5 percent from last year, according to the USDA. Dry edible bean production likely will be up 14 percent from 2016, corn down 19 percent and sugar beets down 1 percent, the USDA said.
The crops are hit and miss, and some may be surprised by yields, he added.
"When you hear guys saying they have 17-bushel wheat, now they aren't proud of that by any means, but they were expecting 3- to 5-bushel wheat," he said.
In other parts of the state, farmers may be harvesting 30 percent of their usual crops, he said.
For now, farmers and ranchers are in "survivalist mode." Some may come out ahead. For others, the drought may be the last straw for producers who have been weighing the decision of calling a quits, Ellingson, Goehring and Olson said.
"There is going to be a ripple effect," Olson said. "We don't know how large."