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Federal Reserve Bank of Minneapolis: Impacts of Summer Drought in the Plains

Ernst Undesser
By Keith Good, Farm Policy News November 14, 2017

Federal Reserve Bank of Minneapolis: Impacts of Summer Drought in the Plains

An update last week from the Federal Reserve Bank of Minneapolis (“The worst they’ve ever seen,” by Ashwini Sankar) explored some of the lingering impacts of this summer’s severe drought in Montana and the Dakotas.

The article noted that, “Recent heavy rains have brought relief to drought-stricken parts of the Ninth District, but months of dryness have exacted a heavy toll on crops, cattle herds and natural resources that is likely to weigh upon regional and local economies for months to come.”

Recall that a FarmPolicyNews update in July noted that, “Drought in North Dakota is laying waste to fields of normally bountiful food and hay crops and searing pastures that typically would be home to multitudes of grazing cattle.

Some longtime farmers and ranchers say it’s the worst conditions they’ve seen in decades — possibly their lifetimes — and simple survival has become their goal as a dry summer drags on without a raincloud in sight.

Below is a map of the High Plains from the Drought Monitor from July 13th.

“Areas of Moderate Drought (D1), Severe Drought (D2), and Extreme Drought (D3) expanded across eastern Montana, North Dakota, and South Dakota where hot and dry conditions continued as well as reports of declining crop conditions and hay shortages. In South Dakota, ‘soybeans statewide are showing thin stands, slow growth, and small size for this time of time year’ according to the South Dakota State University (SDSU) Extension. In North Dakota, small grain crop failures are being reported as well as reports of producers selling off livestock.” U.S. Drought Monitor, July 13, 2017.

Last week’s Federal Reserve update stated that, “In late October, two-thirds of the district was still experiencing some degree of drought, according to the latest U.S. Drought Monitor (see map below), a weekly overview of affected areas of the country.”

“The worst they’ve ever seen,” by Ashwini Sankar. fedgazette- Federal Reserve Banks of Minneapolis (November 8, 2017).

The Minneapolis Fed update explained that, “Heat and dryness hit Montana especially hard; in mid-September, every county was drought-stricken, and half the state was in extreme or exceptional drought, the severest categories tracked by the Drought Monitor. North Dakota wasn’t much better off, with over half its area in severe or extreme drought. The state’s southeastern corner, including Richland and Sargent counties, was the sole area untouched by drought.”

U.S. Drought Monitor- Montana, September 7, 2017

“September rains eased conditions in many parts of Montana and the Dakotas, but as of late October, two-thirds of Montana was still in severe drought or worse. Most of South Dakota was experiencing some level of drought, with the worst conditions west of the Missouri River.”

With respect to the impacts of the drought, the Fed update stated that, “The persistent dryness has imposed hardship on agricultural producers. In many areas, rains have come too late to stave off major crop losses.  The U.S. Department of Agriculture (USDA) predicts dramatically lower production of spring wheat, corn and other crops this fall compared with 2016 (see table).

“North Dakota’s spring wheat production is projected to drop by almost one-third year over year to 186 million bushels. Montana farmers are on pace to harvest 76 million bushels of winter wheat in 2017, the lowest production since 2004—another drought year.”

“The worst they’ve ever seen,” by Ashwini Sankar. fedgazette- Federal Reserve Banks of Minneapolis (November 8, 2017). Click Image to Enlarge

Graph from USDA’s Office of the Chief Economist. Click Image to Enlarge

Graph from USDA’s Office of the Chief Economist. Click Image to Enlarge

On the other hand, the Minneapolis Fed article pointed out that, “But there’s an upside to the drought for farmers who manage to harvest a respectable crop this year. Tightening supplies of wheat and hay have driven up prices of these commodities since the spring (Chart 1), reversing three years of flat or declining prices that have depressed farm incomes in Montana and the Dakotas, leading U.S. wheat-growing areas.”

Chart 1. “The worst they’ve ever seen,” by Ashwini Sankar. fedgazette- Federal Reserve Banks of Minneapolis (November 8, 2017). Click Image to Enlarge

“In June, the price of North Dakota hay rose almost 70 percent year over year, according to USDA figures. In contrast, prices for corn and soybeans haven’t risen appreciably during the drought; these important district crops are mainly grown in areas of the district that have received more rain, such as southern Minnesota and eastern South Dakota.”

While addressing livestock issues, last week’s article stated that, “Parched pastures and elevated hay prices have led some cattle producers to cut their losses. More than 40,000 cattle have been sold in auction barns in Miles City and Billings, Mont., since July, according to the USDA Marketing Service. That’s about 18 percent more animals auctioned than during the same period last year.”

With respect to hunting and recreation, the Fed paper stated that, “Pheasant and waterfowl hunters represent a major source of revenue for hospitality and other businesses in Minnesota and the Dakotas. On the heels of a cold and snowy winter, the drought dried up duck ponds and stunted nesting cover for pheasants, reducing hunting opportunities.

“Pheasant roadside counts in South Dakota were down 46 percent year over year in August, according to the state Game, Fish and Parks department. Pheasant numbers also fell in Minnesota, although 2017 losses were likely due in part to a statewide decline in nesting cover since the mid-2000s.”


Source: : https://farmpolicynews.illinois.edu/2017/11/federal-reserve-bank-minneapolis-impacts-summer-drought-plains/

Ernst Undesser
By Keith Good, Farm Policy News November 14, 2017