Industry Focus: Agri-Business

Left to right: Fred Helbling, North Dakota Stockmen’s Association; John McLean, Cargill Incorporated; Deana Wise, United States Durum Growers Association; John Mittleider, North Dakota Department of Commerce, Agriculture and Bioenergy; Mitch Gardner, Cargill Malt; Eric Bartsch, United Pulse Trading; Les Paulson, Paulson Premium Seed & Conditioning; Jim Hauge, Eide Bailey

Agriculture is North Dakota’s largest industry with nearly 90 percent of the state’s land area consisting of farms and ranches. The industry has seen a fair share of changes in recent times and is facing challenges in everything from regulation to staffing. Recently, executives representing agriculture met at the Bismarck offices of the North Dakota Department of Commerce to discuss these changes and the direction of the industry in the future.

Connie Brennan, publisher and editor-in-chief of North Dakota Business Magazine, served as moderator for the event. These monthly meetings, sponsored by North Dakota’s Department of Commerce, are designed to bring industry leaders together to discuss issues pertinent to their fields. Following is a condensed version of the roundtable discussion.

What is the biggest agricultural challenge facing North Dakota?

Les Paulson: Well, one of the biggest challenges would be transportation within the state as well as railroads and such.

Eric Bartsch: The biggest challenge is freight logistics when it comes to getting the product from our door to the customer’s door. Container access has improved greatly in the last several years with the construction of the port in North Dakota. We’re seeing improvements but it remains a big challenge. Some of the other challenges we’re experiencing more and more is in the global economy. With the fluctuations in currencies and as food prices have escalated, lines of credit are being pushed harder and harder. It really has brought many challenges for us as far as the export market, ensuring payments come through and moving goods. Another challenge I see is, as farms get big, there’s a lot less farm families. Generations of people that grew up on a farm are becoming smaller and smaller. I grew up on a farm so I had direct contact with agriculture, but my kids now won’t grow up on a farm, so that’s another generation that is removed. Educating the public about agriculture is going to grow more and more important as we have more people growing up in urban settings versus rural.

Is agriculture competing with the energy industry to move goods?

Bartsch: Energy is actually helping us because there’s freight that’s coming in, but something needs to send that freight back. So we have a lot of dry-van trucks just for domestic markets that we’re getting more and more access to because there’s more freight coming into Williston. It’s the same with containers. We have containers of products coming in that we can utilize to send them back overseas. There’s considerably more investment being put into rail freight now in the region. BNSF [Logistics] has put a tremendous amount of resources into the Williston area. They’ve expanded their yard and we’ve seen service improve in a way that has benefited us.

John McLean: It’s not been an advantage to us. Cost of freight has gone up over the years. When we first built our plant most of the sunflowers in North Dakota were grown in the Eastern third of the state. Between North Dakota and Minnesota was where most of the sunflowers were. Right now, I’d say Bismarck’s the heart of the sunflower country. We need to access those sunflowers and you can do it by truck. Sunflowers are a light test weight, and get better economics in a truck then they do by rail, but rail is also an advantage to move large quantities. What’s happened is truckers who used to be working for their local elevators are now working for their local drilling company. Don’t blame them. That’s the market. That’s the way it should be. You should go to where you can do the best for yourself, but that’s added cost to us. I agree the railroad is putting more equipment and facilities out here, but they’re targeted towards energy. You have to recognize that the freight cost of our plants has gone up. It’s a fact of life. I’m not complaining about it. If you believe in free-market, that’s part of what it does. It’s not a one-size-fits-all. You could have a nice crop, everything could be sitting in place but if you can’t get it moved, you’re out of luck.

Mitch Gardner: We’re seeing manifestations already of increased traffic on the main line and it’s creating challenges with getting our shipments delivered to customers. Although there have been similar challenges over the last three years, it has accelerated. If you agree with the free-market principles, you understand that those things will happen, but it will become a challenge more and more in the near future.

Jim Hauge: In these more sparsely populated counties, starting at the local roads, as farms get bigger, there are fewer people out there and the roads have not been kept up for semi-traffic and things like that. Our farm also has a feed lot and if you have a load of cattle setting there, you can’t just park it and wait for the roads to dry up. You have to get it out there. It starts there; it starts on the roads. Getting back to the railroad, they planned on double tracking this thing during World War II and they ran out of steel. If we had a double track, they could even have passenger trains or they could have a 10- or 20-car sunflower train. But, with a single track, they only work for unit trains. And so, infrastructure is going to be a big issue. We probably can’t do something about it on the railroad side, but we do something about it on the state side. That’s something the Governor was proposing and I was glad to hear that part of it was going well.

Mittleider: A lot of the roads were built in the ’40, ‘50s, and ‘60s when we had single-axle trucks. They weren’t designed for the heavy semi’s we’re running over those roads today hauling wheat, corn or whatever to market. It’s really caused a strain on the pocketbook at the county and township level, just to keep those roads up to date.

McLean: It’s been my experience at the state level that it’s extremely friendly to agriculture. They do a great many things to assist us and I have no complaints with the state. I think part of my problem with transportation is the system. The system was designed for 1940 agriculture, when every 15 miles on the railroad there was an elevator because that’s how far the single-axle trucks would drive. Since I got here in 1983 we’ve lost about 40 percent of the elevators in North Dakota. We were at about 535 elevators when I got here and it’s now down closer to 300 or a little under. It’s changed the way the producers have to haul their grain. Instead of 15 miles, they may be hauling it now 30 or 40 miles, especially out west. They’re driving at least part of the way on roads that weren’t designed for big semi’s hauling 50,000 pounds of product in the back end.

Why is the 2012 Farm Bill Important?

McLean: Right now getting a decent farm bill passed that our North Dakota delegation supports is extremely important, if for no other reason than to make sure the safety net for the farmers stays in place. The [bill’s supporters] have push back from both parties. They probably could get it passed but I don’t know if they’ll pass it before the election. I believe they’ll try to get it passed in a lame duck session which makes most sense. What worries me is the longer we have the drought, higher prices are going to hit us. The price increases were seeing now on grains, while it’s great for our farmers, is going to have an impact. We grow crops that are unique, but our weather patterns have a tendency to be more extreme. This year in the corn-belt they’ve got some extremes and they’re seeing what we face in a lot of years. Without that safety net, there’s more risk to a farmer.

Paulson: The consumer always looks at what the farmer has, not what he put into it. They don’t realize how many dollars it costs to raise a crop. You might make thousands of dollars, millions of dollars one year and then lose that plus more the next. They just don’t realize how important it is to keep him in operation so that we can sustain ourselves.

How much of the products coming out of North Dakota are exported out of America?

Bartsch: On behalf of pulse crops. I would say 85 percent of our crop is exported globally out of the U.S. The global economy to us is huge. That’s the biggest factor in our ability to move products in selling products globally. We’re selling it to India, China, large-populated regions like that, and their buying ability is important to us. If there are issues, it directly impacts our company and all companies that are associated with our crops.

McLean: The three major crops grown in North Dakota right now, I would say are spring wheat, corn and soybeans. They all have export programs. That’s what the shuttle shippers are for, to put 110-car units together and get them to the Pacific Northwest. There are export programs that are important to North Dakota.

How has the farming industry evolved?

Paulson: Five years ago, if you said, “Well, a tractor will drive around the field by itself and all you have to do is go home.” I’d say, “What kind of booze have you been drinking today?” But, it’s being done all the time now, it’s just staggering.

Deana Wiese: It’s a business. Farmers and ranchers are businessmen and entrepreneurs. If you look at what it takes to attract and expand businesses throughout the state or throughout the nation, it’s the same with farming and ranching nowadays. It’s that level. These are CEOs of companies. It’s not corporate farming, but that’s the level that it’s evaluated to.

Mittleider: They are multi-million-dollar companies.

Wiese: Exactly. There’s risk that they’re assuming. That’s part of the importance of the Farm Bill as well, the risk is huge.

Bartsch: They’re managers today more than they are actual farmers. They’re watching the markets, it’s a year-round job. A lot of people always look at farmers as working from April to September, not working in the winter months. That’s not the case anymore. They’re marketing their products and [researching] the technology they use to plant the crops. [For example], the GPS system, it’s more efficient in seed, more efficient in applying chemicals. When you talk about regulations today, chemical use is more efficient than it’s ever been. There had been over-application. We never see that anymore with GPS, everything is being applied correctly.

Hauge: The biggest thing that’s happened to, at least the western two-thirds of North Dakota, has been no-till farming. We’ve cut erosion, we’ve saved water, we’re increasing yield dramatically. It’s been such a boom for this part of the state. Conventional tillage is where you go out and work the ground and you would come in and probably seed it into a black field that would then be worked. If it would rain or if there was snow melt, you’d have soil erosion. It’s pretty hilly in the western part of the state and it would wash down. Just a little gully through a field takes tons of top soil down into the lake. With no-till farming, you’re planting directly into the crop residue and not disturbing the soil. This has really only been able to come about since we’ve had better chemicals to control the weeds.

Mittleider: We’ve more or less doubled our crop land as a result too. We used to fallow our ground half the time.

McLean: When you’re looking at the farm bill and talking about adding technology, you need to combine the two. We have to make sure, as part of the farm bill, that our farmers retain access to technology. What worries me is the fear mongering we’ve been seeing. We’re seeing it in energy right now too. People say, “Well, we don’t know what fracking is going to do. Let’s wait 30 years to see.” You can always wait and wait to death. Technology isn’t just toys, they’re tools in the combine, in the tractor, in your sprayer, in everything you’re doing. We’re actually more green now than we were 50 years ago by far. Part of the farm bill has got to protect the farmer. The safety net is not just for price but allows the farmer access to technology that’s safe and tested. I’m not talking about something off the wall that’s brand-new and no one even knows about. I’m talking about something that’s been through a thorough testing regime and the proper agencies have said it’s fine. You can’t have another agency come in and slam the door and say, “Well, I want to see another ten years of testing.” You can ten years yourself to death.

Hauge: When you’re talking safety net, are you talking crop insurance or something else?

McLean: I’m talking a combination of things: crop insurance, access to technology, access to markets. Those are the things we’ve got to make sure of.

How big of an economic contributor is agriculture to North Dakota?

Mittleider: Agriculture is the largest component of North Dakota’s economy; 25 to 28 percent of our GDP results from agriculture and agricultural processing.

Wiese: It’s something like an eight-billion-dollar industry for North Dakota.

Mittleider: With the expansion we’re seeing in the oil field, agriculture probably is going to drop to number two at some point; but over the long haul, I think it’s still going to be the major base of our economy in the state of North Dakota.

Paulson: It always will be.

Bartsch: Nothing’s really more important than food.

Paulson: I ask this question: Has the U.S. ever had to depend on their food supply in total or in part from another country in its entire life? I bet we haven’t. What would happen if we had to depend on another country to feed us, in whole or in part? How would you look at agriculture then?

Mittleider: Well, we don’t grow coffee, tea or bananas. A lot of our food products are imported today.

Paulson: Some are. But, I mean, if we had to depend on another country, could we get by?

McLean: We could get by, but it wouldn’t be the lifestyle we want.

Paulson: I sometimes get the feeling that our President feels we don’t need agriculture. We’ll just import all of our food.

How big of an issue is staffing a farm at every level?

Mittleider: Well, first of all, to run it you’d better have an MBA or some equivalent because you have to be an agronomist. You have to be up on regulation, you have to be up on insurance. When I was a kid growing up, I always thought of farmers as someone who was just out there producing a crop, that their mainstay was to produce a crop. Today that’s not the case. Today they’re more interested in what the bottom line is. When they get done producing their crop, they market their crop. Farm managers today are a lot smarter than they were 20 or 25 years ago.

Hauge: Nobody wants to work on a farm now. A farm employee can make between $40 and $60 thousand a year. Granted, that’s probably a lot of hours that they put in, but it’s not an “old straw hat and a piece of grass in your mouth” type operation. They expect a lot out of these people. They expect them to be able to operate sophisticated equipment. Compensation isn’t always the issue. It might be living 85 miles in the middle of the boondocks, that might be an issue.

Wiese: For all industries in North Dakota right now, workforce is a huge issue. Agriculture is no different.

Gardner: It’s been huge in operations as well. Just finding qualified applicants has been a real struggle. It’s gotten a little easier over the last three or four months, for whatever reason, prior to that it was a dry well. They either had no work history or they didn’t have the education requirements. It wasn’t money. It’s one of the higher-paying jobs in the area. We found out, too, as we recruited higher-level management, there’s a difficulty in getting people to come and relocate to North Dakota. I really enjoyed the move, but there are people that just have this feeling that they can’t deal with the cold weather and they want to live in a more urban area. That’s been part of it too. It’s been a real surprise that we cannot find, even at good pay, qualified candidates.

Bartsch: Our plant is located in Williston, so it’s in the heart of the oil industry, and it’s been a challenge. Pay has been part of it for us. We have McDonald’s paying $18 to $20 an hour in Williston. We’ve really had to escalate our rate of pay for employees, and that does impact the growers’ price, the customers’ price because that dollar has to come from somewhere. Housing’s been the biggest issue and we’ve had to, as a company, invest in a house in Williston. That’s actually been a big attraction for people to work for our company, that we can provide them a bed. Williston’s the only place in the country where homeless people are making six figures.

McLean: The miracle is the North Dakota economy right now. We’ve never had enough people to staff all the jobs that was going to create. I’ve heard the same thing from people that call us and are hiring from offshore to come and work on their farms. That’s where all of our parents and grandparents and great-grandparents came from. This is just cyclical. To get people to live in North Dakota has always been a challenge. But, it’s a challenge we’re all facing and it’s a heck of a good challenge compared to some of what the other states are facing. It’s not just the energy sector. Agriculture is still the engine that is driving this state. Even if energy takes over as a percentage of GDP, agriculture is still going to have the most important voice in state government because oil wells don’t vote. Farmers do.

Speak Your Mind