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Ag Conference (Nov 11, 2016)

published by Anton Bekkerman

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MONTANA'S EMERGING PULSE INDUSTRY
Economic Opportunities and Infrastructure Challenges
THE EMERGENCE OF MONTANA'S PULSE INDUSTRY: 2007-2015
Source: USDA NASS Cropland Data Layer
BETWEEN 2007–2015, A 247% INCREASE IN ACREAGE (231,000 AC        804,000 AC)
DOES THE PROFIT PIE GROW?
Yes. But likely not a linear, 1-for-1 growth.
Why not?
Mostly wheat-fallow cropping systems
Fallow being replaced by pulse crops
PAST 70 YEARS
TODAY
CENTRAL/NORTHERN MONTANA GRAIN PRODUCTION LANDSCAPE
+
WHAT EXACTLY IS THE ISSUE?
Montana's Grain Handling Infrastructure Was Built for Wheat-Fallow Systems
Handling Issues
Price Dynamics
More volume delivered
More demand for handling services
Higher demand for off-farm storage
Issues with extended pulse crop storage
Grain elevators must manage increased volume
Market response: Reduce incentives for all deliveries
Potentially lower prices for both wheat and pulses
EXAMPLE:
Compare Montana's grain
handling infrastructure with Kansas'
Notes: Lines represent rail lines. Size of circle indicates total grain storage capacity.
Notes: Lines represent rail lines. Size of circle indicates total grain storage capacity.
Kansas has traditionally produced more crops, developing a grain handling infrastructure with many more and much larger elevators, and a more extensive rail transportation landscape.
RESEARCH QUESTION:
RESEARCH CHALLENGES:
What is the potential state-wide impact of the emerging pulse industry?
Determine if price dynamics from constraints in Montana's grain handling industry exist and how to account for them in estimating likely impacts of growing pulse production?
PUTTING IT ALL TOGETHER
RESEARCH METHODS:
Model the returns in Montana's wheat and pulse markets after accounting for potential price dynamics between markets .
Question 1: Do price dynamics exist?
Empirical Re-phrasing: Is there evidence of wheat basis differences before and after the rapid pulse production increases?
Question 2: What are the returns to pulse market expansion?
Empirical Re-phrasing: How can historical market information be used to determine likely future market outcomes and farm-level returns?
ANALYSIS SUMMARY AND ASSUMPTIONS
Simulate WW-F, WW-pea, and WW-lentil net returns for three Montana regions: Northeastern, North Central, and Central
Model annual 10% new acres entering into pulse production
Assume decreasing productivity returns to additional land
New land allocated to peas and lentils following historical proportions
Scenarios for average regional pulse yields and "potential" pulse yields (due to technological improvements resulting from MSU research)
Model constrained and unconstrained grain handling infrastructures
CONSTRAINED
UNCONSTRAINED
AVERAGE YIELDS MODEL RESULTS
CONSTRAINED
UNCONSTRAINED
POTENTIAL YIELDS MODEL RESULTS
FINAL THOUGHT
Continued profit opportunities in global pulse markets
Entry, expansion, and updating of Montana's infrastructure
Sustained research can maximize Montana producers' competitiveness in these markets
Anton Bekkerman
[email protected] 406-994-3032 http://www.antonbekkerman.com