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Ag Conference (Nov 11, 2016)

created using Meat & Cancer template
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