Snowy Mountain Development Country is Food and Ag Country: Why It Matters

Established in 2001, Snowy Mountain Development Corporation (SMDC) is a 501(c)(3) non-profit organization, a State Department of Commerce-sanctioned Certified Regional Development Corporation (MT DOC CRDC), a Federal Economic Development District (US EDA EDD), and the Nation’s only economic development organization designated as an EnVision Center (US HUD). SMDC is organized for the purpose of building community and economic capital in an all-rural six-county area of Central Montana. SMDC provides free, confidential, professional and technical services through its Business Development Center (BDC), Center for Strategic Development (CSD), and its Leadership, Education and Training Center (LET).

For twenty years, SMDC has responded to the industry-specific needs of new and expanding Central Montana food, farm-derived renewable energy, and other value-added agricultural businesses. Highly-qualified staff provide training, coaching and technical and financial assistance in: product development, testing, analysis and labeling; regulatory compliance training and implementation; food processing; education on industry dynamics and technologies; cooperative development; industry-specific market analysis; business networking; business planning and development; and access to financing.

Since the onset of COVID, SMDC has experienced an uptick in calls for help from the Region’s farmers and ranchers who are encountering significant challenges. To halt the spread of the virus, meat processing capacity has been taken offline, causing substantial supply chain disruptions. With standstills at meat-processing plants, cattle are backing up at feedlots. The plants cannot accommodate demand. Fewer animals are processed. In turn, less meat is available to consumers. This, in turn, has led to surging meat prices at the retail level, price growth that industry farmers are missing out on. Retail beef prices have risen by nearly 25%. Cattle prices have dropped by 30%. Prices paid by processors to farmers remains low. This disparity between farm gate prices and retail prices reduces revenues as grocery stores and retail outlets reap the rewards of soaring prices. Slaughter rates have picked up but recovery is slow and prices are expected to increase, given limited production. These conditions prompt producer attrition, creating further pressures on the industry.

The majority of Central Montana ranchers are cow-calf producers, breeding and grazing in Montana before selling the larger calves to feedlots out of state. Some have sold those cattle at a $111 loss per head. Montana’s dairy producers are dumping milk. Montana swine producers are losing $5 per head on any animal they ship. Producers are slowing the growth of their animals and holding onto them as long as possible. But the extreme volatility in input prices, like animal feed, has made it difficult for industry operators to overcome the logistical challenge of planning herd numbers to ensure appropriate returns. New and beginning ranchers and those highly leveraged with debt are the most vulnerable. Harsh trade conditions and poor domestic prices have pushed some into bankruptcy. Others struggle to access conventional capital given lenders’ concerns with market volatility and risk exposure. According to the US Department of Agriculture (USDA), farm debt levels now constitute the largest share of income for agricultural producers.

Likewise, crop farmers are experiencing dropping commodity prices, on farm storage shortage as they hold onto crops waiting for prices to come up. They are also encountering increasing input costs for fuel, machinery and fertilizer that, in turn, create cash flow challenges.

But COVID presents opportunities as well. As meat prices increase for consumers, they look closer to home to meet their demands. Farmers and ranchers in Central Montana are attempting to accommodate that demand. The window of opportunity to take products direct to market is opening wide. For example, local stakeholders want to partner with SMDC to get Central Montana’s food and ag products into Central Montana’s schools.

They need our help. Three of the biggest challenges are access to capital, access to land, and access to technical assistance. Agri-entrepreneurs and producers need help buying and leasing land, purchasing farm equipment and securing working capital to support farm and ranch operations. Working knowledge of all aspects of ag business ownership and the requirements necessary to secure capital is limited. To meet capital requirements, they need access to professional, confidential, technical business support and training in order to thrive. Keeping up with technological advancements and the ability to pay for that technology is a challenge. To overcome bottlenecks in the ag industry, farmers and ranchers need access to the COVID relief dollars targeted to the industry. In addition, they require community and economic development planning support with local partners who are cobbling together to help them. Technical assistance with meat processing regulations is needed, along with logistics planning to circumvent out-of-state pressures creating bottlenecks. Business planning for direct-to-market sales is needed, with marketing support strategies.

Currently, SMDC staff are working with ranchers in Judith Gap, Winnett, Lewistown and Moore to develop meat processing facilities to relieve bottlenecks in shipping and processing livestock. Staff are ramping up to support direct-to-market efforts. Importantly, SMDC staff are working diligently to connect farmers and ranchers to COVID relief dollars. There is much confusion about how many dollars are available for whom, from whom, and for what.  

Additionally, emerging food and ag businesses encounter a number of barriers to entry. Setting up a farm or a feedlot from the ground up requires significant investment. New ag businesses must raise funds to purchase a feedlot facility, cattle stock, livestock feed and a range of other costs including veterinary services, interest and labor. The average beef cattle farm incurs an average production cost of $55,938.00 per farm. The largest entry cost for beef cattle producers is the equipment and machinery necessary for ranching. Due to the capital investment required, new ag businesses can encounter problems financing their entry costs. This problem can be partially overcome by phasing entry, but existing beef farmers have cost advantages. Like many agricultural industries, the profitability of beef cattle farming has fallen. And, farm income is declining relative to income in the nonfarm sector of the economy. Given these realities, traditional financing companies and banking institutions are reluctant to approve loans. The geographic location of downstream markets limits entry into cattle farming as well. Currently, meat processors and packers represent a large market segment for beef cattle and Montana has very few. We are working on this.

The establishment of crop farming operations requires some investment. New businesses need to purchase land, machinery, such as harvesters and tractors, and irrigation equipment. For existing field producers, establishment costs are significantly lower. Farmers can simply alter their product mix in response to changing market conditions. In most cases, existing farms already have the skilled labor, land, machinery, fencing and buildings necessary to begin operating in this industry. Similar to many agricultural industries, the profitability of crop farming is volatile. It depends on a range of exogenous factors that are beyond the control of farmers. These include supply and demand forces in downstream industries and weather conditions. Given this, traditional financing companies and banking institutions are reluctant to approve loans for establishment costs.

Snowy Mountain Development Country is Food and Ag Country.[1] And, this is why it matters:

? In Fergus County, farms and ranches generated $73.7 million of value-added, or 17% of the county’s total gross domestic product of $432 million in 2017. According to IMPLAN, $46.7 million was directly contributed by farmers and ranchers. An additional $21 million was generated by businesses supporting agricultural production and $6 million was generated by other related businesses. Each dollar of value-added in agriculture by a farmer or rancher contributes an additional $0.58 of value-added in other sectors of the county’s economy. Agricultural production employed 1,488 workers, or 26% of the county’s labor force. According to IMPLAN, economic impact model, 1,062 of the workers were directly employed in production agriculture. An additional 326 workers were employed in businesses supporting agricultural production, such as feed and fertilizer dealers, and another 100 workers were employed in other related businesses, such as grocery and drugs stores. For every 10 jobs on farms and ranches, 4 additional jobs are generated in the county.

? In Golden Valley County, farms and ranches generated $10.7 million of value-added, or 36% of the county’s total gross domestic product of $30 million in 2017. According to IMPLAN, $7.6 million was directly contributed by farmers and ranchers. An additional $2.8 million was generated by businesses supporting agricultural production and $0.3 million was generated by other related businesses. Each dollar of value-added in agriculture by a farmer or rancher contributes an additional $0.40 of value-added in other sectors of the county’s economy. Agricultural production employed 194 workers, or 52% of the county’s labor force. According to IMPLAN, economic impact model, 142 of the workers were directly employed in production agriculture. An additional 48 workers were employed in businesses supporting agricultural production, such as feed and fertilizer dealers, and another 4 workers were employed in other related businesses, such as grocery and drugs stores. For every 10 jobs on farms and ranches, 4 additional jobs are generated in the county.

? In Judith Basin County, farms and ranches generated $55.2 million of value-added, or 41% of the county’s total gross domestic product of $134 million in 2017. According to IMPLAN, $31.8 million was directly contributed by farmers and ranchers. An additional $17 million was generated by businesses supporting agricultural production and $6.4 million was generated by other related businesses. Each dollar of value-added in agriculture by a farmer or rancher contributes an additional $0.73 of value-added in other sectors of the county’s economy. Agricultural production employed 827 workers, or 90% of the county’s labor force. According to IMPLAN, economic impact model, 485 of the workers were directly employed in production agriculture. An additional 234 workers were employed in businesses supporting agricultural production, such as feed and fertilizer dealers, and another 109 workers were employed in other related businesses, such as grocery and drugs stores. For every 10 jobs on farms and ranches, 7 additional jobs are generated in the county.

? In Musselshell County, farms and ranches generated $20.2 million of value-added, or 7% of the county’s total gross domestic product of $278 million in 2017. According to IMPLAN, $13.8 million was directly contributed by farmers and ranchers. An additional $6.4 million was generated by businesses supporting agricultural production and other related businesses. Each dollar of value-added in agriculture by a farmer or rancher contributes an additional $0.47 of value-added in other sectors of the county’s economy. Agricultural production employed 567 workers, or 25% of the county’s labor force. According to IMPLAN, economic impact model, 419 of the workers were directly employed in production agriculture. An additional 147 workers were employed in businesses supporting agricultural production, such as feed and fertilizer dealers, and another 1 worker was employed in other related businesses, such as grocery and drugs stores. For every 10 jobs on farms and ranches, 4 additional jobs are generated in the county.

? In Petroleum County, farms and ranches generated $10.5 million of value-added, or 56% of the county’s total gross domestic product of $19 million in 2017. According to IMPLAN, $6.6 million was directly contributed by farmers and ranchers. An additional $3.3 million was generated by businesses supporting agricultural production and $0.7 million was generated by other related businesses. Each dollar of value-added in agriculture by a farmer or rancher contributes an additional $0.61 of value-added in other sectors of the county’s economy. Agricultural production employed 159 workers, or 54% of the county’s labor force. According to IMPLAN, economic impact model, 103 of the workers were directly employed in production agriculture. An additional 49 workers were employed in businesses supporting agricultural production, such as feed and fertilizer dealers, and another 7 workers were employed in other related businesses, such as grocery and drugs stores. For every 10 jobs on farms and ranches, 5 additional jobs are generated in the county.

? In Wheatland County, farms and ranches generated $25 million of value-added, or 34% of the county’s total gross domestic product of $73 million in 2017. According to IMPLAN, $17.1 million was directly contributed by farmers and ranchers. An additional $5.8 million was generated by businesses supporting agricultural production and $2 million was generated by other related businesses. Each dollar of value-added in agriculture by a farmer or rancher contributes an additional $0.46 of value-added in other sectors of the county’s economy. Agricultural production employed 335 workers, or 43% of the county’s labor force. According to IMPLAN, economic impact model, 215 of the workers were directly employed in production agriculture. An additional 86 workers were employed in businesses supporting agricultural production, such as feed and fertilizer dealers, and another 34 workers were employed in other related businesses, such as grocery and drugs stores. For every 10 jobs on farms and ranches, 6 additional jobs are generated in the county.

Snowy Mountain Development Corporation helped with that. And, that matters too.

[1] County data provided by Bureau of Labor Statistics, www.bls.gov/#cntyaa and IMPLAN Estimates and St. Louis Federal Reserve Bank, IMPLAN Estimates.