Montana ag producers look to expanding Asian markets

Montana ag producers look to expanding Asian markets

Great Falls Tribune: by David Murray

2014 began as a year of high expectations for Montana’s agriculture economy, but ended with them only partially realized.

Spurred by the smallest national herd size since the 1950s, cattle prices reached historic highs in 2014. Late season prices for a 700-pound steer briefly flirted with the $2.50 per pound mark — more than double what they were 10 years earlier during the height of the Mad Cow Disease scare.

According to the U.S. Department of Agriculture, the value of Montana cattle sales has risen more than 56 percent since 2008 alone, and could exceed $2 billion for the 2014 production season.

“Cattle prices peaked out at a perfect time for weaning this fall,” said Montana Stockgrowers Association President Gene Curry. “A lot of producers have taken the opportunity to pay down debt, replace some equipment or add on to infrastructure — buy a new tractor or replacing a pick-up.”

Grain prices, by comparison, have been trending in the opposite direction. The price received by farmers for all wheat peaked at $8.02 a bushel in 2008. Under pressure from a global wheat glut, that price dropped to $4.74 by August 2014. But timely spring rains and favorable growing conditions had many producers expecting at least a marginally profitable year was in the making.

That changed for many during the third week in August, when drenching rains devastated many grain fields just as harvest was about to begin. Large segments of the state’s standing crop of barley and winter wheat began to sprout from the head, stripping away its value. Baled hay sitting in the fields was soaked, with an estimated 10,000 tons ruined by the flooding.

“A lot of the state had some real serious issues with the rain event we had in August,” said Charlie Bumgarner, president of the Montana Grain Growers Association. “It was very unfortunate for the guys who still had grain standing, but it’s been very fortunate to seed back into for this year’s winter wheat crop.”

Bumgarner noted that Montana farmers are currently enjoying some of the best soil moisture conditions the state has seen in decades. Barring some other unforeseen adverse weather event or market upheaval, conditions seem ripe for a good harvest in 2015.

“We’ve got some of the best stands we’ve had for a long time, and we’ve got a lot of good moisture underneath it,” he said. “For next year, what we’re looking at is pretty positive.”

Underpinning Bumgarner’s optimism is the growing demand for Montana wheat along the Pacific Rim.

“Asian countries are very big for Montana,” he said.

Over the last six years, Pacific Rim mega-corporations in Japan and Korea have invested hundreds of millions of dollars into Montana’s grain growing regions. Asian corporations like Mitsui & Co., Marubeni Corp. and EGT now own 11 of the 17 high-speed grain shuttle loaders in operation in Montana.

Historically, the largest destinations for U.S. wheat have been Mexico and sub-Saharan Africa, where about a quarter of the nation’s total wheat exports were delivered prior to 2011. However, over the past decade the Asian nations of Japan, South Korea, the Philippines and Taiwan have gobbled up an ever greater percentage of U.S. wheat exports.

Today, nearly 90 percent of Montana’s hard red winter and spring wheat is loaded onto cargo ships bound for these hungry Asian populations. That trend is expected to continue, with high hopes that wheat markets in China will soon welcome Montana exports.

The U.S. Department of Agriculture lists China as the single largest producer of wheat in the world, harvesting close to 118 million metric tons of hard red winter wheat in 2012. But a poor harvest in 2013 forced China to increase wheat imports by more than 500 percent, and many analysts believe the Asian giant will struggle to remain self-sufficient in wheat production in the years ahead.

Montana cattle producers also are looking toward the future in China. As the Chinese become more affluent, their hunger for beef has grown with it.

According to the North American Meat Association (NAMA), Chinese imports of beef have more than quadrupled over the past several years, up from about 43,000 metric tons in 2010 to more than 193,000 metric tons in 2013.

Thus far Australia, Uruguay and New Zealand have been the primary beneficiaries of the surge, but U.S. beef producers are hoping to cash in as well.

“I’m pretty excited about our Chinese market,” Curry said. “We’re at a low point now in terms of cattle numbers, but everybody expects that at some point the cattle herd is going to start growing again. With more beef on the market you’re going to need more consumers or the price will start to soften. If the Chinese market starts to open up about the time supplies start catching up with demand — it will take care of a lot of any excess supply.”

Asian markets have the added attraction of adding to carcass values. Secondary markets for beef tongue, heart and liver are well established in many Asian countries.

Montana grain growers and livestock producers have the added confidence of knowing the current U.S. Ambassador to China has a special affinity for Big Sky Country. The former senior U.S. senator from Montana, Max Baucus, was sworn in as U.S. Ambassador to China last February.

“Max has always been a champion of Montana and what Montana produces,” Curry observed. “We all feel fairly confident with the ambassador we have right now.”