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Wheat Production Declines in the Dakotas. Why?

February 2, 2018

Recent USDA data shows that during the past 3 years acres devoted to wheat production continue declining in both South Dakota and North Dakota. As indicated in Table 1, South Dakota wheat acres experienced a remarkable decrease of 31.5% during the past 3 years, compared with a relatively mild drop of 16.4% by North Dakota.

According to Stephen Lee of the Capital Journal, winter wheat planting acres in South Dakota hit the lowest record in 45 years. Gary Schnitkey of the University of Illinois attributes the dwindling acres of wheat to the relatively higher profitability of corn and soybean, compared to wheat. The demand for corn from ethanol industry and improved seed varieties for corn also greatly boosted corn production, which in return decreased wheat production.

In this regard, our 2015 land use survey conducted in Eastern Dakotas offers some insight on producers’ wheat production decisions from the producers’ perspective.

The survey solicited information on producers’ previous production decisions, as well as perceptions towards infrastructures supporting crop production. The term infrastructure defined in our survey include transportation, market outlets, equipment and agronomic services to support production of different agricultural products.

Overall, 1026 out of 3000 selected agricultural producers responded to our survey, and their responses revealed from the producers’ standpoint the factors that contribute to or go against wheat growing decisions.

Perceived Infrastructure Change
Figure 1 depicts the producers’ perception of infrastructure change that supported corn, soybean and wheat over the past 10 years. Compared to corn and soybean, a higher proportion of producers’ choice for wheat production infrastructure fell under categories of “much worse”, “somewhat worse”, and “about the same.”

Correspondingly, fewer respondents chose “somewhat better” and “much better” for wheat infrastructure, when compared to the ratings of corn and soybean infrastructures.

Overall, most producers believe the infrastructure for corn and soybean has improved, or at least stayed about the same. This explains to a large degree the increasing corn and soybean acres. For wheat production, however, the majority of producers (55%) believed it to be the same over the past 10 years, with an almost equal proportion (close to 20%) of the rest choosing either ‘somewhat better’ or ‘somewhat worse’. Only 6% believed it is ‘much better’ while 3% believed it became ‘much worse’.

Perceived Infrastructure Change & Wheat Production Decisions
Perception on infrastructure change can greatly affect wheat production decisions. Figure 2 depicts the wheat production status of producers for each perceived infrastructure change category.

For example, out of 33 producers who believed that wheat infrastructure became much worse, only 20% grew wheat every year; however, out of 50 producers who believe there was a much better infrastructure, more than 60% chose to grow wheat. Therefore, even though input and output prices certainly play a role in crop production decisions, the role of infrastructure change cannot be overlooked.

Our findings suggest those who perceived there is better infrastructure that support wheat production in their region are more likely to grow wheat. Given the effect of perceived infrastructure change on wheat production decisions, it might be interesting to investigate whether the producer perceptions are actually in alignment with the real changes in their regions.

Part of Diversified Crop Rotation
Aside from being influenced by perceived infrastructure change, wheat production is more likely to be a part of diversified crop rotation. Our survey results revealed that 24% of the respondents also planted other grains or oilseed crop every year during the past 10 years. From Figure 3, we can see that of the producers who planted other grains or oilseed crops, nearly 60% also planted wheat.

For other producers, however, less than 30% planted wheat. In other words, wheat production most often comes along with production of oilseed or other grains. This observation implies that the producers who plant wheat are more likely to involve wheat as part of their crop rotation to maintain soil health and agronomic benefits.

This finding concurs with Lee, who quoted Reid Christopherson, executive director of the South Dakota Wheat Commission, that “wheat has become ‘a rotation crop,’ planted more for the agronomic value between corn and soybean plantings, than for the cash grain value.”

Location Matters
Finally, we found location greatly affects wheat production decisions. As we move towards the west and the north, the percentage of farms that grow wheat increases. Our survey region spans from longitude -96.47 to -100.79 degrees, with an average longitude of -98 degree. If we divide our study region using the average longitude, then 46% of producers located in the west are wheat growers, while only 26% of producers in the east grow wheat.

Similarly, the ratio of wheat production are 28% and 50% respectively for South Dakota and North Dakota, showing wheat production is more popular towards the north.

Several factors could explain the spatial differences in wheat production decisions. Besides climate differences, our survey results show that there also exists a regional discrepancy regarding perceived infrastructure change. Using our average longitude of -98 degree as the dividing line, we found 23% of producers located in the west region believed infrastructure for wheat became ‘somewhat better’ and 8% opted for ‘much better’ (Figure 4).

Comparatively, fewer producers chose ‘somewhat worse’ (15%) and ‘much worse’ (2%). For producers located in the east, however, only 14% and 3% chose the ‘somewhat better’ and ‘much better’ categories, while a higher percentage chose ‘somewhat worse’ (20%) and ‘much worse’ (5%).

When it comes to the contrast between South Dakota and North Dakota, the perception difference is less visible (Figure 5). Yet similar trend still exists as compared to South Dakota producers, more producers in North Dakota believed wheat infrastructure was either ‘somewhat better’ or ‘much better’.

Therefore on a regional level a better perception of infrastructure change is also associated with favorable production decisions. It could well be that infrastructure supporting wheat production becomes worse due to less wheat acres planted in a region, or vice versa.

Source: Tong Wang, South Dakota State University; and David Hennessy and Hongli Feng, Michigan State University