Young ND farmer adds to farm, feedlot through industry highs and lows
STEELE, N.D. -- Chase Dewitz has fearlessly expanded his North Dakota farm, having ridden the ups and now navigating the downs of lower commodity prices. Fortunately for him, he has livestock as a hedge in the market.
STEELE, N.D. - Chase Dewitz has fearlessly expanded his North Dakota farm, having ridden the ups and now navigating the downs of lower commodity prices. Fortunately for him, he has livestock as a hedge in the market.
In 2005, Dewitz, now 30, was one of only a handful in the region to launch a substantial commercial feedlot. The 2,000-head enterprise is just off Interstate Highway 94 and is among the top 10 or 20 in the state in size - double most operations.
“He was probably one of the first to go in at that size,” says Scott Ressler, environmental services director for the North Dakota Stockmen’s Association. Ressler says there are a couple of feedlots with a capacity of more than 5,000 head, but most are 900 to 1,000.
“At his young age, and when he did it, he took a big gamble and it’s paid off,” Ressler says. “Chase has a couple of advantages, growing his own feed and being accessible to an interstate highway.”
Dewitz also expanded his grain farming at the same time.
He is the driving force on a farm that has ballooned to 20,000 acres - mostly leased land in locations in the Steele and Sterling areas. He and his father, Rob Dewitz, each own about 2,500 acres and have separate but related operations. Since 2008, they’ve constructed about 1.1 million bushels of grain storage. All the while, he’s expanding in cattle, in an operation that currently has 2,400 mother cows and bred heifers.
Ag lenders say changing technology has led to shifting cropland inflation and profits have been strong to extreme in some of the past few years, in some ways rivaling the Bakken oil expansion. Many farmers have bought more and larger equipment, enabling them to handle more acres, and technology has moved high-yielding crops westward.
Occasional farms of 20,000 acres or more exist, but 5,000-acre operations are becoming more commonplace, ag lenders say. The 2012 federal Census of Agriculture found there were 6,437 farms of more than 2,000 acres (the largest category), accounting for 20.8 percent of the farms and 27.18 million acres of land, or 69 percent of the total in the state. The average size of farms in the 2,000-acre-plus category was actually 4,222 acres.
Dwight Aakre, a North Dakota State University Extension Service farm management specialist, says the times led to some expansions.
“It’s been quite uneven,” Aakre says, adding it’s not immediately clear how big farms have gotten.
Simply building larger doesn’t necessarily help farmers survive the commodity price downturns. Farms that have grown relying on $7-per-bushel corn are going to have a tough time managing at $3 corn, Aakre says.
“Will they be able to handle it with extremely tight or even negative margins that the marketing folks are projecting?” He has no answer.
Andy Swenson, his NDSU colleague who works with the North Dakota Farm and Ranch Business Management records program, says the average farm size of the 500 to 550 farms in the group has stayed “remarkably static” at about 2,500 acres, including about 600 acres of pasture. That’s compared with an average farm size in the state of about 1,250 acres.
“It seems like every county has a group of farmers who have gotten quite large,” Swenson says. “I think there are more larger farms than there were. Some guys have been pretty aggressive.”
Whether larger farms are prepared to survive commodity price downturns is an individual issue, depending on how much debt they carry, and whether the debt is on depreciable assets - equipment - or if much land is rented at high rates.
“If you’re losing money on every acre, you can’t make it up on volume,” Swenson says.
It remains to be seen whether an economic downturn will lead to more consolidation, he says. Some middle-sized farms with off-farm income might decide to get out of farming.
“The land has to go somewhere,” Swenson says. “The farms that are left get bigger.”
Few have expanded like Dewitz.
Along with expanding acres, Dewitz has built a lot of storage since 2008 - and most heavily in the past two years. The Steele farmstead has added 710,000 bushels in bin space and he’s added 380,000 in Sterling. Still, he doesn’t have enough.
“For the last couple years, I’ve dumped a lot of corn on the ground, and we’ve cleaned piles up. I will be doing it again.”
Short-term, Dewitz also rented three bins - 270,000 bushels - to get him through his small grains crop. But he was expecting to go into fall harvest with no room for 10,000 acres of corn - down from 12,000 acres he planted in 2013.
“I’ll have enough room to store my sunflowers, but I know I won’t get rid of all these small grains,” he says.
Safer in the field
Like last year, Dewitz thinks he’ll leave some corn in the field. He combined 2,000 acres of corn in the spring of 2014 and figures he lost less than 5 percent of his yield, mostly on the edges of the field. In March, he combined 14 to 17 percent moisture corn that weighed 56 to 57 pounds per bushel - excellent quality.
“There aren’t any other costs involved,” he says of field drying. There’s some risk of more field loss. “I’ll do that again before I put in a dryer. I don’t have anywhere to put it anyway. I’d have to dry it and dump it on the ground, so it’s better off just sitting in the field.
“I’ve dumped 500,000-bushel piles on the ground a couple of times. But if it’s wet, it’s going to stay in the field.”
If he ever decides to put in a dryer, he has a natural gas pipeline running through his property, beneath the cattle feedlot. He already has a feasible potential gas connection.
Dewitz says there is a glut of corn production in the region today, but he thinks the situation will turn around a year from now.
“I think locally, corn production will go down,” he says. He sees a positive impact from a new ethanol plant under construction in Stutsman County.
“(The U.S. Department of Agriculture) told us that corn acres in North Dakota were down 20 percent from last year,” Dewitz says. “We haven’t seen final numbers on that. In my opinion, we’re 30 to 40 percent less than last year. I think there’s more old-crop out there that’s not in good condition, sitting in bins with issues.”
Dewitz thinks a lot of old crop is going to be sold as new crop, or contracted as new crop for fall or even part of early 2015 delivery.
“We just can’t get rid of this grain in a down market,” he says. “You’re going to have bankers putting pressure on farmers, even if they’re having to sell into a down market, bankers are still going to want cash flow.”
Besides corn, Dewitz this year grew malting barley for Anheuser Busch in West Fargo, N.D. He has winter wheat that was pounded with rain and had some crop loss and spring wheat, which yielded well and quality was good. He didn’t plant any soybeans.
Cheap cattle gain
In the cattle market, Dewitz says cost of gain is going to be cheap compared with what it’s been in the past. He says every pound added costs only 30 to 40 cents but can bring $2 in the marketplace.
“But on the other hand, you’ll have the guys that say, ‘I could sell my 600-pound steers for $1,750 off the cow. Instead of owning cattle, they’ll go and buy a new pickup and a new loader-tractor,” he predicts.
Dewitz has 1,250 mother cows and another 1,150 bred heifers.
“I would say more than likely I’ll end up selling all of my bred heifers, maybe keeping 100 or 200, depending on what happens.”
He figures there will be a point where demand for beef declines because of price and imports.
“Seven-dollar corn didn’t last forever,” he says. “And $2.20 (per pound) feeder cattle and $1.60 fats ain’t going to last forever either.”
He sees the cows as his “bank.”
“I could see myself decreasing the cow herd and seeking opportunities to expand farming. It’s not exactly what I want to do, but I think there’ll be some opportunities - quality land at a decent rental rate.”
Dewitz says climate and market cycles are inevitable.
Even if the current unusually wet trend ends, farmers will still produce significant crops with no-till and other technology.
Two fields of Dewitz’s corn suffered hail and frost damage in the first week of September, but most of it was fine and will make mature corn.
“I think we’re going to end up getting dry corn yet,” he says.
Dewitz says the downturn in corn prices will mean some rental deals will have to change, or he’ll have to walk away from them. He’s developed his own variable rate formula - a combination of the soil Productivity Index and a factor tied to that, times the revenue insurance price of corn.
Landowners with good land like the formula because they get paid for it, while people with poorer land sometimes want more than the land is worth.
“Consequently, more and more, I’m shifting away from poor-quality land because the spread isn’t big enough between the rental rates on that land and your good land,” Dewitz says.
As fall weather sets in, Dewitz also indicates that even personal ambition goes in cycles.
An overriding focus on work and being “too expansionist” took a toll on some key relationships, he says. He had time to think about that more after July 20, 2013, when he hit a deer with a new motorcycle and was hospitalized for five days.
He’s mostly recovered now, but the incident has shifted his thinking: “I might just idle back a little bit, and focus on maximizing production on what I already have.”