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THE THREE DAKOTAS
No, not North and South Dakota and some other place we have forgotten about. I am thinking only of North Dakota. Of course it is happening throughout the Great Plains, or as I call them, the northern plains. There is some variation because there are differences among the states. I call it The Three Dakotas but mean only North Dakota because that is where I am from, both physically and spiritually.

As for those other states in what I call the northern plains, Minnesota is the most diverse of the four. It approaches being an industrial state. At least it is from Duluth which really does have a seaport feel to it, and then swinging south and west through the Twin Cities and Rochester and then east down to where it meets Iowa and Wisconsin

The Iron Range, along with a half dozen similar areas in the United States, is mining country. The lakes country is defined by its title. While several other states have similar areas Minnesota’s “up north” must be the biggest lake country in the U.S. It is a culture by itself. No other part of Minnesota is like the lake country.

The rest of Minnesota from the far northwest where it meets North Dakota and Canada down to the South Dakota, Iowa border and all the area not previously mentioned is farm country, some of the most productive in the United States. Like “up north” if you are familiar with farm country you know what it means. If you aren’t familiar with farm country you have a lot of reading to do. Recently I heard a lady who lives in farm country but who has no connection with farming say, “These farmers. All they ever do is complain”. She knows nothing. She understands nothing about farming.

South Dakota is like Montana in the sense that both are farm country in the east and cowboy country in the west. Not the same of course. South Dakota cowboy country is mile after mile of open range until you get to the very western edge in the center of the west boundary where you bump in the beautiful and dramatic Black Hills.

Of course the Rocky Mountains of Montana with Glacier and up against Yellowstone are what most U.S. residents think of when you say the Rockies. What beauty. What drama. How great it is.

And then there is North Dakota. We call them the Killdeer Mountains and the Turtle Mountains, but really, they are at best only respectable hills.

We do call one area hills, the Pembina Hills, but they aren’t. It is a gorge, a dramatic and gorgeous gorge to be sure, but they are not hills. Skeletons from a prehistoric fish have been found in the Pembina Hills.

North Dakota along with much of our Canadian cousins was once part of the great inland prehistoric seas. Listen to that great Ian and Sylvia folk song, The Seven Seas. That is us, 100s of millions of years before we were us.

The closest we come to honesty in our naming of a variation from the plains state we are is The Badlands. That it is, and the terms the tourist bureau uses in describing them are honest. It is a place of beauty. A special place, and truth be told, more beautiful than the badlands of South Dakota, or so I think.

So, after all those qualifiers what am I talking about when I say the three Dakotas? It is this, going back about a decade in North Dakota, before the oil boom, it is what was developing in North Dakota, and to a lesser extent because of differences among the northern plains states, what is happening in the farm country of Minnesota, South Dakota and Montana. It is what is happening because of the new technology in agriculture. The technology from the satellites that direct the tilling, planting, spraying and harvesting. Those unfamiliar with farming today don’t realize how all-encompassing this technology is. It is how this technology means that even though every acre is still farmed there are fewer farms and that means there are fewer farmers and there are fewer people who make their living by accommodating the farmers directly and indirectly.

When I was twelve years old I told my dad I could drive the combine. In the best day that meant I combined 35 acres in a day. Today if I got on that combine in the best day I could combine 250 acres. Just think how many fewer farmers that means.

Today, just push a couple of buttons at the beginning of the field and take your hands off-off everything. The satellite sets the threshing numbers, the concaves, the sieves, and the speed. It steers the combine so all 40 feet of the header are full, to the last inch. As conditions change going down that cut, so too will the combines setting.

Of course when planting in the spring that same satellite set the depth and the seeding rate. Before the seeder went down the rows that same satellite set the fertilizer rates and combinations. It did the same for the sprayer each time it went down the rows.

Impressive? Well, it gives us the biggest yields possible once that great satellite in the sky that has been there since the big bang gives up the growing degree days and the rain.

To sum it up, if you move beyond the eight or so largest cities in North Dakota and now also move out of the one fourth to one third of the state that is the oil patch you see a North Dakota that has changed dramatically, and is changing completely. If that photographer from the National Geographic thought he had some pictures a decade ago wait until the middle of this century, no, maybe only another twenty five years.

There will be fewer abandoned yards left because the land will become too valuable to leave in that state. Tear the buildings down, and rip the soil back into fields.

There is a web site called Ghosts of North Dakota. It is about ghost towns and abandoned places in North Dakota. Many are not true ghost towns because there are maybe one or two houses and even a business still occupied. However, there is not much left. It is a good website. Worth the visit if you care about our great grandparents Dakota.

If the children or maybe grandchildren of the website’s author, Troy Larson, try to continue this site they may not find much interest, at least among descendants still living in North Dakota because there will be so many old places that are relatively new every six or seven miles down the road that the visits won’t be unique.

What may be interesting is every 20 miles or so there may be a “farmstead” with storage for small grains and specialty crops. That storage, because of the costs of today’s storage bins may not look like today’s farmstead.

Instead of a 5000 to 60-70000 bushel bin that is filled at harvest and then emptied as soon as a couple of weeks after harvest only to sit there empty until next year what you might see is a circular platform with five feet or so of a hard permanent circumference. In the center of that will be a large capacity unloading system. Today systems are built to unload a1000 bushel semi-trailer in as little as two and one-half minutes. As the pile grows at that speed the unloading system keeps going up, and up and up.

Around that system is tied a “tent”, actually a new high tech cover. When the system is full it looks like the biggest Native American teepee you have ever seen. The cost per bushel is a fraction of those metal granaries of today.

North Dakota will become like many of the other prairie states. Too few people in too few places. How do you provide the infrastructure to those great unpopulated distances?

I don’t mean schools. That’s easy. Make them live in the few towns, one spouse and the kids? Or, do like Australia and deliver education over the internet.

The problem is building and maintaining the roads, and other tax supported factors. Who pays when agriculture is still an important part of the economy? Maybe not the largest, but a close second.

What happens when you need a part and a technician (we used to call them mechanics)? See that helicopter off to the southwest about 10 miles? He is on the way to this field with that technician and part. Of course if the part is too big even today most implement dealers have a boom truck that comes to the field accompanying the van that is equipped with welders, torches, air wrenches, and every other tool any respectable shop has.

Some examples of what we will look like: Colorado, what is there after you move out of that Denver-Boulder-Colorado Springs metropolis? What about Nebraska? Omaha and Lincoln. Then move 20 miles either side of the Platte and there is nothing there expect some great agricultural land, part of the Great American Bread Basket, but it doesn’t take very many people given the technology of those crops to get that cheap food to the American, and world, population.

These past half dozen or so years have been the start, but it is only the start. There will be three North Dakota’. One will be the oil patch, and it will be impressive, even if you don’t agree with it. There will be substantial changes from today’s technology, but we will be important to the United States and to the world. Then there will be the eight or so larger towns.

I say eight or so, because I am not sure what role Jamestown and Devils Lake will play. I think they will have some role because of the distance between Fargo and Bismarck, and Grand Forks and Minot. Stanley will be important because of oil. Finally, because of the industrialization north, south and east of it, so too will Wahpeton, although no larger than today, and probably smaller.

Finally, there will be farm country. That will be the most dramatic economic and cultural change of the three states within North Dakota. There will be very few people. There will be great distances. There will be technological changes so great that the tech writers will write about North Dakota then just as the energy writers and economists are writing about North Dakota today.

This is my Dakota. The Dakota farm. Mile after mile of fields of wheat. Of course in the Red River Valley it meant sugarbeet fields and in smaller numbers of farmers in the northern valley more for the individual was the potato crop.

The Red River valley became the third largest potato producing area in the United States. That happened with fresh potato stock. Then when the processing potato industry became so important, especially because of potato chips, at one time if you were eating a potato chip west of the Rocky Mountains there was two chances out of three that the potato for that chip came from the Red River valley.

North Dakota lead the nation in other specialty crops. One half of the dry edible beans (baked beans and taco beans, both) were from North Dakota. North Dakota raised more sunflowers than any other state. Today it leads in pulse crops (edible peas, etc).

Time changes all things. Potatoes are still important. Simplot’s (McDonald’s supplier) largest french fry plant is in Grand Forks. However, in total while stability has returned potatoes are a much smaller percent of North Dakota acres than they were in the 1980s.

Today what has changed in North Dakota is the very large increase in acreage devoted to both corn and soybeans across the state. Corn in now a larger crop in terms of acreage than is wheat.

In 1980 it was only Cass and Richland county farmers in North Dakota who knew that was a soybean field they just drove by. Today, as with corn, it is all over the state.

What does this mean? Given the change in technology, and the resulting increases in costs, and given the changes in the crops the North Dakota of anyone more than 50 years of age is gone, and will be changed beyond recognition. It becomes less and less so every year. The social and cultural aspects of that time is gone. That time of our great grandparents is gone. It can never be recovered. We can only hope enough of that has been saved.

 

First, be sure to look at the report below this one. It was also just posted and covers the city sales taxes for July as well as the First Quarter 2014 state sales taxes.

As for this report, it is the most recent report about North Dakota oil and gas production. Another million barrels a day report. Even a little better than when North Dakota finally broke through that milestone last month. With more and more wells being completed we can expect that figure to continue increasing. Of course as more and more wells move into that post twenty month age that will lead to a daily decline, but we should have enough wells by then to stay in that category for many years for now.

Now the next interesting thing is what will happen to the natural gas production. We should see that become a major business in the state.

At this point it is just watching the market maturing.

 

I am presenting a more extensive report of sales taxes this month then I have in the past. Not only do I have the Grand Forks data and other major cities in the state for the month of July, but I also am presenting the first quarter 2014 state sales tax collections. Of course the time is different so we have to be careful in the analysis here.

That is, the first (top) table is taxes received by the cities in July. You will recall, if the businesses are forwarding the sales taxes they have collected from the consumers it should be for sales that occurred in May. The business then forwards the receipts to the state in June, and the state treasurer then sends the city that money on the 15th of July. That means on average the money the city receives was paid by the consumer two months earlier. The business got to use the money for about two weeks, and the state used it, or made interest on it, for six weeks.

As for the state sales taxes, the business gets use of the consumers tax payments for two weeks and then forwards it to the state for their immediate use. Of course the business acts as a collector of taxes and does not get paid anything for those administrative costs for being the governments.

An analysis shows the continuing slow down in the North Dakota economy. It is a slowdown that should be expected. It comes from two places. First, it is the maturing of the oil boom. Not a bust by any means, but a maturing of the explorations and an increase in the technology of drilling and the pumping. The costs of the wildcatting is now under control. This oil patch has to be the best organized, most efficient exploration ever. It has a success rate of well into the 90 percent category, a figure unheard of before.

The drilling and placing of the wells will go on for at least two more decades and longer if new technology is developed. This will be a development unlike any ever before, and that is good for North Dakota and for all of its sub-divisions, especially for some. It has taken some subdivisions that were disappearing from North Dakota history and turned them into some of the wealthiest in the state.

The second slow down is in the agricultural sector. The interesting thing for economists is that the oil boom, this never before seen level of economic activity in this state, and the nation is taking place at the very time that the largest, most extensive agricultural boom is also occurring. There may have been times when adjusted for the value of the dollar that farmers received more for their products in the past six to ten years, but there never has been a time when this level of prices lasted for this long of a period.

Not only that, but it was happening when new technology was happening at a level not only never recorded, but not ever imagined. Tractor horsepower increased from moderate levels to unimagined amounts. Satellite technology became common place on the farm, in the field. It was used to steer the tractors and combines, to set the machinery, to till, plant and harvest in ways unimagined not a decade before.

While at this time the boom has not turned into a bust, but it has created a significant slow down in the returns to the farms, and that has “multiplied” itself all the way across the state. Machinery sales are down significantly. Money for the farmers to buy business investments and personal purchases have declined significantly. So too then has the money received by the businesses, the carpenters, the car dealers, etc.

Not a bust, but a major slow down. It is a good thing the state has all that savings from the extra income from oil and agriculture this past decade.

Now, that all being said, the state is in a slowdown, but if you recall the last report by the OMB North Dakota government collections for its major taxes, after significant reductions by the legislature, is not slowing down. In fact collections are significantly greater than projected by the firm the state hires to tell them what to expect. It will take a major economic slowdown for the state not to have significantly more money than anticipated at the end of this biennium.

Given that places like Williston, Tioga, and Watford City actually are collecting less sales taxes than last year, but Dickinson is collecting more, and Fargo, as far from the oil patch as you can get, is collecting a lot more. No, more than a lot more.

Both Dickinson and Fargo are up about 17 percent from last year (for the first 6 months of 2014), and Fargo is over four times as large as Dickinson in terms of collections.

Finally, to my Grand Forks readers, I keep hearing how Grand Forks isn’t growing. I don’t know who is looking at what data to come up with that conclusion. Yes, it is slow compared to Fargo, but it is consistently ahead of last year in total, and in fact in every area. Some things like sales taxes are only up a few percent, but when we realize how our Canadian traffic, an important segment of the Grand Forks market, has slowed down because of their dollar when we look at the building, the employment, and other factors we need to be happy with Grand Forks economy. Grand Forks needs to keep two three letter words in mind: UND and UAV. While AGR is slowing down those two are increasing.

 

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First, this is the third post I have made to the website today. Below this you will find a posting on U.S./Canadian border crossings, and below that a posting on the city sales taxes in selected North Dakota cities.

NOW, after that terrible winter, after all those announcements from those who couldn’t wait for the fact to occur before they reported it, now it has happened. North Dakota, in April averaged producing over one million barrels of oil per day. Only three other states have ever done that, Texas, California, and Alaska.
Today it is only North Dakota and Texas.

Right now the production in Texas is significantly greater than in North Dakota. Some think that North Dakota can eventually pass Texas in total production. That will take a lot. In 2013 Texas produced in excess of two and one-half million barrels a day.

In the meantime, we will not worry about who is first. Instead, we need to make sure North Dakota production continues to drill new wells on a business like basis, and most importantly that the United States continues to apply new technology in all the oil patches for the good of our economy and for the safety of our armed service members who then will not have to go in places we are not wanted. Let those places sell those barrels to others, or even shut their wells off.

 

Second verse same as the verse. A little…. You remember the song, and I don’t mean to be repetitive in my comments, but I just have to say this. Although it is not a great amount the legislative forecast at the end of April is off by even more than it was last month.

In total the amount received at the end of April is nearly 9% more than forecast. Last month that figure was 7.1%. The error is nearly 30% more than last month.

You might also remember that OMB said that a lot of the problem would be solved when income tax payers, especially the corporate, sent their final tax reports in and corrected for over payments they had made. Last month the corporate income tax collections were about 42% larger than the projections. This month that figure is about 39%. That is not much. The difference for the individual income taxes is less than 2%.

In sum, individual tax collections are nearly 36% larger than projected collections, and corporate nearly 39% larger. That is a lot.

The only account that is even close is sales tax collections. That is a peculiar account to be close given North Dakota’s still booming economy, and then to miss the income taxes by so much.

Remember, both income taxes were changed and state sales taxes remained the same. Seems to me Economy.com didn’t know how to adjust for changes to the income tax, both corporate and individual.

Finally, I will note again, and hope those in charge of preparing and voting on the next bienniums budget, keep in mind these continuing errors. If not, when the economy, even the growth in the economy, slows down we will find the North Dakota budget in deficit. With the total receipts being only about 9% greater than the projections income would be about $5 million dollars short if the two income tax accounts had been correct just to this point in the biennium, or $12 million at the end of the biennium if the North Dakota economy stays like this. We easily could handle that, but if it continues through the time that will amount to a significant amount-something unnecessary.