A Peek at Montana's Economy
by George Everett

Halfway between Butte and Bozeman in the wheat country near Three Forks, Wheat Montana is busy baking up to 8,000 loaves of bread and bags of bagels a week to ship as far away as Idaho, North Dakota, Wyoming, and throughout Montana. The high-protein wheat they use is grown on their own 7,000-acre family farm five miles from the bakery. When harvested, all but a small percentage of the grain is shipped to a mill in Conrad near Great Falls and then returned to Three Forks for baking. This year, 100 percent of the wheat they grow will be used in their products.

Until the early 1980s the Folkvord family would sell their grain to distant markets like other wheat farmers and they were getting hammered by the ups and downs of the world wheat market. They settled on a way to diversify their operations to include a bakery with their own brand name bread and a thriving business selling their high-protein grain to more than 130 specialty bread makers around the country.

"Our farm now generates 10 times the gross income that it did when we shipped grain as a Plain Jane wheat farm," said Dean Folkvord of Wheat Montana.

The Montana historian K. Ross Toole once wrote "Montana's growth, in one sense, has been a series of traumas."  Since the 1860s, Montana's economy has relied on extracting the wealth of natural resources to sell in distant markets. Gold strikes in the 1860s and later silver booms brought thousands of miners swarming in over the mountains. Just as quickly, the booms busted, leaving the state dotted with ghost towns.

From the 1890s to the 1980s, the tremendous wealth pulled from Butte's copper mines turbo-charged the state's economy. In 1909 alone, the copper taken from Butte was worth $46 million dollars and three-fifths of Montana's wage earners, about 13,000, worked in Butte's underground copper mines.

Butte's mines created a huge demand for timber for mining stopes and that demand, along with the arrival of railroads that required timber for railroad ties and trestles, resulted in a thriving lumber industry. New railroads promoted a land rush to attract farmers who had no idea just how many acres were needed to thrive in the arid valleys and plains.

With the onset of periodic drought, more than 11,000 busted farmers had packed up and left by the 1920s, but those who stayed provided the nucleus of a giant agriculture industry that flourishes today with more than 20,000 farms and ranches valued at more than 20 billion dollars despite extreme weather cycles of wetness and drought, withering summer heat, and Arctic winter cold. More than 2.5 million cattle grow fat on Montana grass and hay despite the same conditions.

In a state economy worth about 16 billion dollars every year, the big engines are still agriculture, mining, and forest products, although to a lesser extent after the deep recessions of the 1980s.

During the 1980s, lumber mills in the western half of the state began laying off thousands as mills were retooled to accept smaller trees. Drought and the whims of international trade hurt wheat farmers around Great Falls. Copper mines in Butte and smelters in Anaconda and Great Falls shut down. The glut of cheap oil drowned an oil exploration boom, sending Billings into recession at the same time that railroads were consolidating and laying off employees in Billings and elsewhere along their routes.

During these dim years, thousands left Montana to seek work elsewhere.  In the 1990s, Montana's economy has become more diverse, but it still depends on the wealth generated from its vast natural resources.

"About 60 to 70 percent of Montana's economic base is still in resource extraction industries," says Dr. Paul Polzin, the director of the Bureau of Business and Economic Research at the University of Montana in Missoula.

At the same time Montana's economy has come to rely on the growth of tourism, and on talents, skills, and sometimes entire businesses brought by an influx of recently arrived immigrants. While the 1990 census counted only 799,065 citizens living in Montana, that number is now more than 870,000.

Dr. Thomas Power, a professor of economics at the University of Montana in Missoula believes that the changes are fundamental.  "With the relative decline of extractive industries, the economies are changing. Basically, people are moving to the region for the amenities of living here and bringing economic activity with them as opposed to the past when economic activity brought the people to the area," says Power.

Polzin agrees that these new immigrants are affecting the economy, but he sees their economic impact differently. "As in Washington state, only about 5 percent of these immigrants are what you would call 'lone eagles' who bring along their own businesses. However, the majority of these recent immigrants are younger and less skilled and they seem to be filling entry level positions in the growing service industry," says Polzin.

That growing service industry has been spurred in part by the influx of non-resident tourists to Montana. Tourism has surged as non-residents have come year-round to observe the wildlife and natural beauty and to ski, to hike, to bike, to boat, to hunt, and to fish. They come to see the natural wonders of Yellowstone and Glacier National Parks and to visit the sites of historical events such as Custer's Last Stand or to retrace the steps of Lewis and Clark.

In 1992, according to the Montana Bureau of Business and Economic Research, 6.5 million tourists visited Montana, bringing along revenues of $930 million dollars. By 1995, the number had risen to 7.7 million visitors who spent $1.2 billion dollars in Montana.

Hollywood has been boosting local economies at the same time that they may be contributing to the influx of tourists. Over the past few years, major studios have given Montana a supporting role in A River Runs Through It, The River Wild, Iron Will, Beethoven's 2nd, The Return of Lonesome Dove, and Broken Arrow.

According to Lonie Stimac, who heads the Film Office of the Montana Department of Commerce, in 1993 the film industry brought in close to 20 million dollars while filming in Montana. She estimates that the industry brought about 10 to 12 million dollars into the state in 1995 and 1996.

Meanwhile, Montana's economy continues to gain modest strength through diversity.
"Montana's economy is becoming more and more like the national economy," says Dr. Power. "Montana's less and less a state of mining and milltowns and more one of diverse rich residential settlements."

This transition is probably nowhere more striking than in Butte. Butte's economy has always had mining at its core and this continues today with three nearby open pit copper and gold mines in operation. In 1997, a new silicon processing plant is under construction by Advanced Silicon Materials, Inc. (ASiMI) of Moses Lake, Washington. The new ASiMI plant promises to eventually bring close to 300 new technical jobs and a ripple effect that will inevitably add hundreds more.

In the last few years, Bozeman and Kalispell seem to be locked in a race to see which town can grow the fastest. Both have seen big benefits from the tourist boom, being located so close to Yellowstone National Park near Bozeman and Glacier Park near Kalispell.

Both Bozeman and Kalispell have other economic drivers aside from tourism. Video Lottery Technologies, a corporation that produces electronic gaming machines, is one of Bozeman's main employers with more than 200 employees. The biggest employer by far, however, is Montana State University which has been able to attract millions of dollars in research money each year.

Kalispell has Semitool, Inc., a light manufacturing firm that makes equipment involved in the production of computer chips which now employs about 1,000.  Like Kalispell and the other larger towns in Montana, Missoula serves as a retail trade center for the surrounding area. Missoula's economy has traditionally relied on the wood products industry and the Stone Container pulp plant on the west edge of the Missoula Valley still employs hundreds. Another major employer is the University of Montana. However, Missoula is also the location for several high tech startups.

>In Great Falls, the fortunes of Malmstrom Air Force Base seemed bright when NASA recently announced that the base will be used to test the new X-33 space shuttle launch vehicle in 1999. Malmstrom now accounts for 30 to 35 percent of the city's economic base, providing employment to 4,800 with an annual payroll of 84.5 million dollars.

Great Falls is surrounded by an area of vast wheat farms known as The Golden Triangle and agriculture has always been key to its fortunes. Now, a new pasta plant will add value to Montana wheat before it is shipped out of state. Now under construction, the pasta plant will initially employ 50 and will expand to employ 125, according to Tim Ryan, Executive Director of the High Plains Development Authority in Great Falls.

"We have also been successful in attracting new firms with 800-number service centers, too," says Ryan. "CUC International has been here for about two years and they now employ about 200."

Billings is by far Montana's largest city with 124,655 residents in the metropolitan area. Its economy still relies on three oil refineries with their annual payrolls of more than $165 million dollars. The Western Sugar refinery is also a major employer with more than 200 employees and a $5 million dollar annual payroll.

Again, diversification has come to Billings as well as elsewhere in Montana.  An expanding service sector, a growing health care industry and decisions by several corporations, including most of the state's banks, to locate their headquarters in Billings have also added fuel to the area's economy.

With a trade area that includes more than 400,000 potential customers, Billings is growing as a trade center for the region and the new stores and businesses have transformed the southwest end of the city, according to Jim Day, Director of Business Development for the Billings Area Chamber of Commerce.

Overall, Montana's economy is projected to grow slowly at about 1 or 2 percent a year over the next few years. "Montana will probably remain a slow growing state in a fast growing region," says Paul Polzin.

And this growth, while it may be less dramatic than it has been in the last few years, will also be less traumatic than it was in the more distant past when the upheaval of boom and bust loomed over all aspects of the resource economy.  Meanwhile, there will be rewards for Montana businesses that are able to diversify within a slow-growing economy. This is the changing face of Montana's economy, still dependent on the bounty of the state's natural resources, but seeking to diversify wherever possible.

Proof of that is Wheat Montana, which now has 53 employees and has begun to contract with other farms to grow high-protein wheat for their bread and flour. The strategy that Wheat Montana chose in the face of wheat price fluctuations beyond their control seems to be the right recipe for success in Montana's economy today.