The following article is directly from Iowa State University's Extension office Horticulture site- Another problem has been noted recently on spruce in several states, including Wisconsin, Missouri, Kansas, and Minnesota. Needles on the older growth of individual branches quickly turn yellow or brown before falling off, usually leaving behind only the newest growth. Affected branches may be scattered through the canopy. The overall canopy of the tree thins, sometimes leaving bare branches. This condition has been called "sudden needle drop" or "spruce needle drop, "sneed" for short, and has been seen on Colorado blue spruce, white spruce, and Norway spruce. The fungus Setomelanomma holmii has been found associated with symptoms of sudden needle drop, but it has not been proven that the fungus causes the disease. The fungus forms small, black, round spore-producing structures on the stems and bud scales of affected spruce, and we can identify that it is Setomelanomma by looking at the spores under a compound microscope. A large number of other fungi produce small black structures on healthy spruce branches, so microscopic examination is necessary to tell whether Setomelanomma is present. It is still unclear whether Setomelanomma holmii causes the condition that has been termed "sudden needle drop." It is also unclear whether other factors, such as improper planting, adverse weather, or other stresses, could directly cause the symptoms or make the trees more susceptible to the disease. Research is ongoing, but it may be years before we have clear answers.
What should we do? If a sick spruce tree is found to have either the Stigmina fungus or the Setomelanomma fungus, is there anything we can do? Without knowing more about how the fungi live, and especially whether either fungus is actually a pathogen, it is impossible to have a confident answer to this question. If Stigmina is truly a pathogen, it would make sense that it probably infects the tree in the spring and early summer as new growth emerges, similar to when Rhizosphaera infects trees. If so, it would make sense that fungicide treatments that work for preventing Rhizosphaera needle cast (one application of a contact fungicide such as chlorothalonil or Bordeaux mixture in mid-May, and another four to six weeks later) would also help to manage "Stigmina needle cast." Fungicide applications at other times of the year are not likely to help. If Setomelanomma is really a pathogen, it would make sense that removing heavily infected branches may help minimize disease in the rest of the tree. However, there is no research or anecdotal evidence regarding management of either disease, if they truly are diseases, so this is only a guess. In general, stress makes trees more susceptible to disease. We can minimize stress to trees by choosing an appropriate tree for the site, buying high-quality planting stock, planting it properly with proper spacing, giving it a three-inch-deep layer of mulch over the rootzone, and watering it during especially dry periods. This "preventative maintenance" is the best way to manage tree problems. -Iowa State University Extension