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11/12/99 Contacts: PLAIN ECONOMIC SENSE For release Nov. 15, 1999 Column 389 Impacts of Changing Ag Structure on Rural Communities By Mark A. Edelman The Center for the Study of Rural America of the Kansas City Federal Reserve Bank recently issued a commentary titled "Rural America in a New Century." Here are some excerpts. "On the surface, the 1990s have seen a strong rural economic rebound, with employment growth in nonmetro counties nearly matching the rates experienced in the 1970s. Yet those gains have not been widely shared. Four in every ten rural counties have captured nearly all of the employment growth. These rural growth havens generally have three key traits. Some are next to major cities and are being suburbanized. Others have striking scenic amenities such as mountains or lakes. Still others are emerging hubs of rural commerce--providing retail, financial and health services to an ever widening rural region." "The biggest rural economic gains, therefore, are flowing to regions like the intermountain west, the Ozarks and rural counties that benefit from market access along interstate highways." The commentary's national map shows 16 of Iowa nonmetro counties to be in the high employment growth group for 1990 to 1997 period. The remaining 75 nonmetro counties in Iowa are in the low employment growth group. "In the main, these counties remain heavily tied to traditional economic bases, including agriculture. In many cases the economic problems in the lagging counties are compounded by a shrinking [and aging] population." Agriculture is redefining the way it does business. The number of farms has been falling for decades as farmers expanded operations to drive costs down. However, the move to supply chains represents a tidal wave of change now beginning to sweep agriculture. Supply chains not only change how agriculture does business but also "who" does business. In almost all cases, supply chains include a relatively few [large] farm producers. The number is held down since the firm putting the chain together wants to minimize the costs of managing highly integrated business alliances. Supply chains lead to a very different rural geography--one based on concentration in relatively few rural places. Many rural places will still depend on a commodity agriculture that will continue for the foreseeable future, even as more segments are dominated by supply chains. The struggle for these 'commodity communities' will be building an economic future with fewer farms, fewer banks and fewer businesses. In the end, this probably means far fewer farm communities. Meanwhile, some rural communities will hitch themselves to the brave new world of industrialized agriculture and supply chains. These communities will benefit from the jobs that processing activity will bring as well as the prospect of higher per-farm income for large local producers. Still, supply chains will locate in relatively few rural communities. And with fewer farms and fewer suppliers where they do locate, the economic impact will be different than with the commodity agriculture of the past. The current pipeline of agricultural research points to a multitude of engineered food products on the horizon all likely to give rise to new supply chains. The question that remains is where this specialized agriculture of the future will locate. If the history of supply chains to date is any guide, relatively few rural communities may benefit. The economic changes now sweeping rural America point to a broad new slate of policy issues. While agricultural policy was rural policy in the 20th century, a much broader approach will be required if rural America is to achieve its economic potential in the 21st century. The commentary concludes that four issues will be especially important to the course of the rural economy in the 21st century: Development of new economic engines. Much of rural America is searching for new sources of economic growth. The key will be the ability of new rural entrepreneurs to establish new businesses in rural America. Business and technical assistance programs aimed at rural businesses may get new attention. Physical and digital infrastructure. Roads, bridges, water and sewer systems will have a major impact on sustaining new economic initiatives in rural areas. An even bigger issue may be providing adequate digital infrastructure in rural America. [Telecommunications technology is an increasingly important factor in whether a rural place has competitive access in serving business customers globally.] Innovations in financial markets. Rural businesses face a shorter menu of capital options [particularly for start up ventures] than their metro area counterparts. This points to the opportunity for market innovations that increase availability of equity and other forms of capital. Reinventing public services. Innovation in the delivery of public services will be a necessity in the 21st century especially in rural communities where population and tax revenues are declining. [The rural counties that emerge with economic vitality may need public service innovation to manage their growth and serve an even wider rural region.] ml: isupes |
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