Prospering in Rural America

Rural development issues in
spotlight at Outlook Forum

By Dan Campbell, editor
dan.campbell@wdc.usda.gov

Editor’s note: For the complete text and webcasts of
speeches made at the USDA Outlook Forum, visit:
www.usda.gov/oce/forum.

very winter, USDA holds a little get-together for more than 1,200 national and international farm leaders at an event called the Agricultural Outlook Forum. The two-day forum has grown into a world-class conference under the guidance of USDA’s World Economic Outlook Board. Attendees get the inside track on what USDA and its invited guest speakers see as the shape of things to come on numerous fronts: crop and livestock markets, trade, technology, nutrition, food safety and security, farm policy and legislation, among many other topics that determine the state of the nation’s $260 billion agricultural industry.

But this year the program took on a distinctly new twist, with more general rural development issues than ever in the spotlight before a record crowd of more than 1,600. Agriculture Secretary Mike Johanns devoted a much of his keynote address to the impact USDA Rural Development programs are having on the rural economy. One of the five conference “workshop tracks” was devoted to rural development, with sessions ranging from the impact of e-commerce on rural communities to finding the next generation of farmers and skilled rural workers.

Rural economy evolving
Johanns noted that just 160,000 of the nation’s 2 million farmers, who work 33 percent of our farmland, are responsible for 75 percent of U.S. farm receipts. In 1987, it took 295,000 farmers to account for that much of the nation’s crop and livestock production. That means 92 percent of ag producers, working two-thirds of U.S. farmland, rely heavily on off-farm income.

“They choose to carry on the great American tradition of agriculture, but they do not depend on it as the sole source of income or, in many cases, even as their primary source of income,” Johanns said. “We must provide greater economic opportunity for people to choose a rural quality of life, a lifestyle that upholds the values and principles upon which this great nation was truly built.”

This trend is one reason why public testimony at the Farm Bill listening sessions around the nation in recent months has been so unanimously supportive of USDA Rural Development programs, Johanns noted. USDA hosted 52 listening forums, of which more than 20 were conducted by Johanns himself. The Secretary is well known as an intense listener who takes notes during most meetings. He recalled some of the key comments he heard regarding Rural Development programs: Johanns said the USDA Rural Development hurricanerelief team was one of the first on the scene “in the trenches, helping people find shelter.” He noted that Rural Development has invested $239 million in housing, economic and community development recovery, and rebuilding efforts to “help rural families put their lives back together and their communities back together. We helped to place more than 10,000 evacuees in 45 states and helped 22,000 families literally pay the mortgage.”

Market-driven strategy
The featured panel discussion during the opening plenary session was titled: “Rural America’s New Economic Frontier.” During it, Under Secretary for Rural Development Thomas Dorr said that sustainable market development must be market driven, not program dependent. He said he sees USDA Rural Development’s primary role being that of an investment banker and an “enabler” for rural America, rather than a central planner or lender of last resort.

What rural America most needs, Dorr stressed, is “viable businesses, self-sustaining communities and young families eager to build a future.” This job, he said, begins with identifying opportunities.

Dorr said he sees three primary areas of opportunity for the future of rural America: The “place” to be
“Place,” Dorr said, “is peace and quiet, green fields and fishable streams. It’s lower taxes and a lower cost of doing business. It’s affordable housing and a big yard for the kids. It’s the pace of life, low crime and good schools.”

He contrasted the rural Iowa landscape where he farms and was raised to the 5 years he has spent in Washington, D.C., now an urban metropolis of some 3.5 million people. “I’ve never seen a real estate ad in D.C., or any other city, boasting about a bigger mortgage for a smaller house, high taxes, noise, crime and a three-hour commute... We’re not trying to run folks out of urban areas; but given the chance, people will vote with their feet. Our job is to help empower that choice by investing in the infrastructure and business development that makes it possible.”

Much of rural America has long suffered from a “brain drain,” in which it has produced well-educated young people who, after graduation, migrate to good jobs in cities. “Very few of the college graduates come back,” he noted. In his own class, for example, Dorr said he may well have been the only one (and certainly one of the very few) who returned home to a family farm (in Marcus, Iowa, in his case).

The goal must be “to create communities where our kids have a future; communities where the next generations have more and better choices than we did. If our kids’ hopes, dreams, ambitions and talents take them around the world, that’s great. We want them to have that opportunity. But they shouldn’t be forced to leave simply because there is nothing at home.”

Getting connected
Advances in information technology — especially in broadband Internet service — have ignited a communications revolution, Dorr said. This is resulting in “the most radical decentralization of information in human history — and it’s happening at a critical moment in history. Since the fall of the Berlin Wall, up to 3 billion people have joined the world market system. This represents both a new market and a new source of competition, he said, calling it “the greatest expansion of economic freedom and opportunity in human history.”

The broadband revolution has intersected with this new world marketplace, meaning that “every person is going to be connected — more-or-less instantaneously — with everyone else,” Dorr said. “Whether we want to or not, we will be competing with everyone in the world with similar skill sets and a modem. The upside is that our potential customer base will be just as broad.”

Because data can be so easily shared across great distances and there is less need for shuffling paper from desk to desk in one office, “administrative structures, manufacturing, and distribution networks can be decentralized. To a degree unprecedented in history, people are going to have real choices about where to live and how to work.

“Broadband makes rural communities more competitive than they have been in generations. It opens the door to everything else.”

Energizing the nation
Rural America may also hold the key to the nation’s energy future, as biofuels and other renewable energy sources sprout into a major new cash crop, Dorr stressed. He noted that President Bush devoted a portion of his State of the Union Address in January to expressing his support for funding new research on wind, cellulosic ethanol, clean coal and new-generation nuclear power. “The commitment is there and, frankly, thanks to $60 per-barrel oil, so is the opportunity.”

Dorr cited the following statistics to underscore how rapidly the renewable fuels industry is developing: < “Energy from agriculture, in fact, offers the rural economy its biggest new market in history. But it’s not automatic. We’re talking about the emergence of a distributed energy system. That’s something different. It’s new. It will take some creative work to make it happen.

“The key issues will be ownership and wealth creation — and our goal must be to bring the benefits of this extraordinary new opportunity back home to rural America... Farmers and other rural landowners are on the ground floor.”

Farmers need to be
energy system owners
As great as it is for farmers to be netting an extra 5 to 10 cents per bushel of corn from ethanol, Dorr said, “the real return is downstream, in the valueadded as a premium fuel.” In this renewable energy economy, the ultimate question is: “Will farmers and rural landowners participate as vendors, or as owners and investors?”

Business and investment models, including new tax and regulatory regimes, are needed to bring the benefits of new energy sources back home to rural communities, Dorr said. “This doesn’t require more government expenditures on subsidies. But it does require a strategy — new investment models and supportive regulatory and tax regimes — that permits distributed energy opportunities to be capitalized by the existing wealth already distributed within rural communities.

“This will happen when not just farmers, but also the local dentist and the school bus driver, the shopkeepers and school teachers, the mechanics and the retirees, all have a chance to participate in this extraordinary new opportunity to generate wealth in rural America.”


Storms, disease and soaring fuel costs
couldn’t derail farm economy in ‘05

Editor’s note: The following is excerpted from Keith
Collins’ address at the 2006 USDA Ag Outlook Forum. You
can read the full text, or view a webcast of Collins (as well
as other plenary session speakers), on the conference
website: www.usda.gov/oce/forum.

On paper, 2005 should have been a disaster for American farmers and ranchers. Just consider some of these negative factors checked off by USDA Chief Economist Keith Collins during his annual address at the USDA Agricultural Outlook Forum in Arlington, Va.: Anyone who would have seen all that coming would have said the farm economy would be in “deep, deep trouble,” Collins noted. Instead, the farm economy seemed to respond with a: “What, me worry?” Domestic demand for farm products soared, exports set a record high, U.S. farm income was the second highest ever and farmland values and farm wealth reached new all-time highs.

“The reasons for this outcome include strong global demand for food, the flexibility of the agricultural system to rebound from shocks, a substantial increase in government support spending and cyclically tight markets for some commodities, such as meat,” Collins said.

“While demand remains strong, the farm economy will be challenged by large stocks of crops, built up from the abundant harvests the past two years, livestock expansion, higher interest rates and energy costs, animal disease issues and weather. While it is too early to be definitive, these factors suggest that farm income will likely drop in 2006 and the farm economy will contract,” Collins said.

“The forecast for farm exports in fiscal 2006 is a recordhigh $64.5 billion, up $2 billion from 2005’s record. Imports are forecast at $63.5 billion, up $2 billion from USDA’s last forecast, leaving a forecast surplus of $1 billion for FY 2006. The current period of strong foreign economic growth and continued effects of the decline in the value of the dollar from several years ago should show up in higher U.S. agricultural exports in the future and an improving trade balance. Projected economic growth suggests continued increases in agricultural exports and imports, with the agricultural trade balance forecast to be positive but less than in past years.

“Record or near-record production of major crops has added to the stock levels built up last year. As a result, U.S. supplies for feed grains, cotton and soybeans are at a record high this year, although not for wheat. But this picture of the crop sector moving toward the bottom of the cycle is not as transparent as it seems. Four factors suggest the prospect for divergent performances among the major crop markets over the next couple of years: (1) Global grain and oilseed markets are moving in different directions; (2) Biofuels may drive faster-than-expected demand growth. Indeed, ethanol — rather than China — could well be the No. 1 factor driving farm prices higher over the next few years; (3) Energy and interest costs are likely to be a rising challenge for many producers, and (4) Weather is already being disruptive for the upcoming crops.

“From indicators such as a return to average national farm income, lower enterprise and regional farm income, lower cash margins, higher net worth and greater utilization of debt repayment capacity, we can draw several conclusions for 2006. There is not an impending financial crisis in U.S. agriculture, yet there will be greater financial stress for an increasing number of crop producers in many regions. That stress will likely show up in tighter credit standards and delayed loan repayments and loan extensions.

“The coming year will present more of a financial challenge for U.S. agriculture than in recent years. In addition, agriculture will have to contend with questions over the effect of rising interest rates on the durability of the U.S. economic recovery, the value of the dollar, issues raised by the federal budget deficit, trade negotiations, bird flu, BSE, oil prices, Middle East issues and terrorism. Producers will likely need to draw more on their resiliency and managerial capabilities in 2006 than they did during the past couple of years of abnormally high farm income.”





March/April Table of Contents