The Present State of
Rural Economies

Glimmerglass Film Days this year featured a documentary entitled “Storm Lake” that chronicled the operating of The Storm Lake Times, a small local newspaper in Iowa farm country much like The Freeman’s Journal/Hometown Oneonta.

The community of Storm Lake endured profound changes in the last two decades as the local farm economy declined and was replaced by a very large Tyson pork processing plant that now employs 2,500 mostly migrant workers. The town’s population is about 11,000; its surrounding Buena Vista County about 20,000 in all.

The film cites corporate consolidation of corn and soybean farming and the “vertical integration” of the pork processing business — a fancy term for owning your suppliers — as the primary reasons for an agricultural downturn. Before the consolidation of the pork business, corn and soybean family farmers in Buena Vista County supplemented their crop business with hogs.

Consolidation lowered the price for commodity corn, soybeans, and hogs to the point where local small farmers either got bigger or sold out. The typical farm had to be more than 1,000 acres to be profitable versus 300 from the previous generation, and raising hogs was no longer economically feasible.
The corporate farm model eliminated local farm suppliers and a large portion of the newspaper’s advertising revenue. Corporate farming also benefits from economies of scale to lower the cost of production to where small farms can’t compete. Perversely, corporate farms have better access to billions of dollars from the USDA to support crop prices. If something goes wrong there is a bailout at the end of the rainbow.

The other effect is a capital drain from the local economy. In the past, the sale of commodities resulted in the full price being reinvested and recirculated locally; now, much of the capital ends up somewhere else and the local economy declines.

The Storm Lake economy would have collapsed completely without the Tyson plant bringing new employment, investment and wages. A common feature of rural agricultural communities these days is there better be something else going on or economic decline will decimate the town.

The parallels to Otsego County are clear. Farming was some 25 percent of our economy in the early 1960s. Our farms relied on many small support businesses that, in turn, purchased advertising in our local papers. The capital was mostly retained here and we had a major export business from a county perspective.

Today, agriculture represents less than 5 percent of our county’s economy.
Communities can thrive only when the capital that is exported on things like retail purchases from Amazon, Walmart and Dollar General for products not made here can be matched or exceeded with capital coming into the economy. Major sources of imported capital in Otsego County include tourism, the colleges, our small manufacturing sector, and health care. Health care generates much of its imported capital from the federal government through Medicare and Medicaid.

Banks also create capital by making loans. Lack of a local bank reduces that source, too, as borrowers instead send payments and potential reinvestment capital to financial centers like New York City.

As we citizens of Otsego County look to the future, it is vital that our business and community leaders pay close attention to how their activities and policies will ensure that we do not become a net exporter of capital with a declining economy reliant instead on government transfer payments.

Wayne Mellor
Chair Sustainable Otsego