State Side: Rural America's vanishing local economies

Thursday, January 31, 2008

U.S. farmers spent a record $254 billion last year to grow our food and fibre, but most of the money left the rural areas, never to return

by ALAN GUEBERT

One of the oldest truisms in agriculture had it that "When farmers make money, everybody in town makes money."

Note that I used the past tense because, if you've passed through almost any farm town in any farm state lately, few businesses - outside a coffee shop, a convenience store and a pub or two - exist anymore.

The reasons for rural America's empty storefronts are as many as they are irreversible: fewer farmers, more mobility, the rise (and domination) of chain retailers, the internet, loyalties pegged to dollars rather than neighbours. These are cold facts, not nostalgic laments.

Yet the dollars that once were spent locally, and then pinballed through local businesses five or so times before moving on, are still being spent. In fact, according to November 2007 U.S. Dept. of Agriculture estimates, farmers and ranchers spent a record $254 billion (all figures in US dollars) last year to grow our food and fibre. Those same farmers and ranchers also pocketed a record net farm income of $87.5 billion, or nearly $30 billion more than in 2006.

So where does the money go? The usual places, mostly into the pockets of giant, U.S.-based transnational businesses, only now it gets there more directly instead of through the local zigging and zagging of 30 years ago. Moreover, once it gets into the international pipeline, it's deposited everywhere - but only rarely in rural America.

For example, Deere & Co. made a $1.8 billion profit on sales of $24 billion in its 2007 fiscal year, of which $85 million then went to purchase Nihgbo Benye Tractor and Automobile Manufacturing, the largest tractor maker in southern China.

Likewise, CHS, Inc., formerly known as Cenex Harvest States co-operative, achieved record sales of $17.2 billion and a record profit of $750 million for its 350,000 members in 2007. The money quickly moved to, among other things, generous patronage to co-op members, increased investment in its domestic petroleum and biofuel businesses and a new grain trading office in Switzerland.

Some of it - CHS is not saying how much - was added to cash from a new Japanese partner, Mitsui & Co., and a current Brazilian partner, Multigrain AG, to buy 247,000 acres (386 sq. miles) of Brazilian farmland in early November to "strengthen the ability of Multigrain and its owners to originate commodities for global customers."

Monsanto, too, had a smashing 2007. Left for dead (by me, among others) just five years ago, the global biotech leader's net income soared 44 percent, to nearly $1 billion, on sales of $8.5 billion last year. The company, noted Business Week in early December, "is minting money," most of which will be spent in 2008 on perfecting, then marketing, new seeds for American, Indian, Chinese and Brazilian farmers.

How far-flung the agricultural giants and big box retailers make and spend their (formerly your) money is, of course, their and their shareholders' business. That most of it leaves the local community never to return, however, once was everyone's business.

Truth be told, few in rural America even worry about our vanishing local economies now and even fewer have the skills to do something about it.

A generation or so ago, we stopped bending over to pick up a penny and began driving 20 miles to save a nickel. Those choices, like all those nickels, carried value - value that now ends up elsewhere.

In the 23 years that I have lived in central Illinois, arguably the dead centre of the richest farmland in the world, Wal-Mart has built five, ever-bigger "super" centres in the two county seats equidistant from my home.

Well, Wal-Mart didn't build 'em. We did with our nickels. And that, too, is a simple, cold fact. BF

Alan Guebert writes from the U.S. cornbelt.