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Farm Deja Vu: Is the rural economy headed for a 1980s repeat?

June 16, 2010 By Lee Egerstrom, Economic Development Fellow Lee Egerstrom

The current economic climate is variously compared with the 1981-82 recession and, for depth, the Great Depression of the 1930s. For Darrell Cruea, a suburban Twin Cities business development and retention consultant, such exercises in finding comparisons are mere parlor tricks.
What frightens Cruea is what happened to rural America - rural Minnesota especially - after the last deep recession. It preceded what has become known as the Farm Financial Crisis of 1982-1987, although for many stressed out farm families no relief came with the theoretical "recovery" that started in 1988.

A survey of farm loan officers that he and colleagues completed a year ago found similar farm finance and debt service trends that were common during the 1980s crisis. From a high water mark for income and profits in 2008, farm balance sheets and financial performance for many are falling into the same patterns spotted 25 years ago.

All this means that agriculture and the rural economy must adjust to forestall a repeat of the earlier crisis that drove farm families off their land and shuttered Main Street businesses in small towns everywhere.
Before Cruea became the principal partner in the consulting firm Cruea & Associates LLC of Cottage Grove, he was a rural business development consultant and financial adviser working out of Colorado and Wyoming during that earlier crisis.

Cruea remembers trying to help farmers cope emotionally with the 1980s crisis; it wasn't easy, and he doesn't want to see it repeated. One farmer shot Cruea in the chest when he approached a farmhouse in an attempt to keep a farmer from committing suicide.

The sheriff's office had equipped Cruea with a bulletproof vest. It saved his life. And then Cruea took a bullhorn from a sheriff's deputy and began "talking the man down." It worked. Two lives were saved that day.

Former South Dakota Gov. William Janklow brought Cruea to Pierre to head rural economic development efforts after that earlier crisis, primarily to help form New Generation Cooperatives (NGCs) in communities to revitalize the rural economy. Later, Janklow appointed him Agriculture Secretary for South Dakota (1995-2000).

He helped build community-based and sector-based NGCs in South Dakota that added value to what farmers were producing nearby, which enhanced economic activity in local communities.  Cruea was among those who helped shape a new, post-1980s rural economy in farm country - that wider group included North Dakota's Bill Patrie, Minnesota's Alan Gerber and Kevin Edberg, and their counterparts in Iowa and Wisconsin.

Unfortunately, agriculture is only one leg - but a huge one - on a three legged stool of the rural economy in Minnesota. Mining and forestry suffered just as much in the 1980s, and communities depending on these other two resource-based activities fared no better than the agricultural towns. The Iron Range communities of Minnesota lost half their population in the 1980s.
Keenly aware of the hardships Rural America experienced after that crisis, Cruea and his colleagues are now working with other groups and institutions on reshaping a new rural Minnesota and a national rural economy.

Capital formation was always and continues to be a problem in rural communities. He and his colleagues work to create new cooperative credit institutions for agricultural value-added development through Other Financial Institutions (OFIs) created in partnership with AgriBank FCS in St. Paul. (This will be the subject of a future article.)

He is also working with others in exploring bio-energy development, especially gasification from dairy and livestock operations that are, in themselves, the first step up in the value-added chain. One project involving groups in North Carolina and the Danish government will explore how manure digestion and processing from pork production plants can efficiently produce energy for the business operation and surrounding community.

One especially important research project involves finding substitutes for corn to finish feeding livestock economically since ethanol development - based on corn - has driven up livestock feed costs. This project with North Dakota State University scientists holds great promise for the regional economy since it could further diversify Upper Midwest agriculture while reducing the corn-ethanol pricing relationship for the livestock industry.

All such projects have the potential to move Minnesota, and Rural America, forward. It is especially urgent because the rural, resource-based economy could follow manufacturing and the finance industries into the same hole that toppled the broader U.S. economy. Relatively recent history shows that agriculture can fall into that same hole, but takes a much longer time coming out.

Cruea is no nostalgic farm leader who longs for the 'good old days' of agriculture. They weren't all that good for about half the farm population. Technology and markets constantly change, grabbing and taking farm families and small towns along for the ride through good times and bad.

For those reasons, he said, agriculture must adjust again to emerge from the current financial crisis just as it did coming through the 1980s. That will take creative entrepreneurship by individuals and cooperatives going forward to create a new Rural America, and rural Minnesota.

It won't be all out on the farm. It must be built up from the farm.

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