Designing a Viable Rural Economy

Don Hofstrand, Co-director, Agricultural Marketing Resource Center, Iowa State University, Ames, Iowa

When I was a farm boy growing up in rural America in the 1950s, the most important event of the week was Saturday night.  That was when the farmers went to town.  The main street was crammed with parked cars.  The stores were full of farmers doing their weekly shopping and visiting with friends and neighbors.  Even though our home town was less than 1,000 people, it had grocery stores, clothing stores, a drug store with its own pharmacist and soda fountain, restaurants, a hardware store, a movie theater, a couple of machinery dealerships and various other businesses. 

Government price support programs for farmers were in place at that time and were not very different than today’s programs.   It was believed that, in addition to supporting farm income, these programs also supported rural America because farmers spent this money in local towns and communities. 

Fifty years later we still have government price support programs, and we still believe these programs are supporting rural communities.  However, in my home town the streets are deserted on Saturday night.  The stores are gone and the farmers - the few that are left - drive through town to the big town down the road to shop at Wal-Mart.  Obviously, government farm payments are a poor rural development program. 

Debate on the new farm bill will start soon.  It is time to reassess how we create a viable and sustainable rural America.  Although we cannot save my home town, we may be able to improve economic activity in rural areas, county seat towns and regional trade area cities.

However, we cannot do this by government fiat.  Nor will it be accomplished by pushing large sums of government money into the rural sector with vaguely defined objectives.  Sustainable rural development requires that we create modern private sector business ventures that can effectively compete with the non-farm sector.  To accomplish this, rural residents must garner the entrepreneurial and business development skills and resources needed to drive the economic engine of rural America.  This will require targeted government programs like the following:

1. Facilitate the creation of “business development organizations” where rural entrepreneurs can work together and share resources and knowledge in creating rural business ventures.   Successful business development involves mastering business development “process” skills.  These organizations provide the business environment needed to develop and hone these process skills.  It also provides an environment for networking with a wide range of people involved in business development.

2. Foster programs designed to increase the information and communications infrastructure for the rural sector.  The Internet has created a vehicle for eliminating the disadvantage of vast distances that has plagued rural areas.  However, if the rural sector does not take advantages of this new technology, it will find itself even further behind.

3. Business development skills are best created with “on the job training” of actually creating business ventures.  However, this process can be embellished with government supported programs that provide business development information, processes and analysis. 

4. In addition to building the capacity of rural residents to create viable business ventures, programs need to be designed to build the capacity of rural business consultants.  Qualified consultants play a major role in building successful businesses.

5. Provide seed capital funding for new business ventures.  The value-added producer grant program provided by USDA Rural Development has been very effective in providing seed capital funds for start-up business ventures.  These programs need to be maintained. 

6. Programs need to be developed to assist in the creation of various types of private sector “rural business funds” that can be used to provide capital to rural business ventures.  These can range from high-risk, high-return venture capital funds for start-ups to moderate-risk, moderate-return funds for the expansion of existing businesses.  Rural funds would be designed specifically for participation by rural residents.

7. Implement a federal tax credit program focused specifically on business creation and development in low income, economically distressed rural areas.  These credits can provide an incentive to locate business ventures in low income areas while providing an incentive to local residents for investment.

8. Design programs that encourage the private and public sectors to work together.  Many university research programs need to be closely linked to private sector business development organizations for potential commercialization.

The responsibility for revitalizing rural America lies in the hands of the residents that live in these areas.  However, the federal government can play an important role in assisting these efforts.  The points discussed above provide an outline for designing this assistance.

 

New Updates to www.AgMRC.org

Commodities & Products

The following new commodity pages were created or revised – an updated agri tourism industry profile, an updated certified/verified pork profile, an updated commodity lamb profile, an updated commodity pork profile, an updated direct marketing lamb profile, an updated direct marketing pork profile, an updated foodservice pork profile, an updated international lamb profile, an updated international pork profile, an updated natural pork profile, an updated niche pork profile, an updated olive industry profile, an updated organic beef industry profile, an updated organic lamb industry profile, an updated organic pork industry profile, an updated pork processing profile, an updated potato industry profile, an updated safflower profile, an updated wind energy industry profile and an updated wool industry profile.

New profiles inclue a camelina industry profile, a cuphea industry profile and a teff industry profile.

To access these new oilseeds profiles, visit http://www.agmrc.org/agmrc/commodity/grainsoilseeds/grain.htm.

Business Development
“Solving Conflict AmongBusiness Associates,” Located in Business Skills. Written by Don Hofstrand 

“When to Do and How to Use a Feasibility Study,” Located in Market/Business Assessment. Written by Don Hofstrand 

“Creating a Mission Statement, Setting Goals,,” Located in Creating a Business. Written by Don Hofstrand

“How to Use Grants,” Located in Raising Money. Written by Don Hofstrand/Jeff Jobe of USDA Rural Development.

To access business development, visit http://www.agmrc.org/agmrc/business/.

Research
The following research article was added: Alpaca Lies? Do Alpacas Represent the Latest Speculative Bubble in Agriculture? Agricultural Issues Center, University of California. January 2006

AgMRC research files can be found at http://www.agmrc.org/agmrc/research/.

Business Profile – Growing Family Fun

As farm operations transition to include younger generations, expanding traditional crops is not always feasible or economical. Agri tourism offers a possible side business for those looking to involve the next generation.

Geisler Farms Inc. is one such operation turning to agri tourism. This is a third-generation family business that manages corn and soybean production 14 miles northeast of downtown Des Moines, Iowa, and located just five minutes from I-35 and I-80. Darrell and Malinda Geisler manage the business. Malinda also works part-time for the Ag Marketing Resource Center.

Their Growing Family Fun was launched in 2005. It featured an eight-acre corn maze, quarter-acre soybean mini maze and quarter-acre pumpkin patch. Groups were offered hayrack rides and complimentary use of one of three firepits. The business was open to the public from Labor Day weekend through October.

“We are a farm family in transition,” said Malinda. “Darrell's daughter and son-in-law, Rachel and Brad Miller, moved back to farm in 2004. They currently are supported by off-farm income. We needed to add a new enterprise to our corn and soybean production. Traditional corn/soybean production is becoming more difficult to be profitable at. We selected agri tourism to get the younger generation more involved with the farm. “

According to Malinda, one goal of the agri tourism activities is to generate revenue to restore an empty 35 x 55-ft. dairy barn. The ground floor, formally a milking area, could be converted to a roadside market. The open span loft in the gothic style barn offers opportunities for school tours and educational visits year-round, or to rent the loft for wedding receptions, family reunions and outings.

“The agri tourism enterprise took a year of planning and preparation,” said Malinda.

Malinda’s knowledge of agri tourism and communications was put to work promoting Growing Family Fun. “We had a limited budget. The agri tourism enterprise was financed using our crop operating note,” said Malinda.

The Geislers turned to family and partnering institutions for additional outreach. “We had five promotional partners in 2005,” said Malinda. “NK Brand Seed provided the seed corn for the corn maze and Lumax herbicide. Our John Deere dealer loaned us a utility tractor and tiller to create the maze trails. Our implement dealer also provided us a Gator in the fall. Our financial institution, Wells Fargo, provided monetary support for our three firepits. KCCI NewsChannel 8 and the Ag Marketing Resource Center granted us permission to include their logos in our corn maze.”

Another advantage was having a graphic designer in the family. Darrell's daughter, Rachel, created the corn maze design. By using family talent and labor, we cut the maze design into the corn and saved thousands of dollars.

Was the effort successful? “We reached our first year goals set for attendance, group bookings and gross sales,” said Malinda. “We even had a net profit. We plan to gradually add new features and expand our marketing.”

For more information, visit www.GrowingFamilyFun.com/.

AgMRC Web Site Highlight – Niche Oilseeds

Camelina
Camelina is an oilseed that is getting attention for its Omega 3 nutritional attributes and as a possible, affordable source for biodiesel. It contains about 34 to 36 percent Omega 3 oil. Camelina is an annual that originated from Northern Europe. A member of the mustard family, it is also known more as a weed with names like false flax, gold of pleasure and leindotter.

Camelina is well suited for marginal soils. According to Montana State University research, camelina has a lower break even cost compared to wheat and canola. The seed can be broadcast or drilled. Montana State University trials indicate seed rates of 2.5 to 3 pounds per acre. The seeds are dense and small at 345,000 to 465,000 seeds per pound. Yields vary depending on soils and rainfall. Based on Montana State research, camelina will average 1,800 to 2,200 pounds per acre under 16 to 18 inch rainfalls. Yields drop with less rainfall and increase when using irrigation. Montana State University suggests including Camelina in a three- or four-year crop rotation. Camelina byproducts are being studied as feed sources for fish, chickens and cattle. In addition to Montana, camelina is grown in Slovenia, Ukraine, China, Finland, Germany and Austria.

Egyptian Wheat
Egyptian Wheat is also called “chicken corn,” and is a productive late-maturing grain sorghum that produces large heads with lots of seed.  Wildlife, especially quail, doves and squirrels like it and deer will occasionally eat the seed heads.  The growth of both wildlife habitat areas, as well as personal hunting grounds offers growth potential for producers to grow this for the value added agriculture marketplace. 

Several characteristics make it ideally suited as a food and cover plant.  Unlike other grain sorghums, Egyptian wheat is not prone to damage by flocks of blackbirds.  Its spindly seed heads prevent blackbirds and other relatively large birds from perching on the upper stems to eat the seeds.   The tall plants provide cover where wildlife can feel safe from predators.  It is also an ideal place to hide young birds.  

It was introduced into the U.S. from India about 1890.  Researchers with the Louisiana Agricultural Experiment Station were among the first to grow and test the plant.  It proved inferior to other grain sorghums as a grain and cattle forge crop, so it was abandoned for this use in favor other sorghums.

The grain is high in protein and the wheat can be freestanding or mixed with other food plot varieties.

Price for the seed can vary because there is not a large supply available.

Teff
Teff is a cereal grain that is native to northern Africa. The seed is tiny when compared to wheat. It takes 150 grains of teff to equal one kernel of wheat. Teff can be cultivated in a wide range of conditions, from marginal soils to drought conditions. Teff grain is used for human food consumption and the forage for livestock. Teff is a good source of protein, amino acids and fiber. Teff is higher in calcium and iron content than rice, wheat, oats or millet.

Teff has been a staple grain to Ethiopia for thousands of years. In the United States, it is grown primarily in Idaho. There is growing interest in teff within the health food sector because the grain is gluten-free, making it an alternative to wheat, rye and barley.

It is used to make the Ethiopian flat bread known as injera. It is also used as an ingredient for porridge, puddings, baked goods such as cookies, crackers and breads, soups, casseroles and as an ingredient for home-brewed alcoholic drinks.

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