The U.S. is losing share in soy markets

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New Horizons for a New Rural Economy
Mark Drabenstott Center for the Study of Rural
America www.kc.frb.org
Center for the Study of Rural America, FRBKC
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New Horizons for a New Rural Economy

• The quest for a New Rural Economy
• The new rural opportunities
• The new policy challenges

Center for the Study of Rural America, FRBKC
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The Quest for a New Rural Economy

• Globalization is pressuring old rural sectors
• Leaving the rural economy highly uneven.
• Many regions search for new economic engines
• Yet rural areas lag in high growth businesses.

Center for the Study of Rural America, FRBKC
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Rural factory jobs hurt by shutdowns
Percent of mass layoffs due to factory closures
Source Calculation based on Bureau of Labor
Statistics data
Center for the Study of Rural America, FRBKC
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Rural recruitment strategy now colliding with
the new economic geography.
Sunday, May 11, 2003
Maytag Delivers Expensive Lesson
Center for the Study of Rural America, FRBKC
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The U.S. is losing share in soy markets
Percent
Percent
United States
Brazil and Argentina
Source USDA
Center for the Study of Rural America, FRBKC
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Many rural regions search for a new economy
Low Growth
High Growth
Metro
Source BEA
Center for the Study of Rural America, FRBKC
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Yet rural areas lag in high-growth business
starts
High-Growth Company Index (1991-1997)
Index
Source National Commission on Entrepreneurship,
2002
Center for the Study of Rural America, FRBKC
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New Rural Opportunities
Old engines will not disappear But must be
supplemented by the new. Or current trends
will continue.
Center for the Study of Rural America, FRBKC
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The New Challenge in a Global Economy
Regions must constantly invest in new sources of
competitive advantage Instead of protecting
the old.
Center for the Study of Rural America, FRBKC
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Rural America has exciting new business horizons

• Product agriculture
• Tourism/agri-tourism
• Advanced manufacturing

Center for the Study of Rural America, FRBKC
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Product Agriculture Horizons

• From new-use commodities
• Ethanol
• Bio-plastics (Blair, NE)
• To new high-value products
• Farmaceuticals

Center for the Study of Rural America, FRBKC
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Growing Farmaceuticals

• Big potential for reducing health care spending
• The highest value farm products ever
• High-skill, high-wage jobs
• All built on the power of life science,
  information technology, and advanced manufacturing

Center for the Study of Rural America, FRBKC
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Farm-to-grocer foods

• Affluent consumers want quality, nutrition,
  taste, and choice.
• Farmers within striking distance of cities can
  deliver that.

Center for the Study of Rural America, FRBKC
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Waitrose - Giving consumers choice And farmers
new markets.

• Rapid growth in past 10 years.
• A business strategy built on choice.
• Offer more than 1,500 organic foods
• From farm-fresh organic leg of lamb
• To deep-strawed eggs.

Center for the Study of Rural America, FRBKC
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Creating regional brands The European model.
France Institut des Appelations dOrigine
Appellation Controlee Champagne Bor
deaux Roquefort
Center for the Study of Rural America, FRBKC
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New rural scenic strategies

• Scenic strategy
• Mountain vistas and open skies in the
• Rockies
• Nature strategy
• Pheasant hunting in South Dakota
• Cultural strategy
• Foods, fields, and art in Tuscany

Center for the Study of Rural America, FRBKC
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Advanced Manufacturing

• The ability to use new technologies
• And build clusters of firms
• That can compete globally.

Center for the Study of Rural America, FRBKC
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Advanced manufacturing NCs Hosiery Industry

• Makes 60 of the nations socks
• Employees 35,000 workers
• Many small firms most have fewer than 75
  workers
• And the industry is almost entirely rural NCs
  Catawba Valley

Center for the Study of Rural America, FRBKC
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Partnering to Compete

• In the 1980s, industry feared foreign
  competition
• So, firms partnered to create Hosiery Technology
  Center in 1989
• Located at Catawba Valley Community College

Center for the Study of Rural America, FRBKC
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The Common Thread of the New Frontier

• In the past, independence.
• In the future, interdependence.

Center for the Study of Rural America, FRBKC
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The New Policy Challenges

• Acknowledging the new rural reality
• Agricultural policy alone can no longer be rural
  policy.
• We should not pour old policy into new
  wineskins.
• What else to do?

Center for the Study of Rural America, FRBKC
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The New Policy Challenges
2. Agreeing on the new goal Helping rural
regions build new competitive advantage in a
global marketplace.
Center for the Study of Rural America, FRBKC
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Rural Policy implications

• Agglomeration matters
• so think regionally and pursue clusters.
• Governance matters...
• so innovate policy institutions.
• Knowledge matters
• so leverage education system.
• Entrepreneurs matter
• so shift form recruitment to business
  innovation.

Center for the Study of Rural America, FRBKC
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A Shift in Thinking

• From subsidies
• To growing entrepreneurs.
• From one-size-fits-all
• To leveraging regional opportunities.

Center for the Study of Rural America, FRBKC
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Building blocks for New Rural PolicyEntrepreneurs
hip

• Shifting policy from
• 1. Recruitment to business starts.
• 2. Subsidy to business innovation.

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Making rural America more entrepreneurial

• Helping communities and businesses
• think regionally.
• Delivering better business assistance.
• Making more equity capital available.

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Building blocks for New Rural PolicyEducation

• Training a knowledge-based work force
• Higher-ed institutions as a regional catalyst

Center for the Study of Rural America, FRBKC
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Building blocks for New Rural PolicyTechnology
and Infrastructure

• Broadband access
• Product ag technologies
• Regional business networks
• E-ship resource centers

Center for the Study of Rural America, FRBKC
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Summary Lessons

• Globalization changes everything
• Going beyond commodities is key.

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Summary Lessons

• Subsidies protect the old economy
• And discourage innovation to the new.

Center for the Study of Rural America, FRBKC
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Summary Lessons

• Critical mass matters
• So think regionally.

Center for the Study of Rural America, FRBKC
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Summary Lessons

• The New Rural Economy is an exciting frontier
• But new policies are needed to claim it.

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