Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Tuesday 01/08/13

Vilsack Sparks a Conversation About Rural America
Throughout his tenure Agriculture Secretary Tom Vilsack has talked about the opportunities in rural America, especially in industries such renewable energy and the bioeconomy. Still, he had to add the element of questioning rural America's political relevance to actually spark a national conversation over the past month.[Read Full Blog Post]
Posted at 8:44PM CST 01/08/13 by Chris Clayton | Post a Comment
Comments (25)
Chris: Quite frankly, I never understood Secretary Vilsack's comments. I can't speak for the entire country, but here in western Ohio where I live, rural Ohio and its agricultural economy have never been more relevant. The agricultural economy here is absolutely booming and it is attracting lots of young people back into the business, as it is currently one of the most profitable places for a young person to be. Opportunities here in agriculture abound, including all of the services that support agriculture, such as equipment sales, banking, insurance, and food processing. Frankly, times have never been better in rural Ohio. In the eastern part of Ohio, not really known for extensive grain production, fracking for oil and gas is creating better times than the area has experienced in a hundred years! Young people are recognizing opportunities all across rural Ohio, and the population and economic numbers are showing it. Secretary Vilsack may have just been making a case for the Farm Bill, but as I have said before on this site: The free market is treating far better than any Farm Bill could ever do. I tend to think that Secretary Vilsack needs to get out of DC and go to where the real action is - agricultural America!
Posted by tom vogel at 9:24AM CST 01/09/13
Tom, You need to broaden your horizon! If I peer with near sightedness, I see the same vision as you in our area. If one would scan downtown Toledo or Cleveland the perspective would be totally different. How one would accomplish the vision of the Secretary is beyond me. What I do know is places like California and New York City, there is a huge misconception of reality by the masses which I think the Secretary is referencing. Minnesotas' Legislature, for example, has consolidated, the Environment and Agriculture Finance Committees, with a Representative from Minneapolis as the Committee Chair. I believe the best environmentalists' are those who work everyday with the land. It appears the masses think a Representative from a district without a free flowing creek should be in charge of both cows and fish.
Posted by Bonnie Dukowitz at 10:11AM CST 01/09/13
There are exceptions, but the decline since my childhood (1960s) of many rural Iowa towns is sad and breathtaking. There are hundreds of these towns across the Midwest that are not coming back, period. The fact is that many of the "rural" states have become extremely urbanized, for example, North Dakota, Minnesota, Iowa, etc., with a high percentage of the population residing in the state's largest cities. This has political consequences, and this clearly is the observation that Vilsack is making. Ironically, it's the other political party that should be most concerned. Yes, some people are still making good livings in the countryside, but there is no denying the basic demographic facts. It seems to me that this small town decline will continue unabated, except in pockets where some other economic factor like fracking intervenes.
Posted by chris jones at 11:35AM CST 01/09/13
Federal Crop Insurance is one of the most destructive forces ever unleased against smaller family farmers by Congress as it creates extremely narrow margins of profitability. When farmers receive an investment guarantee from congress this enables aggressive farmers to forego budgeting for marketing and production risks and allows these farmers to bid land rent prices to very small levels of profitability. This is workable and beneficial for large farms, and has proven to be fatal for most small farmers. This transfer of risk assumption from farmers to the federal government resulting in smaller per acre profitability margins is a major cause of the depopulation of rural America. The extreme difference in the fair market value of the federal crop insurance security blankets as well as the subsidy given per policy between large and small farmers is just another example of congress financially discriminating and creating an unlevel and unfair playing field between farmers of different sizes. How is a small or beginning farmer supposed to compete with an established farmer with a highly subsidized multimillion dollar revenue assurance policy? These policies not only guarantee a farmers multimillion dollar investment, but routinely obsurdly even guarantee a per acre profit for the largest farmers. Even John Deere is marketing these no lose federal crop insurance policies to their mega farmer customers. Congress has given the largest farmers bullet proof investment insurance that does not allow the small a chance to compete in the business.
Posted by Lon Truly at 5:56PM CST 01/09/13
Lon, Don't know where or why you feel the way you do. In my opinion you totally wrong and misinformed. Could you please document something rather than ramble. If you have a better option, please present it. I nominate you for President of the National Whiners Club. It has been a few years back, our crops on most acres were wiped out with drought. Before and after we have been paying premium. Had we not had a policy, we would not be on our small farm today. This is just like any other insurance policy, you hope you do not need to use it. Government is no more involved in crop insurance than hurricane insurance. Everone with crop insurance has the option not to.
Posted by Bonnie Dukowitz at 6:40AM CST 01/10/13
I agree with much of your analysis Lon. However, one needs to take a deeper look. Insurance subsidies are not paid to farmers of any size. The insurance companies which are mostly owned by the banking industry are the entity being guaranteed a profit. The worlds money does not differ large or small, nor does the money care, as long as profit, control and power is the result. As long as food producers are fighting among themselves, those in control can sit on their throne and watch the game. Posted by Bonnie Dukowitz at 7:03AM CST 12/19/12
Posted by Lon Truly at 7:36AM CST 01/10/13
And in the interm, Lon, we need work with and what is available and/or provide alternatives and solutions. If only an operator would have an option to purchase viable insurance policies. Maybe you could get AIG or Lloyds of London to design something. Do you have a better solution with-in a totally free enterprize system. I hope you do.
Posted by Bonnie Dukowitz at 8:39AM CST 01/10/13
Government is involved in crop insurance. It is a benefit for agriculture legislated by Congress. Premiums are heavily subsidized and payouts are government guaranteed despite who the insurance writer is. As usual, rural America is subsidized by the urban taxpayers the rural types constantly choose to denigrate. As a general rule, so called red states receive more in federal tax dollars than they pay in. Ag entitlements account for much of this. Rural populations might be best served by acknowledging the contributions of the majority of the US populace to their life style. Then, maybe their influence in the US political arena would appreciate.
Posted by Don Thompson at 9:13AM CST 01/10/13
Lon, I think you are exactly right and you did a good job putting it into words. Though it seems to me that perhaps it isn't Fed crop insurance that is damaging, but rather the high level of subsidy for that insurance. I know there are a lot of folks out there much smarter than myself but maybe a subsidy that declined as total acres insured by an entity increase might help keep more farm operators in our communities. Anybody else have any ideas? Vice Pres. of Whiners Club Ray Nitram
Posted by Martin seeds at 10:28AM CST 01/10/13
Don, You must be counting food stamps as an ag subsidy. One must remember , the intent of the Food Security Act is to provide nourishment, not welfare for farmers. 80% of USDA budget is for subsidizing food programs and only 20% for food safety-administration-overhead and yes, some welfare for farmers. I wonder how much the food stamp program would increase if the government were not keeping prices low.(except lately in commodities.)
Posted by Bonnie Dukowitz at 6:25PM CST 01/10/13
If we want fewer and larger farms we need to double down on government crony capitalistic schemes that target greater benefits to larger farmers. Obviously rather than annual multimillion dollar benefits we need annual multibillion dollar benefits to the select few. On the other hand if we want more farmers working the land we need to dehorn,castrate, and slaughter government program schemes that target greater income and investment benefits to a select few. Perhaps we should be running in the direction of our founding fathers that designed a government that provided for very limited interference in citizens' lifes and their businesses.
Posted by Lon Truly at 7:24AM CST 01/11/13
Bonnie, I did not conduct the study I referenced. Most ag states show farm subsidies as a major component of inbound US tax dollars. Certainly the rural communities have large participation in the food stamp program. More than half of our students in the local school qualify for assistance. No job creation here. State government officials think the answer is to starve the government and" right to work" legislation to ensure wages can compete with third world labor. Grain prices will eventually tank because farmers will eventually over produce. Our rural areas are in a decline with no remedy in sight.
Posted by Don Thompson at 8:08AM CST 01/11/13
I just want to say thank you guys for all the comments. I think they are all incredibly instructive about where we are in rural America on a variety of issues, whether you agree or disagree with the secretary's perspective.
Posted by Chris Clayton at 11:16AM CST 01/11/13
Bonnie - If you still are having trouble seeing how federal crop insurance is wiping out small farmers check out Mike Stamp Bankruptcy in SW Michigan. It definitely is a sordid relationship between politicians and bankers making farm operating loans.
Posted by Lon Truly at 12:06PM CST 01/13/13
Have followed the Stamp issue for quite some time. Crop Ins. was just a small pimple on an elephants ass in that situation, not the entire rear end.
Posted by Bonnie Dukowitz at 6:16AM CST 01/14/13
Wake up Bonnie - There would be no rear end to deal with if federal crop insurance had not been involved. Maybe your banker makes 20-30 million dollar operating loans without government guarantees when government guarantees are available, but yours is the only one.
Posted by Lon Truly at 6:41AM CST 01/14/13
I am awake enough to acknowledge there are government guarantees in just about every financial transaction we do. Don't stand behind the above mentioned and open your eyes to the whole picture. Situations such as Stamp have occured for a couple of hundred years in this country. I reluctantly purchase liability, fire, storm, auto, life, disability insurance, some of which are as a condition of terms.
Posted by Bonnie Dukowitz at 7:21AM CST 01/14/13
You are absolutely wrong Bonnie- It has only been very few years lately when banks have been making 20-30 million dollar operating loans that the government has almost nearly totally guaranteed with federal crop insurance. Previously to that the government only guaranteed a small portion of operating loans with federal crop insurance and that was only for a few years. Previous to that federal crop insurance did not exist and banks made operating loans based on the three c's of credit ( individual's character, collateral, and capacity). The sordid relationship between bankers and government crop insurance has encouraged the great increase in petal to the metal lending for juggernaut farmers such as Mike Stamp and is a major factor in the depopulation of rural America.
Posted by Lon Truly at 7:44AM CST 01/15/13
You are absolutely wrong Bonnie- It has only been very few years lately when banks have been making 20-30 million dollar operating loans that the government has almost nearly totally guaranteed with federal crop insurance. Previously to that the government only guaranteed a small portion of operating loans with federal crop insurance and that was only for a few years. Previous to that federal crop insurance did not exist and banks made operating loans based on the three c's of credit ( individual's character, collateral, and capacity). The sordid relationship between bankers and government crop insurance has encouraged the great increase in petal to the metal lending for juggernaut farmers such as Mike Stamp and is a major factor in the depopulation of rural America.
Posted by Lon Truly at 7:44AM CST 01/15/13
I"ve read in the early 80's that 80% of farm with-in the state of Iowa was in some level od default. Around here farms fell like hailstones. This was long before the crop ins. we have available today. Read the abstracts of property. History is the best predictor of the future. Read all of it, not just what one needs to support their own argument.
Posted by Bonnie Dukowitz at 8:30AM CST 01/15/13
Success and failures are normal phenomena that occur regularly in most small businesses. Government is not spending billions guaranteeing the success of most small businesses with income guaranteeing schemes. You will have to read all the abstracts of real property and of all history as I have work to do.
Posted by Lon Truly at 9:52AM CST 01/15/13
Get your vision and hearing checked Lon. Take a look outside your periscope and you will see, 0% financing, tax-increment financing, renewable energy gifting, developement grants to select private industry, select urban developement grants. Do I need continue? I believe if one pays a premium or part of a premium, the merits are greater than the gifts which appear to be freebees.
Posted by Bonnie Dukowitz at 4:46PM CST 01/15/13
Sorry Bonnie - None of the government grants and financing you pointed out have anything to do with government schemes that guarantee annual profitability to a business. It sounds like you think that government has a responsibility to grant all farm businesses annual guarantees of profitability in exchange for a premium or partial premium. What is unknown is if you also think government has a similar responsibility to guarantee all businesses annual profitability in exchange for an insurance premium. Please don't tell me how conservative you think you are.
Posted by Lon Truly at 6:29PM CST 01/15/13
Sad you do not think 0%int., 0% input cost for infrastructure, 0% property tax for 10 years, 0% health care cost for most employees etc. is not a scheme, as you describe it. And what has happened to Ma and Pa hardware stores next to these giants?
Posted by Bonnie Dukowitz at 5:38AM CST 01/16/13
Bonnie - I never said government grants and financing were not government schemes. Please reread my previous statement. With trillions in deficit spending and trillions in government debt almost all honest thinking people understand that there are nearly innumerable ways the government is flushing the tax payers earnings down government rat holes.
Posted by Lon Truly at 6:52AM CST 01/16/13
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