Pia Orrenius

Pia Orrenius

Sensible, strategic immigration policy better aligned with America’s changing demographics and employment needs could help revive stalled economic growth and spur more development of value-added processing in rural areas.

That was one of the key takeaways from this year’s Rural Economic Outlook Conference, hosted annually by the agricultural economics department at Oklahoma State University.

Featured speakers included Pia Orrenius, an expert on labor policy and a senior economist with the Federal Reserve Bank of Dallas who previously served as an economic adviser during the Bush administration.

Immigrant labor is obviously critical to rural communities and ag-related businesses, but Orrenius took a step back and offered a much broader view of America’s changing demographics to show why it is vital to the economy as a whole.

Workforce growth and labor productivity have both lagged in the wake of the Great Recession, she said, with workforce participation rates of both men and women hitting a plateau and large numbers of aging Americans starting to retire.

“The retirement of the ‘baby boomers’ (those born in the post World War II era from 1946 to 1964) will be devastating to the labor force,” she said.

The workers that remain tend to be more highly skilled than in the past. “The percentage of domestic workers with higher degrees is growing, and the educational attainment among Americans is rising,” she pointed out.

At the same time, much of the fastest job growth is occurring in low skilled areas, such as personal care and food preparation and service.

Historically, temporary worker programs have been used to bring in highly skilled workers from outside the country, but Orrenius questioned whether that was the best policy for the future. Instead of seeking to attract highly skilled workers for positions in areas like medical research, computer software development and engineering, those same programs could be shifted toward providing more workers for industries like construction and agriculture, she said.

Labor availability is crucial for developing more food processing, one of three broad categories that offer rural communities the best opportunity for economic growth, according to Sarah Low, another speaker at the conference. She serves as director of economic and entrepreneurial development at the University of Missouri.

Low emphasized the importance of moving from producing low-value bulk commodities, such as sugar, to making unique and distinctive products, such as wine.

“Economists like me see that there are other countries that are better at producing low value commodities. We need to be adding value to what we do,” she said in an interview following her formal presentation.

That’s especially true in light of heightened demand for locally crafted products, goods and services, she said.

“Developing more food manufacturing is the next phase of the local food movement,” she said.

That includes not just cottage foods like pickles and jams, but mid-sized 50-employee plants making bread or pasta, breweries and distilleries, businesses that can make a sizeable impact on local revenue and employment, she said.

Agritourism is another area that continues to expand, she added.

“The growth is in experience-based kinds of things. That’s where the higher dollars are,” she said.

She also talked about the potential for “promoting a culture of entrepreneurship” in rural communities.

One of her main goals in a room filled with rural bankers was to challenge them to be creative and think outside the box, extending their role beyond deciding whether or not to approve a loan to actively connecting would-be entrepreneurs with existing resources or expertise or additional sources of capital to help make their business concept viable, she said.

Her most important point was that every rural community is different, and it’s up to local leaders to collaborate and collectively determine how to capitalize on competitive strengths and assets.

For example, if lots of residents commute to jobs outside the community, businesses could adjust their hours to stay open later in the evenings or longer on weekends, she said.

“There’s no one-size-fits-all economic development solution,” she said. “The incremental stuff can really contribute to having vibrant rural economies.”

Incremental steps have also been essential to farmers’ ability to weather an extended period of low commodity prices, according to Rod Jones, an OSU economist specializing in agricultural finance.

“I’ve been telling producers, just find a way to cut $20 an acre off of your production costs, and that strategy seems to have worked for a lot of people,” he said as part of OSU’s expert outlook panel. “It might be as simple as shopping around more aggressively on inputs. There seems to be more opportunity to do that now.”

Federal support is also playing a role in keeping farmers afloat. OSU ag and food policy specialist Amy Hagerman gave an overview of current farm programs, including the latest round of trade relief. Farmers have until December 9 to sign-up for market facilitation payments, which are intended to make up for price disruptions caused by the ongoing U.S.-China trade dispute.

The payment rate varies by county, from a minimum of $15 an acre to as high as $115 an acre in some parts of Oklahoma, Hagerman said.

“It was designed a little bit differently this year,” she said of the program. “The large diversity in payments per county has created some confusion around the state.”

Last year the program paid out at a national rate per commodity based on each individual’s harvested production. This year commodities were combined to form a single county rate based on overall planted acreage. In both cases, payments are designed to favor crops like soybeans and hogs hit hardest by the ongoing trade war.

While Oklahoma has not benefitted as much from the trade aid as some states, Hagerman said more federal help is also arriving in the form of disaster assistance through USDA’s Wildfire and Hurricanes Indemnity Program Plus, much of which will go to farmers in northeastern Oklahoma hit by massive flooding this spring.

Oklahoma is also in line to get some federal funding to launch a pilot program to address feral swine control in Kay County and in a multi-county area along the Red River, she said.

In highlighting the rare bright spots that exist in the current agricultural outlook, she and other economists noted the toll African swine fever has taken on the hog population in parts of Asia and Eastern Europe, which could fuel increased demand within the livestock sector.

Jones also noted that despite the ongoing downturn in commodity prices land values have held steady.

“We’ve had six years of economic stress, and our primary asset value remains very stable, so that’s a big positive,” he said.

Combined with input cost reductions and a reversal in interest rates — as well as a favorable outlook for wheat stocker grazing this winter, which was covered by OSU livestock specialist Derrell Peel — farmers could be on the verge of seeing some improvement in their economic situation, Jones said.

“Demand for loans is stabilizing or even declining in some areas,” he said. “I see some signs that things might get a little bit better going forward.”

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