Crafting a 21st Century North Dakota Farm

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Crafting a 21st Century North Dakota Farm
Rod Hewlett Dean, College of Business and
Graduate School Minot State University
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Issues

• Rural agriculture production states experiencing
  out-migration, reduced access to capital, and
  lack of infrastructure to tap markets.
• Why?
• 1930s model of agriculture need robust value
  added model.
• Farm structure.
• Transportation, marketing, and financial
  structures are geared toward production.
• Globalization.

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Rural Transformation

• A New Era for Rural Policy, from the Economic
  Review (Fourth Quarter 2003, Federal Reserve Bank
  of Kansas City) we catch a glimpse of the
  political and economic forces buffeting our
  state. The author, Mark Drabenstott is the vice
  president and director for the Center for Study
  of Rural America at the Bank.
• Drabenstott makes the case that the Rural
  Development Act of 1972 was written for a
  different era in rural America and that rapid
  technological change and globalization is taking
  its toll on the strategies envisioned by the Act.
  He states that in 1972 the leading source of
  income in one out of four counties in rural
  America was based on production agriculture
  however, today that number has shifted to one in
  ten.

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Rural Transformation

• Drabenstott also points out that only 6.3
  percent of rural Americans now live on farms and
  most farm families get most of their income off
  the farm. In the 70s, we began to transform
  rural America through the promise of
  manufacturing. The inexpensive and available
  land, labor, and lower taxes in rural settings
  seemed ideally suited for this shift.
• However, structural changes in the U.S. economy
  emphasizing services along with relocations of
  manufacturing facilities to low-cost and low
  regulation India, Mexico, and China ravaged this
  rural manufacturing strategy.
• Drabenstott cites statistics that support this
  claim, In total, nearly 200 rural factories
  closed their doors last year.Factory closing
  represented fully 45 percent of total mass
  layoffs at rural factories, compared with only 25
  percent at metro factories.

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The Trends (Population)
Based on projections from North Dakota State Data
Center at NDSU
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No Change 0-13.1
Less than 0
3x U.S. Rate 39.6
2x U.S. Rate 26.4-39.5
U.S. Rate 13.2-26.3
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Non-metro Farming-Dependent Counties, 1989
Farming Counties
Other Non-Metro Counties
Metro Counties
Counties with 20 percent or more labor and
proprietors income from farming, 1987-89
annualized average
Source Bureau of Economic Analysis
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United States County Size Distribution, 1998
10,000 or more (Green)
0 to 5,000 (Red)
5000 to 10,000 (Light Green)
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Gain 5 or more (Green)
Net Domestic Migration Rates Per 100 Persons in
the United States by County 1990 to 1999
Gain 0-4.9 (Aqua)
Loss 0-4.9 (L. Purple)
Loss greater than 5 (D. Purple)
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Why Target Industries?

• Identifies industrial opportunities that can be
  achieved as well as leveraged.
• Focuses scarce resources.
• Sends a strong signal to companies and
  organizations within the identified industries
  and site selection organizations of regional
  support.
• Not limiting.
• Agriculture needs supporting industries.

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Methods

• Many potential methods exist, however, we began
  with an applied bottoms-up or deductive
  approach and validated the results through a
  top-down or inductive approach.
• Analyzed industries currently in North Dakota
  that have above mean wages using data from the
  most recent (2002) County Business Patterns US
  Census Bureau, US Dept. of Commerce.
• Compared data against representative border and
  regional states.
• Researched what is happening in other areas, both
  domestically and internationally, within these
  industries that can be transplanted in this
  region method, industries, and knock-on
  opportunities.

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Methods

• Target industries that meet the base criteria
• Achievability.
• Leveragability.
• Above average wage structure resident in North
  Dakota- increase mean and median wages.
• Enhances quality-of-life or as a minimum does not
  damage quality-of-life.
• Future oriented life expectancy of industry is
  growth oriented and expected to exceed a twenty
  five-year horizon.
• Taps current human capital and provides a high
  potential to attract human capital to the region
  encourage net in-migration.
• Creates the potential for industrial clustering
  in the region.

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Change Our Business Model

• North Dakota clusters
• Customer resource management data mgmt,
  knowledge mgmt, technical services, research
  beyond call centers.
• Energy.
• Natural resources and mining.
• Value-added agriculture, specialty crops,
  bio-technology.
• Transportation and distribution..
• Federal services and goods procurement.
• Specialty manufacturing, i.e., health equipment,
  etc.
• Recreation and tourism including agri-tourism.

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On The Production Front

• First in nation ( of total)
• Spring wheat (47)
• Durum wheat (60)
• Oats (15)
• Barley (43)
• Flaxseed (95)
• Navy beans (46)
• Pinto beans (56)
• Dry edible peas (53)
• Oil sunflowers (59)
• Non-oil sunflowers (48)
• Canola (90)

• Second
• Lentils (26)
• Honey (16)
• Third
• Rye (8)
• Sugar beets (17)
• Fourth
• Potatoes (6)

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Value Added Markets

• North Dakotas farmers and rural citizens will
  benefit if we structure our food and beverage
  production to meet the needs of emerging consumer
  tastes as well as alternate uses of agricultural
  products
• Pharmaceuticals.
• Nutriceuticals we are selenium rich and it
  differentiates our products! ND is healthy food.
• Organics.
• Alternate forms of energy production bio diesel
  and ethanol, and bio-polymer products.
• Processed food product from field to the table.

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Crafting a high return future with what we
already know and understand - agriculture

• Focus our institutions in the state, engage our
  political leaders, and structure our laws and
  regulations to support North Dakotas rural
  areas.
• We need low-cost and dependable transportation of
  product in and out of the state - multimodal.
• We need research that supports and focuses on
  agricultural markets and product development
  USDA Nutrition Lab and NDSU Extension with
  support from UND, MSU, DSU.
• Most importantly, we need to set farmers free to
  structure their businesses in a fashion that
  attracts capital and limits liability.
• Farmers need access to high-end markets for
  their products with informed conduits between
  food retailers and producers so farmers can plan
  and make crop planting decisions.
• We need to be in the food and beverage processing
  business on a global scale.

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The old model
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The new model
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Summary

• Hold onto what works.
• Transform to an integrated agriculture state.
• Public-private partnerships to develop the
  infrastructure, i.e., transportation, water,
  other factors of production.
• Craft high return strategies to allow farms the
  capacity to transform with 21st century
  realities.
• Engage the future with entrepreneurial market
  driven agriculture companies.