FED TARGETS RURAL AND AGRICULTURAL ECONOMY

Earlier this month, officials of the Federal Reserve launched a new center to study rural and agricultural needs, saying the new center can play a key role where more than a quarter of Americans -- and more than half of U.S. banks -- are. The fed's new center will be based in Kansas City, and it represents a consolidation of existing rural research and policy projects, said Tom Hoenig, president of the Federal Reserve Bank of Kansas City.

Hoenig said the new venture is aimed at having an impact on policy that goes beyond the agricultural economy. It will be headed by agricultural economist and Kansas City Fed vice president Mark Drabenstrott.

"Rural America is a striking combination of the best and worst of times," said Drabenstrott. "While some parts of rural America have fully participated in the long-running expansion, others have simply been left behind."

Four out of every 10 rural counties, especially ones near metropolitan suburbs, have captured most of the growth, Drabenstrott said. The rest are struggling under the two-year downturn in commodity prices that has mired the farm economy in a sharp slump. Yet this year's cash farm income is projected at nearly $54 billion, only a slight drop from last year because of more than $16 billion in government payments that will swell by nearly $9 billion more under emergency aid legislation signed by President Clinton last week.

According to Drabenstrott, the depression in farm income isn't nearly as severe as the crisis of the mid-1980s. Moreover, he says, land values are defying commodity markets by holding steady throughout farm country.

The center will have an annual budget of $1.5 million and will plan conferences and issue publications on the rural economy, including a newsletter called "The Main Street Economist" to 8,000 rural leaders. The first edition details how a new "supply chain revolution" is changing traditional agriculture, leaving fewer farmers growing more of the production of a single commodity.

An example is the booming corporate hog farming industry. Farmers, rather than making independent production decisions and selling crops at market, sign contracts with major food companies to deliver commodities on a schedule. In 1997, nearly 60 percent of all the hogs in America were sold under some form of contract, compares with only 5 percent in 1980.

It is good to see the Fed take the lead in beefing up its resources to study the economics of rural America. More information, and more information-sharing, can only be to the good in the fight for rural and small-town America.