Impacts of the farm crisis on the rural economy

Abstract

This study addresses the issue of the current farm economic crisis and its impacts on the rural economy. Input-output model analysis of secondary data at the state and county levels is combined with a one- shot case study of one rural Missouri county's agribusiness firms. The farm crisis has affected rural Missouri communities since 1981. Input-output analysis suggests that the farm crisis was one of the reasons for a relatively stagnant growth rate from 1981 to 1984, both at the state and the county levels. Personal income analysis shows the relative importance of agriculture in the generation of the state's personal income. While agriculture dropped from tenth to thirteenth place from 1981 to 1984 in the state ranking, it is still one of the top two sources of personal income in all of the rural counties studied, second only to households and their federal transfer payments. The case study revealed that almost all agribusiness firms had been affected, with most firms taking large bankruptcy losses, up to $250,000 since 1977. Income from farm sources is down significantly, and several business firms in the county closed during the period studied, from 1977 to 1985, citing the farm economy as a major reason. The most common complaints concerning the effects of the farm crisis on business firms included a decrease in sales and income, having to cut back on the number of employees, increased farm delinquency rates, a large number of bankruptcy losses, and an inability to offer services to their customers. Over half of those interviewed were pessimistic in the short run, but optimistic in the long run. The businesses that had managed to weather the crisis tended to be more conservative and to depend less on the farm economy. Both the primary and secondary analysis indicate that a decreased farm income has hurt agribusiness firms, the rural communities, rural counties, and the state economy. If the current economic situation continues, it seems likely, that more rural business firms will be forced to close their doors.