‘This will be a wallop’: Rural areas brace for hard economic hit

Rural communities are bracing for a looming recession caused by the coronavirus pandemic, expecting that it could devastate already shaky economies. As the virus shuts down schools, factories, restaurants and other businesses, rural towns contend with a smaller tax base, less access to high-speed internet and growing strain among lenders. Both farming and manufacturing have been hurt in recent years under President Donald Trump’s trade wars, which in turn took tolls on community banks concentrated in the Midwest. Stimulus policies since the last recession have been less effective in rural areas, where key industries like agriculture, mining and manufacturing have struggled for years even as other corners of the U.S. economy boomed. An aging and shrinking rural population, plus immigration controls, have left rural areas with a smaller labor pool, while new businesses have disproportionately cropped up in bigger cities. Jessie Hobbs, a row crop farmer in Alabama, was worried about the economic fallout long before the national emergency was declared. Now, corn futures have fallen from about $4 at the start of 2020 to below $3.50 this week, and other commodity prices are down off over worries about a drop in demand. “It’s affecting me emotionally, physically and somewhat financially,” said Hobbs, who washes his hands with diesel fuel, which he believes is more effective at sanitizing against germs. “We don’t know much about what’s down the road and what it might bring.” Lenders are worried about huge numbers of auction barns and processing plants closing down, leaving farmers with dwindling places to sell their products. Every hit to agriculture ripples throughout the broader rural economy. “It’s not only the farmers — it’s the Main Street businesses that they’re doing business with, the people that are employed by the processing and distribution chain,” said Mark Scanlan, senior vice president of agriculture and rural policy at the Independent Community Bankers of America, whose members are some 5,000 lenders. “This will be a wallop. This could set things back." A recent U.S. Department of Agriculture study comparing urban and rural areas from 2010 to 2018 found that the most isolated rural counties saw the steepest population loss and have the highest poverty rates. Labor force participation was slower to recover after the Great Recession in rural counties, while the income gap between metro and nonmetro areas has only widened over the last decade. As painful as the last economic downturn was for rural regions, the current crisis poses its own problems that could be more devastating. “This is going to be a whole new game,” said Ian LeMay, president of the California Fresh Fruit Association, which represents grape, blueberry and tree fruit growers and shippers. “There are probably lessons we have learned from ’08, but I think the dynamics around what we’re seeing are much different and potentially could be longer-lasting.”...MORE