A Town and Two Companies

The federal government has poured money into Leflore County, Mississippi, most of it to support cotton. But if you look in Greenwood, you'll find a different future for this Delta community.

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President Obama’s initial attempt to end agriculture commodity payments to farm operations with over $500,000 in annual income has been rejected by key members of Congress. (The most common assessment of the President’s plan in Congress was, “Dead on arrival.”) The focus and fuss about high income farms and crop subsidies, however, ignores the U.S. Department of Agriculture’s more important mission — bringing self-sustaining prosperity to rural America.

Rural development is a challenge, one that becomes clearer with a visit to Greenwood, Mississippi. Two enterprises there are nearly next-door neighbors. To see how they are coping with the dismal national economy is a lesson in the problems and the hopes of rural America.

The two businesses are the Viking Range Company, a high-end kitchen equipment manufacturer, and Staplcotn, the world’s largest and oldest cotton cooperative.  These two firms are the new and old South cheek by jowl — a stark contrast between entrepreneurship and an agricultural subsidy system that underwrites white privilege in a region that is predominantly poor and black.

It is also a contrast between a business that creates good jobs and a prosperous economy and one that does not. 

The old economy of Greenwood is cotton.

Leflore County, where Greenwood is located, is majority African-American and has a 2007 poverty rate estimated by the Census Bureau at over 40 percent. The Census Bureau’s Consolidated Federal Funds Reports tells us that USDA nutrition programs (food stamps, school lunch) pumped $46 million into the county from 2005 to 2007, making for a per capita rate of food subsidy in LaFlore significantly higher than the national average.  In a region with some of the world’s richest farmland, there is a significant population of people too poor to feed themselves. This is typical of counties in the Deep South – including those where high agricultural commodity subsidies are concentrated. 

But for the town of Greenwood and Leflore County, a new South is rising. Inside the small downtown of Greenwood you can see restored old buildings, foot traffic on the sidewalks, and energy. The reason? In large part it’s because of the Viking Range Corporation, a locally-owned business that now has three plants in the area employing more than 1,000 people. A renovated hotel, The Aluvian, is perhaps the finest in Mississippi, and hosts travelers from all over the world who come to take cooking classes at Viking.  

Viking succeeded because its founder anticipated market demand and built high value products that commanded a premium price. Along the way the company has likely benefited from a welter of state and federal incentives and investments – work-force training, water and highway improvements and tax breaks. But there’s a lot to show for that investment.

This is the new Delta, an increasingly diversified economy that contributes to widespread economic opportunity and security. But the old Delta remains. 

Staplcotn does well — thanks to commodity subsidies.

A short walk from Viking is Staplcotn, the headquarters of a cooperative of cotton growers. The large, multi-state cooperative isn’t like the Southern States seed and feed operations we think of when we hear about farm cooperatives. It has extensive, sophisticated marketing and financing for its 4,000 plus members. The Staplcotn headquarters has a plush, modernist touch that would fit in on Manhattan’s Park Avenue.  But don’t let the modernist touch of the restored structure fool you. Staplcotns’ wealth isn’t the product of  newfangled entrepreneurship. A significant source of its opulence is direct USDA commodity payments to its members. The Environmental Working Group, which has a prodigious database of USDA farm commodity payments data, shows that over a six year period, the 4,000 Staplcotn members received $1.5 billion in commodity payments. In other words, U.S. taxpayers subsidize the production costs that the market alone will not bear 

More locally, from 2005 to 2007, the USDA subsidized commodity crop producers in Leflore County to the tune of $48.8 million, according to the Environmental Working Group’s most detailed compilation of publicly available data. These payments dwarf the $1.2 million spent by the USDA Rural Development program in Leflore County over the same three years.  Other federal small business and community development grants added another $1 million. These totals probably miss some workforce training investments in the county. Still, the margin between the amount spent on commodity subsidies in Leflore County and the amount spent on rural development is enormous. 

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The Leflore County courthouse was built in 1906. [/imgcontainer] For all the money spent on agricultural subsidies, they create little regional economic vitality. Agriculture employs few people, is largely seasonal, and pays lower wages than manufacturing. In another Delta state, Arkansas, an analysis of rice-growing counties as part of the broader USDA analysis I did two years ago indicates that despite massive agriculture subsidies, nonfarm employment declined significantly in the first half of the decade. This finding echoes more substantial analysis done by the Kansas City Federal Reserve of agriculture transfer payment counties in the mid-west. 

The economic downturn has hit both cotton growers and manufacturers such as Viking Range Corporation. Viking has laid off 213 workers in the past year. Staplcotn has cut back on warehouse operations, and market conditions have led cotton farmers to plant far fewer acres.

But there is a catch – for cotton growers, there are still subsidies. In the Spring 2009 issue of StapleReview, the quarterly publication of the cooperative, President and CEO Woods Eastland advises members on the incredibly complex choices they must make for the planting season, but the bottom line is clear. Cotton pays because the government pays.  “If you plant cotton for 2009, right now it looks like you will be planting for the government benefits plus the other income items that come with cotton, but don’t come with most other crops,” Eastland wrote

Would a more balanced use of USDA resources likely lead to poverty reduction? Absolutely. For Leflore County, and the rest of the distressed Delta counties in Mississippi, Arkansas and Louisiana, how many millions of USDA nutrition program dollars would be saved if the region’s poverty rate could be reduced by 10 percent? 

And if you want the value to be in the billions, factor in the reduction in cost for another poverty program – Medicaid, which for Leflore County, Mississippi, alone received $167 million over the same three year period. 

Among the commodity crop associations, the most intransigent have been the Southern rice and cotton associations – the legacy institutions of the Old South’s plantation system. And in a region where blacks constitute 70 percent of the population, the 2002 Agriculture Census estimates that 95 percent of USDA agricultural subsidy dollars in the region are going to farm operations with white operators.

(There are hundreds of African American cotton farmers spread throughout the South. The Federation of Southern Cooperatives has released the third and final part of a study which has sound, holistic recommendations for these smaller, limited resource growers.)

Sane, effective federal policy should be driven by the goal of increasing widespread prosperity and reducing dependence on federal life preserver programs – whether it is food stamps or commodity subsidies. We can see in Greenwood and countless other small towns and rural communities how this might be done.

Jason Gray is a writer/consultant. He lives in North Carolina.

 

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