As those living in rural Kentucky look forward to the 21st century, it is becoming increasingly clear that the economic environment will continue to change radically. The future of tobacco, long the leading cash crop for the farmers in the Commonwealth, looks increasingly bleak, as federal officials renew efforts to further regulate the sale and use of tobacco products. Rural Kentucky will not likely continue to rely on income from tobacco production into the 21st century to the extent it was important during the last three decades of the 20th century. The purpose of this paper is to examine some emerging trends in Kentucky agriculture and the rural economy as we embark on the 21st century, and offer some suggestions as to the changing nature of the leadership role the College of Agriculture might assume.
Second, prices cited for industrial hemp are based on current worldwide supply and demand conditions, based on the crop being legally grown only in some countries. While additional production may trigger the development of some new uses for industrial hemp, it is difficult to see how the market might absorb a significant increase in supply without some significant downward price pressure. Further, for Kentucky to successfully compete against other states in hemp production (assuming the crop were made legal and initially found to be quite profitable for Kentucky farmers), this state would have to possess some peculiar intrinsic comparative advantage that would make farmers in other states unlikely or unable to grow the crop if the profitability of the crop were to continue. What this comparative advantage might be is unclear, although some advocates have argued that Kentucky climate is well-suited to industrial hemp production. All of this suggests that it is unwise for farmers in Kentucky to hope that industrial hemp will be a panacea for declining tobacco revenues in the future.
These challenges will come from many directions. Potential financial liabilities arising from the health-related lawsuits now being argued will pose an increasing threat to the continued profitability of the major tobacco product manufacturers. Efforts to limit the access by teenagers of tobacco products, if successful, will likely have significant long-term negative impacts on domestic sales of these products: if unsuccessful, the likelihood of direct federal regulation of tobacco products as drugs increases. Either way, the industry loses. And, as the use of tobacco products is banned in more and more locations, and as fewer and fewer stores sell cigarettes because of regulations governing sales to minors, domestic consumption will likely decrease. In addition, potential national health insurance reforms, the continuing debate over the health impacts of second-hand smoke, and continuing trends toward smoke-free public areas in public buildings, shopping malls and in other places will each have adverse impacts on domestic cigarette consumption.
Many tobacco producers and tobacco product manufacturers are hoping that international sales, particularly increased demand from developing Pacific-Rim countries, will more than offset any decline tobacco used arising from decreases in domestic sales. That this will indeed happen is not at all clear. The major tobacco manufacturers, as reported in the news media, even now are facing increased pressure for regulation in many international markets (China included) because of health-related concerns. Furthermore, the tobacco product manufacturers are multinational companies, and the equipment needed for large-scale production of tobacco products can be readily set up in any country where the demand is present.
Kentucky burley producers take pride in a top-quality crop for world markets. But the multinational tobacco producers are concerned about profitability for shareholders. If, in order to open new markets in a developing country for the sale of tobacco products, agreements to acquire a significant share of tobacco from the that country's farmers are required, manufacturers will be quick to do this, quietly reducing the share of burley purchased from Kentucky producers. If Kentucky burley producers expect to satisfy a significant share of potential increases in world-wide demand for burley tobacco, they mist be price- competitive.
The tobacco manufacturers and Kentucky tobacco farmers have had a shaky coalition in the last few decades because their interests--primarily that of responding to and attempting to protect the tobacco industry from outside criticism--coincided. There is no reason to believe that tobacco products manufacturers will continue to purchase tobacco from Kentucky producers if the best interests of their corporate shareholders are served by purchasing tobacco from farmers located in or near the country where the cigarette sales are being made. In addition, many of these countries, with ultra-low labor costs, are better positioned to assume a comparative advantage in tobacco production than are Kentucky tobacco producers.
Despite all this gloom and doom, is it still possible for Kentucky to have an increasingly vibrant rural economy as we head into the 21st century? I believe that it is. I would argue that the state's rural economy, and the University of Kentucky--a university that serves all the people of the Commonwealth--will both face numerous challenges as we move into the 21st century.
The state's rural economy might place considerably less emphasis of the production of the traditional, generic agricultural commodities in the future than was true in the past. Agricultural production, to the extent that it continues, will increasingly be dominated by farmers willing to produce products under contract for specific agribusiness firms who need products with specific sets of characteristics--that is, the approach now employed in broiler production will increasingly spread to other agricultural products. Branded and differentiated agricultural products designed to meet a particular consumer need, not graded generic commodities, will assume increasing importance within the state's agriculture. I envision a coalition of farmers and agribusiness firms working together in order to accomplish this.
For the combination of farming income and off-farm employment to provide an adequate standard of living for many Kentucky families living in rural areas, off-farm employment opportunities in rural areas must continue to expand. In the last decade, Kentucky has made considerable progress in expanding off-farm job opportunities in rural areas, but these efforts must continue. Off-farm employment opportunities may increased not only by attracting new firms that need employees, but by expansion of employment within existing firms already located with the rural area. For many rural communities nationwide, employment expansion within existing firms has become more important than gains in employment achieved by attracting new firms. In addition, fewer public-sector costs (such as tax breaks) are usually incurred when firms are being expanded than in situations where an attempt is being made to attract a new firm.
There will likely be decreased reliance on income from the sale of crops and livestock in most rural areas, while off-farm employment opportunities too (in the agricultural and the non-agricultural sectors) must improve. States such as North and South Carolina are far ahead of Kentucky with respect to the role that industrialization plays in the rural economy. North Carolina, several other tobacco-producing states have been more successful than Kentucky in moving to diversify their agricultural economies away from a heavy dependence on tobacco.
In the absence of strong rural development efforts, structural changes in Kentucky agriculture leading to decreases in the farm population could adversely affect the non-farm rural economy as well. Can Kentucky too move forward in this area? A lot depends on the willingness of the state's agricultural and economic leadership to press forward in new directions instead of simply defending the short-run interests of producers which often reflects the status quo. We must recognize that as we move into the 21st century, the economic structure under which the state's rural economy has traditionally survived is changing dramatically, and this calls for leadership aimed at redirection and the redeployment of the state's resources, both human and physical.
The College's human resources have traditionally been balanced in favor of the commercial farming interests within the state. Changing times suggests an increasing need for refocusing, re-balancing and redirecting efforts to better enable the College to provide the leadership and assistance necessary for improving the well-being of Kentuckians and increasing the vibrancy of the state's economy.
The University of Kentucky College of Agriculture must continue to assume and develop a leadership role in this respect. The College of Agriculture exists to provide services and benefits to all Kentuckians, not just the various groups of producers of specific commodities. Attempts by the College to defend the status quo in an effort to protect the apparent short-run interests of producers politically important for funding and political support are not going to accomplish the broader objectives aimed at improving the lives of all Kentuckians. When the short-run interests of a special interest group run counter to the broader interests of the public at large, the College must always make choices and offer recommendations consistent with the broader public interest. This is true regardless of how politically important a particular special interest group might be in their support for funding of the College.
The College is charged with a broad responsibility to attempt to do good on behalf of the public's best interests wherever and whenever possible, and to never make a recommendation or assume a position that would cause harm to anyone, whether it involves the use of potentially harmful pesticides by producers, the use of tobacco products by consumers, or even issues involving diet and nutrition. Further, the College has a continuing obligation to assume a leadership role on the public's behalf.
The College must continue to speak out as the great issues affecting the lives and the well being of the state's residents are being debated, and must actively seek out and promote solutions that protect and improve the health and the well being of the public at large, regardless of the short-run impacts on special-interest groups. This is true whether or not these positions and recommendations might have negative short-run implications for funding support. We dare not deviate from this task.
"A Comparison of Social Capital in Rural and Urban Settings"
"Agricultural Sustainability and Consumerism"
"New Strategies for Effective Rural Development"