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Deere CEO says U.S. should make rural development national priority

If the United States wants to remain a global economic superpower, it should stop treating rural America like a stepchild.

That may not have been exactly what Robert W. Lane said at USDA’s 2006 Agricultural Outlook Forum, but that was the message that came through from the chairman and CEO of Deere & Co.

“U.S. farmers and ranchers contribute directly and substantially to U.S. economic growth,” he said. “They provide a secure, abundant and affordable supply of food, fiber and fuel. In doing so, they literally feed and fuel the U.S. and global economy.”

Considered in that light, rural development must be more than a concern for rural communities, the former head of John Deere’s operations in Europe, Africa and India said. “Rural development must be considered a strategic national objective, one supporting a global objective of economic prosperity.”

There’s little doubt that John Deere has deep ties to rural America, Lane told the audience of 1,600 at the opening session of the USDA Forum in Arlington, Va., Feb. 16. (He spoke on “Providing Leadership for Rural America” at a Plenary Panel session on the future of Rural America.)

“For those of you familiar with our products, business or heritage, you know that our links to rural America run deep,” he said. “Rural communities have sustained our company from its founding 168 years ago to the present day and will continue to do so.”

While America’s farmers have helped make the United States the envy of the world, rural communities have undergone significant change in the last several decades. Much of the country now regards rural America as something to occupy the space between the megalopolises on each coast.

Strong economic links

“Yet there are and always will be strong links between the health of the rural U.S. economy, U.S. agriculture’s vitality and U.S. economic prosperity,” said Lane, one of three speakers on the panel. (The others: National Corn Growers President Gerald Tumbleson and Undersecretary of Agriculture for Rural Development Thomas Dorr.)

“Prospering in Rural America,” the theme of this year’s Outlook Forum, will require leadership, he said, leadership by all of those assembled in the room and in rural communities across the country.

“This is a topic of great importance not only to Deere and to everyone in this room, but to the country as a whole,” said Lane. “The challenges faced around the globe from increased competition in food, fiber and fuel markets require significant strategic investments in rural America’s future.”

Reversing the trends in rural America will require innovation and a willingness to take risks, he said.

“For much of the 19th century, our company prospered as a manufacturer of horse-drawn plows and farm implements,” said Lane. “Then, in 1918, our board of directors agreed to purchase a gas-powered tractor manufacturer and entered the tractor business.

“This was risky at the time because the technology wasn’t proven, but it was a risk worth taking because tractors had the potential to greatly improve farmer productivity, while also enhancing Deere’s manufacturing capabilities and generating a return for our investors.”

Innovative thinking

The acquisition marked a turning point in the company’s ongoing evolution of Deere’s business as a provider of innovative technologies and solutions in agriculture. “Innovation is a core value for our company, it is essential to the prosperity of rural America, and it is essential to the citizens of the world,” he said.

“I would suggest to you that the challenges facing rural communities require, from all of us here today, a level of innovative thinking, risk-taking – and leadership – that is no less important or potentially worthwhile than in those earlier times.”

Lane says John Deere believes it can contribute to meeting these challenges by providing sound business practices, innovative technologies, quality products and solutions, financial and human capital and a strong commitment to enhance a prosperous rural economy.

One avenue is through its dealer network, which includes about 700 owner groups operating in about 1,400 locations. Last year, those dealers generated more than $14 billion in revenues in rural America and employed more than 26,000 workers with a combined payroll of $750 million.

“A crucial part of their – and our – success is employee training,” said Lane. “Our dealers spend more than $15.6 million on employee training each year, so that we are assured of having the skilled workforce needed to provide equipment repair, service, sales and business management.”

John Deere has also entered into teaching-training partnerships with 16 rural community colleges and six state universities to offer two- and four-year degrees in various disciplines that develop dealer management and rural entrepreneurial talent.

Another avenue is energy development, particularly ag-based energy. The value proposition for the latter has changed dramatically in recent years, according to Lane.

“We know that agriculture-based energy production provides opportunities to create new jobs, increase the tax base and diversify the local economy,” he said. “It offers important new markets to commodity producers, which improves their own profitability and, in turn, further stimulates rural development.

Ethanol shows way

“Ethanol has shown us this key trend, and we believe that biodiesel and cellulosic biomass-based energy also can provide significant growth potential for rural communities. In fact, a 2 percent biodiesel blend is the preferred factory fill for all diesel-powered John Deere machines now made in the United States.”

Lane said John Deere is also excited about the potential for wind power, which, in 2004, generated about 7,000 megawatts of electricity. Experts predict this could reach 100,000 megawatts by 2020 – enough to power more than 32 million U.S. households.

“Our company has looked carefully at how we can best help our rural customers unlock this potential,” he said. “Last year, we started a new business unit to provide project development, debt financing and other services to those interested in harvesting wind power.”

Deere is also expanding its activities in development and deployment of information technologies to “fully capture the benefits of economic development in rural communities.”

“In an increasingly ‘flat world,’ rural access to information technology is essential to educate our youth to compete globally and to develop the skilled workforce on which prospering rural communities and rural businesses will depend,” said Lane.

“John Deere is identifying new opportunities for producer customers and their business partners to add value across the food, feed, fiber and energy supply chain. We’ve built a business upon years of experience in global positioning, sensors, communications and geographical information systems.”

The new technology-based services Deere and others are providing can make producers more productive and efficient and create new opportunities, he noted. And those services can benefit a broad range of rural enterprises: producers, crop consultants and other ag professionals.

Lane said he wanted to commend Agriculture Secretary Mike Johanns and Undersecretary Dorr for focusing the Forum on rural development. “They have put the issue out front on the Department’s and the country’s agenda. All of us should take their lead and do the same.”

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