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Livestock drives local economiesLivestock drives local economies

Indirect and induced effects multiply the benefits of livestock industries to a community.

Kevin Schulz

July 27, 2023

6 Min Read
Pigs in individual chutes
ECONOMIC PUSH: Livestock operations add to local economies in a number of ways, from added employment to supporting feed mills and veterinary services to improving corn basis for crop farmersCourtesy of National Pork Board

Bob Thaler has a saying on his desk attributed to Bill Even, when he was South Dakota’s secretary of agriculture: “If you want jobs, you’ve got to have chores.”

“It can be a dairy operation, beef feedlot, poultry or swine operation, but you’ve got to have human bodies there 365 days a year caring for livestock. So, if you want to bring new full-time jobs into a community, it’s got to be something like that,” says Thaler, Extension swine specialist and distinguished professor at South Dakota State University.

In preparation for the 2019 South Dakota Governor’s Ag Summit, Thaler prepared a report on the economic impact that a swine concentrated animal feeding operation has on local communities.

Backing up Even’s comment that chores make jobs, Thaler finds that a 5,400-sow complex needs at least 13 to 15 full-time workers, as well as several part-time workers.

“If you’re looking at bringing the next generation back in, livestock is a good way to do it,” Thaler says, “because someone’s going to be doing chores 365 days a year. … I know there are limitations, but if you get into contract production, that allows those young people to come back and build up equity with relatively little risk.”

Adding to tax base

In addition to maintaining or even adding to the rural community populations, Thaler says livestock operations are a key economic driver by adding to the tax base. His 2019 numbers show the cost to build that 5,400-sow unit was $16.5 million, and a 2,400-head finishing barn was $950,000.

In South Dakota, the state sales tax on such projects are returned to the county of the project when requested by the county commissioners, rather than going into the state’s coffers.

As Thaler compiled his numbers, his “Oh, wow” moment came when he looked at the impact an established livestock industry has on local corn basis.

He compared corn basis level over a four-year period, 2014-18, at Sioux County, Iowa, “the No. 1 livestock county in the country, a net importer of corn; and 136 miles away is Parkston, S.D. — good ag county, but not much new livestock coming in in 2014,” he says. In the four-year spread Thaler looked at, the corn basis between Sioux Center, Iowa, and Parkston, S.D., changed by 28 cents a bushel. “People in Parkston were getting 28 cents a bushel more in relation to the four years before,” he says. “That spread narrowed that much because of livestock.”

Thaler says growth of the livestock industry — specifically swine operations — in South Dakota also adds to local economies as barn construction firms, equipment retailers and feed suppliers need people to keep up with demand, bringing jobs to small communities where opportunities may be lacking.

He admits the current situation in the swine world has slowed the industry’s expansion since the time when he first compiled his report.

Spreading impact

South Dakota is not an island on its own where livestock industries have a large impact on local economies.

Also during 2019, Joleen Hadrich, Extension economist; Megan Roberts, Extension educator; and Brigid Tuck, Extension senior economic impact analyst, all with the University of Minnesota, saw how COVID-19 was impacting not only the livestock industries but also the communities in which processing plants were located.

“Sometimes a frustration of mine is that city folks, my friends in the city, even in a small town like Le Sueur [near where she lives], they just don’t necessarily see how agriculture is affecting their lives, and why should we care what’s happening around us?” Tuck says. “So, the idea was to help raise awareness and maybe give communities some things to talk about, and how do we address some of these issues?”

The U-M trio looked at the swine, dairy and poultry industries and their impacts to Minnesota’s economy.

Singling out the swine industry, as Thaler did in South Dakota, Tuck says Minnesota hog farmers generated $2.7 billion in 2019 sales, creating $1.5 million in economic activity per farm and $33,100 in state and local taxes per operation.

Induced effects multiply benefit

In their study, the Minnesota team looked at indirect and induced effects of livestock industries, as well as direct effects. The economic contribution of a 6,000-head-per-year hog operation, average size for Minnesota, showed feed manufacturers, grain farming, real estate and wholesale trade benefited the most.

“You’re working with your local co-op, usually, to buy products,” she says. “You look at the veterinary, local vet services or at least regional vet services — all those inputs that go into producing an animal we have that’s embedded in our communities.”

As the hog industry has grown, more production companies have a large geographic footprint, and Tuck addresses the argument “But they don’t buy local.”

“They might not be buying feed or other products in every community where they have a presence, but they are buying supplies in some ‘local’ community,” she says. “They aren’t going to have a feed mill in every community where they have barns.”

That average hog farm also contributed $376,410 in labor income, supporting employment for eight workers.

Livestock need local supply

Livestock farms, and agriculture in general, add more to the Minnesota economy than a lot of other industries, because of the need for that local supply.

“With a history of being in agriculture and livestock, we really have those support services built in — and even a lot of our supplies,” Tuck says, “Look at a Stearns County and dairy. They’ve got the big supply companies that have a presence in those communities because there’s so much dairy production going on. So that indirect effect is a lot higher than you would see for some of the other industries in Minnesota. … Simply because we have that supply chain so well-developed for livestock. That’s important for people to understand: If you compare livestock versus a manufacturing facility, the manufacturing facility is probably importing a lot of their supplies from somewhere else, and then they’re turning it into the final product, whereas livestock is using something we’ve already grown here or manufactured here.”

Beyond the impact from the farm gate, Tuck says one cannot ignore the spending that livestock workers and their families contribute to local economies. “We have the induced effect, and that is the effect of the spending,” she says. “Livestock operations employ people, so that person has money so they can go to grocery store, pay their mortgage — all the things that they’re doing is included in the impact of that farm spending.”

Tuck says these induced effects figured include both hired labor as well as spending by farm families, “so you can see that kind of event has a fairly significant impact on communities as well,” she says.

For the U-M study, Tuck says the dairy herd size was a 200-head dairy, “which doesn’t have a lot of employment, but you make that a 600-head farm and now you’re getting more employment involved,” thus creating even more local economic impact.

About the Author(s)

Kevin Schulz

Editor, The Farmer

Kevin Schulz joined The Farmer as editor in January of 2023, after spending two years as senior staff writer for Dakota Farmer and Nebraska Farmer magazines. Prior to joining these two magazines, he spent six years in a similar capacity with National Hog Farmer. Prior to joining National Hog Farmer, Schulz spent a long career as the editor of The Land magazine, an agricultural-rural life publication based in Mankato, Minn.

During his tenure at The Land, the publication grew from covering 55 Minnesota counties to encompassing the entire state, as well as 30 counties in northern Iowa. Covering all facets of Minnesota and Iowa agriculture, Schulz was able to stay close to his roots as a southern Minnesota farm boy raised on a corn, soybean and hog finishing farm.

One particular area where he stayed close to his roots is working with the FFA organization.

Covering the FFA programs stayed near and dear to his heart, and he has been recognized for such coverage over the years. He has received the Minnesota FFA Communicator of the Year award, was honored with the Minnesota Honorary FFA Degree in 2014 and inducted into the Minnesota FFA Hall of Fame in 2018.

Schulz attended South Dakota State University, majoring in agricultural journalism. He was also a member of Alpha Gamma Rho fraternity and now belongs to its alumni organization.

His family continues to live on a southern Minnesota farm near where he grew up. He and his wife, Carol, have raised two daughters: Kristi, a 2014 University of Minnesota graduate who is married to Eric Van Otterloo and teaches at Mankato (Minn.) East High School, and Haley, a 2018 graduate of University of Wisconsin-River Falls. She is married to John Peake and teaches in Hayward, Wis. 

When not covering the agriculture industry on behalf of The Farmer's readers, Schulz enjoys spending time traveling with family, making it a quest to reach all 50 states — 47 so far — and three countries. He also enjoys reading, music, photography, playing basketball, and enjoying nature and campfires with friends and family.

[email protected]

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