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12/2/2018 12:02:00 PM
Despite recovery, concerns exist for Howard County economic economy
Scott Smith, left, president of Triple S Smith Farms in Windfall, was one of many local farmers to express concern about tariffs impacting the agricultural industry. Tim Bath | Kokomo Tribune
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Scott Smith, left, president of Triple S Smith Farms in Windfall, was one of many local farmers to express concern about tariffs impacting the agricultural industry. Tim Bath | Kokomo Tribune

George Myers, Kokomo Tribune

Howard County’s economy, touted as one of nation’s fastest-growing since the Great Recession, is not without its concerns.

Those worries, along with reasons for optimism, like ongoing downtown development and urban growth, were discussed last week during an annual economic outlook summit at Indiana University Kokomo.

Howard County, which remains dependent on manufacturing and agriculture industries despite recent diversification efforts, ended October with a 3.7 percent unemployment rate, nearly identical to the state average, according to the Indiana Department of Workforce Development

Less than a decade ago, the county’s unemployment rate sat above 20 percent.

The recovery has been remarkable.

But its success is facing a new set of challenges – some temporary, others permanent.

“Now would be the time to just begin to prepare for what could be some challenging times ahead,” said Alan Krabbenhoft, the dean of IUK’s School of Business.

Climate change

After the release of a dire climate change report by the federal government – quietly unveiled on Black Friday – political leaders and economic experts have taken a hard look at the economic impact of a problem that in each passing day forces itself to the front of the public consciousness.  

Krabbenhoft said the short-term impact of climate change is unlikely to be dramatic for farmers used to dealing regularly with fluctuating weather patterns and unpredictable seasons.

But as months and years tick off the calendar, and the effects of climate change become more noticeable and more distressing, farmers will have no choice but to adapt.

“I think longer-term, what the [federal government’s climate change report] seems to suggest, is that drought episodes are going to be more severe and more widespread,” said Krabbenhoft.

“Which means that unless we are able to come up with, and it’s not that we can’t, but unless we can come up with hybrids that are less hydration- or water-dependent … we will start to see the level of crop production diminishing. And I think long-term that does have a negative impact.”

Krabbenhoft noted that farming operation like Beck’s Hybrids have already started to adapt to what will soon be a new reality, conducting research and using test plots to create durable hybrids that can better handle droughts and other extreme weather patterns.

Notably, a report published this fall by Purdue University’s Climate Change Resource Center painted a bleak picture, saying that Indiana farmers will have to change the types of crops they sow, the timing of plantings and adapt in other ways to the changing climate.

The state will likely see heavier rainfall patterns, earlier springs and hotter summers in the decades ahead, the report said.

“The climate has already changed, and it will continue to change. And if we just keep going on as normal, we are going to run into some problems,” said Jeffrey Dukes, the center’s director. “We are going to be at greater and greater risk of losing money if we stick with the status quo.”

Warmer and wetter weather could lead to more weeds, pests and diseases, the report said. Higher overnight temperatures could also lead to a decrease in corn production. Increased temperatures could also put farm workers at a higher risk and cause livestock heat stress, researchers said.

Farmers may need to plant earlier, use different varieties of crops and install ventilation and cooling stations for livestock and workers, researchers said.

Melissa Widhalm, operations manager at the Purdue center, spoke in Howard County earlier this year, explaining the risks facing the local agriculture economy.

For starters, Howard County residents can expect much hotter temperatures. Between 1915 and 2013, the average high temperature came in at 97 degrees. By the 2050s, that number will jump to 106 degrees. Fast forward to the 2080s, and the average high will be 111 degrees.

Today, the county on average experiences 21 days with temperatures above 90 degrees. By the 2050s, the study predicts that to skyrocket to 76 days.

In the coming decades, summers in the county will gradually begin to feel like summers in northeast Texas. Winters will feel more like the climate in Virginia.

By the 2050s, the study predicts the frost-free season in the county will extend 38 days and stretch from early April into early November with less hard freezes during winter.

That means insects which currently cannot survive because of the cold weather will eventually migrate to the region and thrive. Widhalm said foreign insects could devastate crops and throw the local ecosystem into turmoil.

Longer growing seasons also means people with allergies can plan to suffer longer with intensified symptoms, since pollen-producing plants will grow faster and larger.

The report predicts rivers will be inundated with 10 percent more water by the 2050s, and the county will see an 8 percent increase in rainfall amounts – most of which will come in the winter and spring.

Widhalm said that means rivers and streams will become more contaminated as the county experiences more heavy-rainfall events that will cause soil erosion and wash more chemicals from fields into the water supply. That will create less drinkable water, more fish kills and more toxic algae blooms.

Still, while climate change cannot be avoided, its severity can be curbed with an immediate response and changed behaviors.

Widhalm pointed to Indiana cities like Kokomo, which was one of 21 cities that last year participated in the state’s second-annual Climate Leadership Summit to discuss green jobs, renewable energy and public health.

Kokomo Mayor Greg Goodnight in last year’s state of the city address cited climate change as a driving force behind the tornadoes that ravaged the city in recent years. He urged residents to “take climate change seriously … because of the destruction, instability and the overall expense it is already causing here in Kokomo.”

Ag abounds

This year, noted Krabbenhoft, was an impactful year for the agriculture industry.

Corn yields in 2018 were up over 12 percent in terms of bushels per acre, he said, and soybeans increased by more than 9 percent from 2017.

“It really meant for a bumper crop,” noted Krabbenhoft, speaking for the university’s 14-county service region.

But with that come some serious concerns.

“The challenge has been, though, that bumper crop, with the basic elements of supply-and-demand … that increase in supply is going to more than likely have some negative impact on the crop prices in general,” he explained.

Combine that with Chinese tariffs targeted at American crops and it’s been a “relatively disappointing year with regards to ag prices.”

By the end of October, the price for a bushel of corn was down to $3.67, down from $4 in May. Meanwhile, soybeans were priced at $10.75 per bushel in March, but by October had dipped to $8.44, a roughly 22 percent decline.

“While ag production might be very solid and up, there’s a lot of storage having to take place, because the ability to sell and turn a profit with regards to these is virtually impossible,” said Krabbenhoft.

“At this point in time, the drop in prices is pretty close to if not exceeding the level of increase in productivity. From that perspective, it has been a very difficult challenge for these areas.”

After China all but stopped buying U.S. soybeans in response to President Donald Trump’s trade tariffs, farmers are now putting their fingers to the wind, wondering how long the political winds will blow.

Farmers produced a record U.S. harvest of 4.6 billion bushels this year, but the USDA reports exports to China are down 94 percent from a year ago since Chinese companies were ordered to stop buying American soybeans and find other suppliers, reported the Associated Press.

Soybean farm organizations have cultivated other markets, including Egypt, Argentina and Iran, and boosted sales to the European Union and Mexico. But that doesn't make up for the gap left by the loss of the Chinese market.

And while a $12 billion bailout program meant to offset plummeting crop prices was announced this summer by the federal government, so far less than 10 percent of that has been paid out, noted Krabbenhoft.

“Our prices are in the toilet, and it’s the tariffs that have killed our soybean prices,” Brad Winger, who farms corn and soybeans with his family in eastern Howard County and parts of Miami County, told the Tribune in a previous interview.

“I was sort of all for Mr. Trump at first, but it’s time for him to get these (trade deals) settled,” he said. “It’s killing agriculture. They’re trying to put a Band-Aid on it, but it’s just that. It’s not nearly going to make up for what we lost.”

Krabbenhoft sees an equally stark landscape. 

“I’m not overly optimistic that this trade war is a short-term scenario,” he said. “I’d like to say that it is, but I’m not overly optimistic with regards to it. … The Midwest is one of the areas that is hardest hit by this particular aspect.”

“I think we have concerns with regards to matters such as inflation, where that will put us,” he continued later. “And trade matter and inflation are a lot of times precipitators of economic woes.”

Growth and uncertainty

There are many reasons for optimism inside the immediate future of Howard County.

With a conference center and hotel planned for Kokomo’s downtown, along with a recently-announced apartment complex targeting young, middle-income workers, the trend of economic development in the city’s center isn’t slowing down.

It exists outside downtown as well, as evidenced by a new apartment development being constructed just down the road from the IUK campus where Krabbenhoft and others spoke Wednesday morning.

Combine upcoming projects with those completed in recent years, including Kokomo Municipal Stadium and the luxury apartment complex 306 Riverfront District, and Kokomo has become a focal point of north central Indiana.

“We will see how much longer that will continue,” said Krabbenhoft. “If the interest rates rise as they may do, business investment in those aspects may start to be curtailed to some extent, but our hope is that at least the downtown development and the other aspects of manufacturing will continue to grow.”

And manufacturing, despite job growth in Howard County’s medical and higher education fields, plays an enormous role in local fortunes.

Without increased diversification, that can create risks.

“Our decline, really in 2008 and 2009, was deeper and our recovery has been stronger, as compared to the U.S.,” Greater Kokomo Economic Development Alliance President and CEO Charlie Sparks has said.

“I think it’s our over-dependence on not just one industry, but one employer,” he added, referencing Fiat Chrysler Automobiles.

That reliance can be fickle.

“[Manufacturing jobs] do face in some instances, unfortunately, as we saw with General Motors’ announcement the other day, the greatest risk from the effects of concerns about economic downturn,” remarked Krabbenhoft.

GM announced Monday it will cut up to 14,000 workers in North America and put five plants up for possible closure as it abandons many of its car models and restructures to focus more on autonomous and electric vehicles.

The reductions could amount to as much as 8 percent of GM’s global workforce of 180,000 employees.

The restructuring reflects changing North American auto markets as manufacturers continue to shift away from cars toward SUVs and trucks. In October, almost 65 percent of new vehicles sold in the U.S. were trucks or SUVs. That figure was about 50 percent cars just five years ago.

While contained to GM, and in many ways unique to that company, the move created waves across the always-sensitive automotive industry.

“I don’t think they can ignore it,” said Krabbenhoft about FCA.

Any time uncertainty enters the market – Krabbenhoft also referenced FCA’s temporary shutdowns in Kokomo and Tipton this fall as an example – the economy can be impacted.

And extreme uncertainty has come, again, from tariffs.

The GM layoffs came amid the backdrop of a trade war between the U.S., China and Europe that likely will lead to higher prices for imported vehicles and those exported from the U.S., although company officials did not directly link the layoffs to tariffs.

While Krabbenhoft called related concerns “not terribly threatening” to local automakers, it isn’t far from their minds.

“Certainly the people that I’ve spoken to who have leadership positions in the plants have said that their costs are rising,” he said. “And, to the extent that their costs rise, they’re going to only be able to bit the bullet and not pass those increases onto the customer for so long.”

The Associated Press contributed to this story.

Related Stories:
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• OPINION: Alternative responses to climate change
• Hancock County feeling tremors over tariffs on soybeans
• 2018 tariffs on incoming goods hangs heavy over some Hoosier manufacturers
• OPINION: China is a poor and backward nation
• OPINION: GM's layoffs are a warning to Indiana's workforce policies

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