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Greg Gardner
Greg Gardner
Special to the Times
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Minding Our Own Business

Let’s peer at the new year: the 2015 economic outlook

First published: January 18, 2015 at 12:30 am
Last modified: January 16, 2015 at 2:46 pm
TRIBUNE NEWS SERVICE

This is the season for business and economic forecasts for the coming year, so I will jump right in and offer mine. Hopefully I am right — and if not, I can only hope you have forgotten what I said by the time 2016 rolls around.

While the final economic figures for 2014 are not in yet, it is clear that the nation and much of the state have emerged from the Great Recession that began in 2008. The north country continues to lag behind much of the rest of the state in economic recovery, which is not surprising. Historically, recessions hang on up here longer than they do in more urban areas.

According to the state Department of Labor, average unemployment for the tri-county area was significantly better for 2014 than it was for 2013 and probably the best we have seen in the past five years. Fundamentals like workforce size have not changed, so the figures seem to reflect real growth.

The consensus among economists for 2015 is guardedly optimistic. Most forecasters are predicting better U.S. growth than in 2014, with a combination of lower energy costs, still-low interest rates, rising employment and the increased demand and spending those things are expected to produce.

Globally, demand will remain limited, as emerging markets continue to struggle and Europe remains stuck in the Euro crisis and its side effects.

The forecasts for New York state are similar, but the very bright predictions for New York City and more urban downstate regions obscure the much less optimistic expectations for rural upstate regions like ours.

Locally, the picture should be similar, but with a few specifics that seldom make the national forecasts. Our boom in housing construction should taper off and a strong U.S dollar should limit Canadian visitors and their spending. The threat of defense spending cuts and a possible reduction in forces at Fort Drum will send occasional chills down some spines in our region. The recent drop in milk prices will plague local dairy farmers, but increasing interest in grape-growing and other agricultural opportunities should provide some growth in the sector overall.

The demand for housing driven by Fort Drum resulted in a blizzard of projects in 2013 and 2014, many supported by PILOT programs sponsored by our local economic development agencies. The unforgiving laws of market economics suggest that we have probably overbuilt already, although that news will take months to arrive. This means that we should expect some moderation of rents across Jefferson and nearby sections of Lewis and St. Lawrence counties as these projects come on line.

That is good news for renters and bad for landlords. If nothing else, it is time for local economic developers to shift their attention away from building apartments and toward something new. I have some ideas on that score for a future column and would love to hear yours as well.

The Canadian economy, like the U.S.’s, is looking at an optimistic year, with growth roughly equal to our own. Canadian households are even deeper in debt than are their U.S. counterparts, however, and a relatively strong U.S. dollar is likely to temper Canadian spending in our local economies. We still offer a better deal for consumers on many products, and cheaper gasoline means less cost to travel, so the national trends will be moderated by local conditions. Look for overall Canadian sales to be flat compared to what we saw in 2014.

Government deficits, a new round of military base closures, and planned military spending cuts have led to some warnings of possible deep troop reductions at Fort Drum. While any serious cuts are unlikely in 2015 and the post is well-positioned to survive the Base Realignment and Closure round, any reduction in Fort Drum’s economic presence will affect us.

Even more so, the fear of such cuts in the future is likely to limit capital investment by area businesses in 2015. Fort Drum is the largest actor in our local economy and it affects us all to some degree. In 2015, look for lowered spending from Fort Drum in a variety of areas, no expectation of growth and reduced capital spending by many retailers.

This will be offset somewhat by increased spending by consumers enjoying lower gasoline prices, but the future of the fort should remain murky enough to keep retailers wary.

Agriculture will remain a cyclic business in 2015. We saw very high milk prices in 2014, which encouraged growth and investment by many dairy farmers. The collapse of those prices in 2015 will drive that pendulum the other way. Like housing markets, agricultural markets are merciless for commodity producers such as dairy farmers. Grape growers and noncommodity agriculturalists will be largely shielded from this, and those look like the best areas for growth in the ag sector in 2015.

Gov. Andrew Cuomo’s much-advertised StartUp New York plan is off to a great start, judging by reports from his office. While all the good news is being reported largely from urban downstate regions with large SUNY research centers, regional television stations continue to enjoy the benefits of advertising revenue as the governor promotes the program to the people who are obligated to pay for it. Look for more of that in 2015.

Higher minimum wage rates will hurt some businesses that depend on low-cost labor, but that should be offset by lower energy costs in many cases. According to the state labor department, private sector labor rates statewide rose an average of 2.9 percent in 2014 without an increase in minimum wage and we still managed to grow, so this is probably not as significant an issue as opponents claim. Of course, the argument that the higher minimum wage will lead to increased consumer demand is probably overstated as well.

Short-term interest rates are likely to remain low through much of 2015 but will probably rise in the last quarter. Gasoline prices should remain low for at least the first half of the year before they begin a more gradual rise to previous levels.

All of that means more money in households and easier credit for businesses and consumers. That suggests that 2015 is a good time to launch a new product locally or to update your plant or equipment if you are selling to national markets.

Local retailers should focus more on plans to increase sales through new marketing efforts. Go after that fresh disposable income freed up by lower energy costs while you can, but be wary of making significant capital investments in new facilities if you can delay those a bit. We are likely to end the year with higher gas prices and interest rates than we began it.

Best wishes for a happy and profitable 2015.

Greg Gardner is an associate professor of business at SUNY Potsdam. Email him at ggardner@wdt.net.

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NNY’s locavore movement ready for takeoff

First published: November 30, 2014 at 12:30 am
Last modified: November 25, 2014 at 1:06 pm
WATERTOWN DAILY TIMES
In this 2008 photo, a vendor and customer chat over fresh vegetables at the Canton Farmers Market.

My last column was about locally produced wine, and this one is about the food we can produce to go with it. Judging by the response I got from the first two columns on the subject, there is a strong community of people in Northern New York who really care what they eat and where it comes from.

The north country has been filled with farmers ever since it was settled by European colonists in the 18th century, so we are no strangers to growing food. What is new, however, is the chance to find new markets for the food we produce and a broader opportunity for economic growth that addresses some issues where we have seen little success in the past.

The locavore movement is typically described as a market of consumers who insist on buying only food produced within 100 miles of their homes. While many economists argue that the complex business of calculating “food miles” is nonsense and that the existing industrial food chain has evolved to be the most efficient way of providing diverse nutritional food at the lowest possible cost, I maintain that those folks are just killjoys. This is not about national food policies. (Do we really have those?) It is about encouraging the development of local agriculture and giving us some great alternatives to nationally prepared food products. It is also about creating jobs and economic growth over the long run.

Fortunately, surveys from a variety of universities and state organizations across the country suggest that most locavores are really after food they perceive as being fresher, healthier, tastier and a contributor to local job creation, rather than a response to global climate change or fears of a faceless industrial food chain. This is a group of folks who prefer to eat locally because it is better for them. We have a share of that market in Northern New York, and our agricultural sector has begun to respond to those demands.

Locavores and other shoppers at farmers markets in the U.S. are more likely to be female and above average in education and income, but the trend is broad enough that those kinds of general demographics are seldom useful in identifying them among other consumers.

More broadly, however, a 2012 study by the A.T. Kearney consultancy reported that 70 percent of those surveyed would spend more to order local food in a restaurant or market. Research in California suggests that most shoppers in farmers markets will spend at least 5 percent more on local products than those in a standard grocery store, and many will pay premiums of 10 percent or more. This is a market of people who will pay for what they want.

I have already mentioned how impressed I was at the success the French have had in linking small local farmers with urban markets. The U.S. is still a bit behind on that but is catching up rapidly. According to the U.S. Department of Agriculture, the number of farmers markets in the nation went from 1,755 in 1994 to 8,144 last year. The surge in farmers markets has been driven by a variety of factors but is gradually tapering off as most areas in the country gain access to one or more markets. The reasons given for shopping at a farmers market are typically very similar to those of locavores in general — a desire for healthier and tastier foods that support local agriculture.

We have 35 farmers markets in the tri-county area, according to the New York State Department of Agriculture and Markets, including nine stops by a mobile farmers market operation in St. Lawrence County. We also have some Community Supported Agriculture operations that bypass markets in favor of direct scheduled sales to consumers. Out of the reported 235 CSA operations in New York, 12 are located in the tri-county area, according to localharvest.org, a market support site for agriculture and food in the state.

Training and support for would-be agricultural entrepreneurs interested in targeting this local food market starts at Jefferson Community College in Watertown, with a newly launched program in agricultural business taught by professor Alissa Donnell. The program is intended to train entrepreneurs and businesspeople interested in agriculture, and to support the development of agriculture as a growth industry in our region, attracting new entrants and making the career more attractive to young people.

“The average age of (farm) operators in our area is 64.5 years,” Ms. Donnell says. “Local farm to table has been one of the top five trends for the past five years.” Her goals are to develop the fledgling program into a sustainable force in the community.

The direct connection between local food and local jobs is hard to demonstrate. There have been a number of economic impact assessments by various states and research groups that show a connection, but those alone are not enough to get me excited about the long-term impact. What stirs my blood is the connection with economic development research done by professor Richard Florida, formerly of Carnegie Mellon University, in his 2002 book “The Rise of the Creative Class.”

In this book, Mr. Florida demonstrates that economic growth can be driven in unlikely areas by an ability to attract a group of creative and well-educated people who come looking for a particular lifestyle. The arrival of these people triggers entrepreneurship and job creation, not as a function of traditional economic development policies (think tax breaks and subsidies), but as a function of a talented and energetic community who create jobs when they cannot find them already in place. The production and marketing of local food presents such an opportunity for us.

As Ms. Donnell notes, “People from Fort Drum are staying here, and many are interested in starting hobby farms.” These people have an interest in food and how it is produced and marketed, and they create both supply and demand for local foods. A thriving local food scene is just what we need to attract more of these locavore foodies who will move to our community for the food but join the fun as producers when they need to finance their habits.

We don’t have everything we need yet. Both Ms. Donnell and Jay Matteson, the Jefferson County agricultural coordinator, bemoan the lack of a “food hub” — a local facility to support meat, cheese and other processing operations. We also lack an effective regional/local brand, in spite of past efforts by the Jefferson County Job Development Corp. to develop one. All those things will come, and they represent great opportunities for regional economic developers. Good things to have on our Christmas wish list.

For the rest of us, I suggest stopping by Cross Island Farms on Wellesley Island or another local producer to stock up on a local turkey or ham for the holidays. Give local food, wine and distilled products as gifts, especially to your out-of-town friends and family. Locally produced gifts will look great under a tree cut in the north country and all the fresh locally produced snow that always seems to show up here for the holidays.

Greg Gardner is an associate professor of business at SUNY Potsdam. Email him at ggardner@wdt.net.

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Wine, beer and spirits ventures mean jobs, growth for NNY

First published: November 16, 2014 at 12:30 am
Last modified: November 14, 2014 at 3:14 pm
UNIVERSITY OF MINNESOTA, DAVID L. HANSEN
Marquette grapes, which grow well in cold climates, are used to make north country wines. #1211

The winery count in the tri-county region stands at 10 and is still growing. The use of cold-hardy hybrids is proving a success as we discover that they not only survive north country winters but make tasty wines as well. Julie Purpura Hosbach, the winery management and marketing instructor at Jefferson Community College in Watertown predicts 10 more wineries will open here in the next four years. At the same time, the number of local brewers and distilleries continues to mushroom as well. Alcohol in various forms is giving us regional economic growth at promising levels.

Two years ago, I was a SUNY representative at one of Gov. Andrew Cuomo’s summits for the wine, beer and spirits industry. While the event was the kind of carefully staged kabuki theater that one expects from Albany, it did result in an impressive set of policy changes to help small booze producers in New York expand and generate more growth and employment. Clearly our governor realizes the promise in this industry.

Unlike commodity dairy production or grain farming, producing wine requires an understanding of market demand and product differentiation, and that means a need for workers who understand marketing as well as production. Fortunately, we have a growing supply close at hand.

JCC launched a certificate program in winery management and marketing in 2012, in response to growing demand for skilled middle managers in our wine industry. “As a community college, it just seemed natural that we would add a program in winery management and marketing,” says Alexander P. Vickers, the department chair overseeing the wine, agriculture and hospitality and tourism programs at the college.

Most jobs created by wineries are in the field of marketing, and local wineries and other specialty agricultural processors were having trouble finding enough middle managers, says Mr. Vickers. “Middle managers were proving hard to keep. They had to understand both farming technologies and people.”

Apparently the program is working. According to Ms. Purpura Hosbach, five out of the six interns recently completing the program found jobs in the industry. The students are described as diverse, with many seeking skills rather than specific degrees, according to Ms. Purpura Hosbach. “Many are taking courses with plans to start a winery of their own.”

Unlike other sectors of our economy, winemaking seems to have an ample supply of entrepreneurs who understand the business. The limitations we face now seem to be two-fold. First, the growth of wineries means we need more cold-hardy grapes. Grapes are much more site-specific than are other crops, so would-be growers need to select land very carefully. Before you decide to convert some marginal corn land to grapes, check out http://wdt.me/UTzpzK to explore specific sites in the area.

Both Michael E. Hunter, field crops specialist at Cornell Cooperative Extension of Jefferson County, and Jay M. Matteson, Jefferson County’s agricultural coordinator, are wary of predicting any serious shift from corn to grapes on most existing farms in our community, citing the need for very different sets of skills and capital equipment between the two crops. Corn producers in the region are “not even giving grapes a thought,” says Mr. Hunter, although he is more hopeful that some corn farmers will convert to malting barley or hybrid rye grains to support an emerging brewing and distilling industry.

Mr. Matteson agrees, adding that current high prices for fluid milk have acted to increase corn prices to $500 per acre, decreasing interest in grapes as an alternative crop. He reports that local wineries are “encouraging me to encourage everyone to grow grapes,” but he expects most new grape production to come from land and people who are not currently farming.

The second thing we need to increase the economic impact of our wineries is a serious effort to brand and market our wines beyond our regional borders. “Our cold-hardy wines are not well known,” says Mr. Vickers. “We need a branding effort.” This means aggressive brand-building and marketing by a consortium of wineries with all the public support we can muster.

If we cannot grow more grapes locally, it means wineries will be forced to import them from the Finger Lakes or Long Island, costing us local jobs and taxes and a chance to differentiate our wines even further. If we cannot find external markets for all the wine we produce, then we risk seeing painful failures and consolidations among existing and emerging new wineries in the region.

Local wineries are typically able to sell all the wines they make, but that may not last as more new wineries open to compete for the same local dollars.

So what should we do? I suggest that the local economic development community partner with the program at JCC to develop and execute a plan to brand and promote local wines to specific markets, as well as to integrate them into broader tourism promotion efforts. The competitive pressures our wineries, breweries and distilleries face severely limit their ability to cooperate without a trusted third party organization to shape that cooperation. The economic developers understand how to organize and finance these business cooperatives, and the folks at JCC understand how to build brands and market wine, beer and spirits in promoting tourism destinations.

If you are considering opening a winery, brewery or distillery — or growing grapes, hops or grains to support the industry — please spend some time talking with Jay Matteson and the folks at JCC and the local Cooperative Extension before you break ground.

If you are not sure about entering the industry but think it sounds like fun, take some courses at JCC before you decide to launch. You might decide to work for an existing producer for a bit before launching your own venture. Don’t worry. This opportunity is not going anywhere, and if we can solve the challenges of supply and demand for our products, there will always be room for one more winery.

For the rest of us, we need to drink the wines, beers and spirits made in our region. This holiday season, I suggest we all open a bottle of local Marquette. It’s a nice pairing with turkey, as well as being a taste of the north country.

Greg Gardner is an associate professor of business at SUNY Potsdam. Email him at ggardner@wdt.net.

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A growing effort: Cheers to local food and drink

First published: October 26, 2014 at 12:30 am
Last modified: October 23, 2014 at 3:11 pm
JASON HUNTER N WATERTOWN DAILY TIMES
Kenneth M. Hebb, Canton, owner of the St. Lawrence Brewing Company, right, talks with employee Travis L. Pierce, Canton, Monday at his brewery in Canton.

I am back in the north country after multiple deployments and trips abroad, and things look good. The season is shaping up well at SUNY Potsdam, where I teach, the national and regional economies are continuing to slowly improve, and I am excited about the future.

The most exciting thing, I think, is the tremendous energy and promise emerging from our agricultural industry, including the wine industry. This is some of the best economic news I have seen in the past 20 years.

Agriculture has been in our local news a lot lately. In recent weeks, we have seen articles that told us of declining milk and increasing wine consumption nationwide, and how Clarkson University students were helping to repair a mobile poultry processing truck so it could serve farmers across the north country.

We have learned about the ups and downs of sales at the Watertown farmers market. We learned that state laws have been modified to ease the sale of wet spent brewers’ grains by local brewers to local farmers for use as cattle food.

A winery in Lewis County got a major grant to expand production. We have heard the various contenders for our local congressional seat discuss their approaches to supporting agriculture in our area.

So what does it all mean?

Dairy farming is the largest sector of our regional agriculture industry and probably will remain so for many years, but it is unlikely to be an engine of growth. Since the end of World War II, local farms have been consolidating, and technology has given them increasing levels of productivity, reducing the total demand for labor and increasing the demand for capital.

Dairy farming is no longer driven by hard work alone but depends on increasing economies of scale and increasing levels of capital investment. That is a typical evolution in any industry and is not something that our elected representatives at any level could seriously hope to affect.

The most promising chances for growth in our local agricultural community appear to be coming from the wine, beer and spirits industries and from a group of consumers known to marketers as locavores — people who prefer to eat food produced locally whenever possible. They are driving a small but growing shift to the production of diverse local foods.

The size of the locavore market and its main demographics are poorly understood, although evidence from both the U.S. Department of Agriculture and private research finds that the market is growing faster than nonlocal markets. USDA research also suggests that locavores will pay a premium for foods produced locally.

Research from the University of Kansas finds that women and people over 55 are most likely to purchase local beef. There are few broad or definitive studies that allow a better description of the typical locavore, although marketing and media coverage suggests that most locavores resemble typical “green” consumers, who also buy products such as hybrid cars.

That market tends to be higher-income and better-educated than the average consumer. Their motivations include a desire to eat fresher and healthier foods, a desire to reduce the environmental impact of shipping processed foods long distances and a desire to support local farmers and local economic growth.

My wife and I spent several weeks in France this past summer studying regional cooking and wines and enjoying some time together after my retirement from the Air National Guard last spring. The most exciting thing I saw in France was how successful they were at linking small agricultural producers with consumers who valued the specific products of the region and season.

France has supermarkets and a large-scale industrial agriculture and food system similar to ours, and that system feeds most people most of the time, as does ours. They also have a highly functional system of small farms and local producers who deliver to a huge array of local outdoor farmers markets.

The result is a set of economically viable small farms that produce jobs and tax revenues, as well as a set of happier and better-fed city customers who are willing to pay a bit more for foods that are fresher and more closely linked to their locality. That is what happens when a nation listens to its locavores.

Here in Northern New York, we are beginning to see progress in the production of local foods as well as the rapid expansion of our wine, beer and spirits industry. This is driven by growing demand but also by the emergence of the regional infrastructure needed to support these activities.

If there is a star in the show at the moment, it has to be the food and wine programs at Jefferson Community College. If there is a sandbag slowing this development, it is the lack of local processing and distribution/sales capacity for meats and specialty cheeses. Somewhere in the middle is the availability of capital to finance the growth these industries can generate.

In addition to its longstanding culinary and tourism programs, JCC has recently launched programs in agriculture and wine production and marketing, both perfectly positioned to train workers in those industries and, more importantly, active entrepreneurs. Both programs are led by energetic and passionate young professors who have begun to plant the seeds of our economic growth. (Pun intended. Sorry.)

Both of these new programs are funded by grants with limited lifespans, however, so keeping them going means finding enough students. This is promising but not certain.

I plan to write a number of upcoming columns exploring the locavore movement in our region and the development of specialty agriculture and wine, beer and spirits businesses. If you are a locavore, are in a local food and wine business or just have ideas and thoughts on the subject, please send me an email at the paper (address below). I hate pontificating in a vacuum.

In the meantime, I have a request for the JCC Center for Community Studies: How about adding some questions to your annual survey of the community about local food preferences so we can get better information on our own locavores? The local economic developers could help as well by funding some of that research.

The availability of good market/demand data is part of the information infrastructure that supports investment and lending in any industry. Gathering national data is helpful, but local information is vital.

I hope your fall is pleasant and healthy. Eat and drink local and enjoy the harvest. More to follow.

Greg Gardner is an associate professor of business at SUNY Potsdam. Email him at ggardner@wdt.net.

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