Carl Steidtmann, chief economist for Deloitte, discusses local and national economic trends during the Navigator Awards on Friday at the Sheraton Steamboat Resort.

Photo by Matt Stensland

Carl Steidtmann, chief economist for Deloitte, discusses local and national economic trends during the Navigator Awards on Friday at the Sheraton Steamboat Resort.

Steidtmann: Routt County's economy has hit steep drops

Economist speaks as part of annual Chamber meeting

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— Economist Carl Steidt­­mann offered an audience of Steamboat Springs business people Friday the prospect of a thaw in consumer spending in time for the holidays. However, he likened the steepness of the hits the local economy has taken during the past 30 months to a double black diamond ski run.

“You lost 2,000 of Steam­boat’s 15,000 jobs over a 30-

month period. That’s a fairly depressing number,” Steidt­mann said. “The fact that you’re surviving this tells me you are very savvy businesspeople. I think (employment) will stabilize in the summer and fall (of 2011). Consumers are coming out of the bunker to spend more on gifts and entertainment.”

Steidtmann is the chief economist for Deloitte Research and works on behalf of a list of global clients. He’s also a resident of Steamboat. And he urged the business leaders gathered at the 103rd annual meeting of the Steamboat Springs Chamber Resort Association to let go of the notion that America’s economy will eventually return to “normal.”

“Things will return to normal when pigs fly,” Steidtmann said. “Normal is an idea you should try to get away from. What is this yearning for normalcy? It’s not what we should be thinking about.”

Instead, he suggested, business leaders should be thinking about the transformation of the American economy and how they fit in.

The U.S. economy has under­gone a “shattering” event, Steidtmann said. He took the term from historian William Manchester’s book “A World Lit Only by Fire,” which is about the transformation of European society from the Middle Ages into the Renaissance.

When two hedge funds at Bear Stearns failed in August 2007, he said, it foreshadowed a shattering that will prove to have forever altered the American economy.

The current economic rec­overy has been “the most unusual and difficult recovery in the post-World War II era,” Steidtmann said. It has been remarkable for the rapidity with which Fortune 500 companies have returned to profitability, for their reluctance to spend cash and for it’s continuation in spite of consumers’ reluctance to get off the sidelines.

The United States has lost 8 million jobs in the construction and manufacturing sectors, and prospects for recovering that employment are bleak, he added.

“It’s not like they’re ever coming back,” Steidtmann said. “Those skills don’t match with the new economy.”

Steamboat has seen the issuance of building permits drop almost 83 percent from the peak, and construction jobs, a key driver of the local economy, are down 27 percent.

A 25 percent drop in retail sales here throughout a period of 26 months describes the second double black diamond slope.

On the hopeful side for North­west Colorado, Steidt­mann said, prices for coal, oil and natural gas all are increasing. In the agricultural sector, prices for beef and lamb are going up, and thanks to a Russian embargo on grain exports after last summer’s fires, domestic grain prices also are up.

Finally, Steidtmann offered a glimpse of what Steamboat’s role in a post-recession world might look like.

“Bandwidth is destroying the importance of location” for businesspeople, allowing them to live anywhere they please. “I think we’re going to be seeing more and more of those people coming to town.”

Comments

housepoor 3 years, 5 months ago

sounds like it was an interesting discussion.

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Scott Wedel 3 years, 5 months ago

Overall, I agree with him.

Though, as Scott Ford frequently notes, regional income from ag is minuscule compared to everything else so rising beef and lamb prices would have the smallest effect. Price of coal may be increasing, but it appears Twentymile is selling less to existing customers and having a hard time selling to new customers. Production is down due to lack of demand.

I agree that bandwidth is destroying the importance of location, but it also creates demographic challenges because skiing has had minimal success expanding outside of those of European descent and people from the rest of the world are the growing part of the population.

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ybul 3 years, 5 months ago

A small effect is better than no effect. In addition while the price of beef or lamb may not have that much of an effect. The strategy should be in adding value. While the foundation is the beef, one could add value in making Jerky to be distributed nationally, or a myriad of other options.

Unfortunately, we are blinded by the fact that everyone wants to make something for doing little. It might just be that we are moving back to an economy that relies on some of these more traditional types of jobs.

Do you count the processing, shipping, marketing as part of the beef or simply use the analysis of beef on the hoof in your extrapolation of what value comes from ag. You think we might have to use something we manufacture in this country to balance our budget deficit with China. Maybe we should be teaching mandarin and trying to get some sort of pipeline going with Chinese tourists who want to spend their money.

My cousin is in town, works with Train and is their translator for Mandarin. They were saying that the Chinese are paying large sums of money for all kinds of crazy things. Why not focus on opening up a pipeline to China with our goods produced here. Get the sheep grower to move to a higher quality wool sheep to be spun in Oak Creek, hayden, etc. to be shipped over there. Invest in the technology so we can compete with them. Buying plane tickets is not going to cut it for the long haul. Having high quality wool here, might actually be a draw for tourists. Put in the technology to weave it at a competitive price and have a local product that we ship out.

The ideas are endless, and the adding of value to the base product is going to be what takes the region to the next level.

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Scott Ford 3 years, 5 months ago

Hi Scott W - Towards the end of his speech, Carl did a good job of trying to fold in some local economic data. At a minimum, I was glad he did not reference city sales tax collections. He has done that in the past. Way too often, this statistic is discussed as the primary indicator of the local economy and it drives me a wee-bit crazy.

I appreciate that Carl recognizing how broadband is changing the local economic landscape. He admitted as much that this technology allows him to live in Steamboat Springs with his boss and direct reports scattered around the world. Having the Yampa Valley Regional Airport is also a big plus.

The livestock prices quoted by Carl were a way of acknowledging this industry sector that a lot of folks think is far bigger than it really is. I think Carl falls into this category as well. The Ag sector is very valuable to the economy because it is the keeper of a lot of prime open space. Open space that does not require significant public dollars to for it to be maintained as open space.

The reality is that Ag has been about the same relative size in Routt County today as it was 40 years ago. In 1969 Ag income in Routt County was about $2.5 million. It represented 10.9% of the county's personal income. In 2008 it represents less than 1%. The scope of agriculture activities did not significantly change, however, the rest of the local economy eclipsed it.

Adjusting for inflation in 1969 the personal income in Routt County for all sources was $133.1 million. Today that number is $1.2 billion. Not bad for a sleepy little mountain town. On the same adjusted for inflation basis personal income from agriculture activities was $14.4 million in 1969. Today it is just over $10 million. Source: Bureau of Economic Analysis

There was a time in Routt County (1969) there were 60,000 sheep in county - today that number is in the 5,000 to 7,000 range at best. In 1969, there were about 43,000 cattle today that number is about 30,000. Source = USDA / National Agriculture Statistics Service

Carl is getting better about asking me for numbers before he does one of these speeches. I provided him Routt County's gross retail sales from 1999 forward on a monthly basis. Progress is almost always incremental and it is improving. Who knows the future may hold promise. I am a patient guy.

I really enjoyed his speech I always do - He is a very smart guy and I lean from observation how he presents economic concepts.

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Scott Ford 3 years, 5 months ago

Hi Ybul - I think we are done doing much in the way of sheep in Routt County. Predators are the biggest factor that limits sheep production in Routt County. There was a time that the predators (primarily coyotes) were controlled very effectively with poison. In 1972, President Nixon issued Executive Order 11643 banning the use of poisons to control predators on Federal lands. Shortly after that, the EPA would no longer license the production of poisons effective against coyotes.

The problem with the poisons is that to be strong enough to kill a coyote it kills a lot of things that would subsequently feed on the coyote's dead and rotting carcass. Eagles specifically found dead coyotes carcass very tasty and it became their last meal. (If only we could train Bald Eagles to be more discriminating in their culinary choices.)

We still graze a lot of sheep in the summer time in the Routt National Forest, however, the resident Routt County sheep population is a fraction of what it used to be. A lot of the visiting sheep are lost due to predators as well but the loss is viewed by the producers as a cost of doing business and they expect a certain level of loss.

I am curious, do you think the agriculture sector is doing poorly in Routt County?

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ybul 3 years, 5 months ago

No I would not say ag is doing well. It is doing, however, the point was where do you stop measuring agriculture and what can agriculture do to promote tourism. Agri-tourism is the fastest growing component of tourism.

Here is a question, in Napa Valley, a region thats agricultural sector is bringing in lots of tourist dollars, do you simply count the value of the grapes that are produced in relation to how much value there is in the economy directly attributed to tourism? Maybe those grape orchards add a lot of economic activity for the economy that would not be classified as agriculturally related. That is the point, where does agriculture start and stop.

I think with all the whoopla surrounding health care reform, one could even argue that agriculture gets into the health care industry as we are what we eat and poor diet is associated with health care woes. To take it a step farther it is being show we are not just what we eat but we are what are food eats, with the rise of omega-3 enhanced eggs, the result of flax seed in the poultry's diet.

ANyway enough said as I was trying to point out that agriculture could be a large factor in promoting tourism if it were nurtured in that way. However, it is viewed as the ugly stepchild in the valley that adds little value and is a tiny component of the economy, so why worry about that fragment as it has stayed constant for a long time.

The resident sheep population is down in Routt county as the sheep ranchers know it is more cost effective to migrate there flocks out of Routt county in the winter as the deer and elk largely do, as the cost of producing hay and feeding it destroy the profitability of a ranch.

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Scott Ford 3 years, 5 months ago

Good Morning Ybul - Your comments about agriculture in Routt County are very insightful. There are a host of folks that think agriculture is under such financial stress it is on the verge of collapsing. This is not the case in Routt County as a whole. I am sure there are individual situations - there always are.

To put it simply, its hard work to be in agriculture. Those that are, are committed to it because it is a way of life - often because they grew up doing it. It is likely that very few ranch operations in Routt County are "self-sustaining" . They are able to make ends meet often as a result of off ranch income, i.e., the spouse may work as a lab technician at the hospital.

Cultural Heritage Tourism (CHT) I think will be a growing income generating option for a few in the agriculture community. The challenge will be how much money can be made from such activity. Hard saying? Thus far any of the ideas that I have heard would at best it will be fractional part of farm/ranch income. The largest economic benefit from CHT comes from housing and feeding the visitor involved with CHT activities. If folks can do this on their ranch - there is a wee-bit more money to be made - but it is not classified as agriculture. It is classified as accommodations and food services . And it comes with a host of its own challenges - that have nothing to do with agriculture activities.

Locally gown products likely has the greatest potential of being an additional measurable source of farm/ranch income. However, we are limited because of the climate in the Yampa Valley. There may be some opportunity with 100% grass fed cattle. Likely there is more opportunity with cool weather botanicals such as Osha, St John's Wort, "Wild Ginseng", etc. (I am sure there are others herbs that would thrive here.) During the summer months the Yampa Valley has warm days and cool nights. This combined with a rapid transition to fall I am told enhances the pharmaceutical potency of certain botanicals.

If we got really good at growing botanicals known for their pharmaceutical potency, over time, not unlike the Napa Valley that is known for their wineries, we could become known for our botanicals, ( growing-harvesting-processing and selling). This type of activity would be considered as agriculture income. Like the wineries have discovered in the Napa Valley more money can be made if the "middle men" can be removed and the producer deals directly with the consumer.

Increasingly the general population is seeking complementary and alternative medicine. Botanicals play a role in this movement and demand is increasing. This is why I see opportunity. How big is this opportunity? It depends on the type, quality, potency and acceptance of the botanicals we can grow locally.

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Scott Wedel 3 years, 5 months ago

The challenge facing ag is that this is a resort area so the buyers of ranches are not dependent upon ag for income and thus ag is just a hobby. Maybe horses for fun. Maybe some sheep or cattle to graze to control the fire hazard.

Ag tourism may be growing, but it is also starting from such a low point. It is hard to envision how the numbers could ever reach a point where there are thousands of people in the valley for ag tourism. But we do get thousands for summer and winter tourism.

It is also a fallacy based upon local pride to look at the one exceptional place and use that as the model of what we should expect locally. There are very few places like Napa that have a large number of high quality wineries, in a pretty valley and is also close to a huge urban area. But there are dozens, if not hundreds, of places that have tried to do winery tourism and may have had some success, but nothing comparable to that of the Napa Valley. A prime example of the fallacy of local pride is Oak Creek recently passing a comprehensive plan saying only retail on Main St first floor, no more offices so they can have a Main St pedestrian mall like Steamboat. But unlike Steamboat which knows how to get things done so the SB mmj dispensaries can rent appropriately zoned space and start grow operations the next day (RMR without fuss has rented how many thousands of sq ft for grow operations?), OC has a process that takes months only to then have one board member say that maybe the Town should see if it can find an acceptable location. The Town's new proposed land use code has so many required steps that time to be approved to open a new store on Main St should, on average, take 2 1/2 months. That is the philosophy of local control to make sure they like everything that is done. Meanwhile, SB has zoning and approved uses so opening a new store in a commercial district takes just a few minutes at City Hall.

Anyway, point being that towns and cities can get a reasonable share of economic activity and if they are better at allowing new business to move in then they have a good chance of getting more than their share.

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aichempty 3 years, 5 months ago

Wow. Only in this town could anyone propose that marketing marijuana is the key to economic success.

There are not a lot of really successful people spending a whole bunch of their income on marijuana to the point that the so-called "industry" could support our local economy.

2012 is coming, and it may not be the end of the world the Mayan calendar predicts, but with the change in government everyone is predicting for 2010, marijuana dispensaries could be the first target of the incoming Republican administration in 2013. Any secretly held plans to "go global" with mountain-grown MMJ after a nationwide movement for legalization succeeds are probably not going to pan out. The MMJ bubble will be a lot easier to bust than the real estate bubble was, because the DEA will be able to look up the locations in the phone book.

California may well legalize pot this time around. There will be two years to see how that works out before the 2012 elections. The state of California is already bankrupt, driven into financial disaster by a tax structure that has made business move away, and the prosperity required to service its infrastructure has already collapsed. They're just waiting for the repo man to show up, for somebody to turn off the electricity, and for the desert to start taking back Los Angeles when the squatters leave to find a place where they can work for food. There won't be anybody left in the government who can buy stuff and give it away, because the tax money will be gone. California could, once again, become a place where subsistence farming and ranching is the only way to live. Driving through will be like driving through Mexico at night; you'll be taking your life in your hands. As a matter of fact, it would not surprise me to see San Diego become an American enclave similar to Guantanamo Bay in Cuba (because of the U S Navy bases there), with disorder and lawlessness outside the gates from Tijuana all the way to the Napa Valley, or even further.

People cannot live without someone doing the work to feed them. It is time to get real. People in this country existed by living on the land (farming) for three hundred years before our "modern" era of electrified farms, manufacturing businesses, land speculation and population-growth-fed service sectors became viable ways for lots of people to make a living.

We are suffering from the same illness that killed the original Roanoke colony in Virginia; people searching for gold failed to do the work required to feed themselves, and they all died. If people around here expect to thrive in businesses that depend upon other people prospering to spend money on ski vacations, that may be a thing of the past.

We've seen a lot of immigrants show up in town to take the jobs abandoned by former locals. When the immigrants begin to disappear -- stand by.

So, don't plan on converting foreclosed homes to B&Bs to serve the marijuana tourism business quite yet.

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ybul 3 years, 5 months ago

Yep there are very few places like Napa Valley, the point is to look at the best and shoot for that. Seems that Ag land is coming down in price to me in the area. We are not Vail, Aspen, Telluride either as they are in box canyons.

The point was that in Napa, the revenue from agriculture is based upon the economic driving force that it provides. The labeling a vinyard as an orchard. So that we are not confusing the fact that adding value to the product to make a Yampa Valley Brand Beef Stew, with local potatoes, beef and root vegetables, might just provide some much needed employment and enhance the value of the ag numbers in the region, though those numbers will only count the base value. That is the point.

Where does agriculture begin and where does it end!

The attitude put forth that well it is such a meager component of the economy we should forego any investigation into what we can do to help it thrive, thereby adding to the flavor, spice of the tourist experience.

Mtn biking in the area and then taking in some of the menonites cheese, having some locally produced beef jerky to take with me on that hike.

You are right we are very unlikely to see a level of success like napa's however, we might see success that helps to offset the 2000 jobs lost locally.

The region is the best in the country at putting weight on cattle in the summertime, no sugar beets needed, feedlots in nebraska do not do any better. The competitive advantage for the area is in its ultra high quality grasses, which are baled and shipped off to feed horses in other areas, what if we tried to optimize the productivity of the grasses in the area, and then optimize the caloric return on solar energy converted via grass production.

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aichempty 3 years, 5 months ago

2000 jobs cost at least $100,000,000 per year. Everybody in the county would have to increase their spending by $10,000 per year to make up for it.

That's a lot of potatoes and jerky, ya know?

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jerry carlton 3 years, 5 months ago

The good news is the number of livestock still outnumbers the people in the county. The bad news will be when the people outnumber the livestock.

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Scott Wedel 3 years, 5 months ago

Aic, Oakland and SF California have already shown how to deal with the DEA busting dispensaries during the Bush Admin. They directed their police depts to not cooperate with the DEA as long as the DEA is not respecting city and state laws. They recognized that the DEA has the right to enforce federal drug laws, but that there is no legal obligation for local law enforcement to cooperate with the DEA. Well, DEA is highly dependent upon local law enforcement so the DEA quickly caved. Which is why the Justice dept under Obama made it official policy to respect local mmj laws because they didn't want to repeat that losing situation everywhere else that has mmj. Plus, the DEA lost cases in court because local juries would not vote to convict someone following local and state laws even if they were violating federal law. It would be interesting to see if a Republican administration would want to start that fight with so many cities.

MMJ is not the great economic salvation, but it is local money and jobs instead of the same money going to illegal operations growing it someplace else and paying for illegal smuggling and distribution operations.

More important to the local economy, it that it shows how SB can be an easy place to run a business. Okay, number of dispensaries is limited, but those dispensaries are allowed to rent space for grow operations as they see fit, not as the City sees fit. There are not public meetings taking months for every grow operation that ask if the dispensary is busy enough to justify additional grow space and so on.

Just like the City was helpful to Smartwool by getting them into the unused airport terminal building.

Good ideas that generate jobs should not be ignored. Though, resources spent on an idea should reflect the amount of potential jobs. So SB probably should not be shifting money from winter marketing into ag tourism.

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Scott Ford 3 years, 5 months ago

Carl's statement about losing 2,000 jobs is accurate, however, it all depends when one starts to keep score. In 2007 Routt County had an average unemployment rate of 2.7%. The civilian labor force was 15,870 and there were 15,442 jobs. The civilian workforce is simply defined as individuals between the ages 16 and 64. When one considers students, stay a home parents, etc., it is little wonder that the help wanted classifieds in the paper were 5 to 7 pages.

In 2009 the civilian labor force was 15,104 and the number of jobs was 14,066. Did we really lose 1,376 jobs? Absolutely! However, in the Bureau of Labor Statistics all jobs are created equal. A job that is 40 hours per week counts the same as a job that is only 10 per week.

At a very high level what we have seen locally is that the number of jobs has declined but the average weekly wage has increased. This is caused by a combination of things. Part-time employment has been squeezed out of the system and a disport ion of the jobs losses occurred in industry sectors that pay below the median annual wage. Most likely the greatest share was due to squeezing the part time jobs out of the system.

Because of our seasonality the 1st quarter of the year is typically the most active with regards to employment. Comparing 1st quarter 2008 to 1st quarter 2010 we see the following: 6% loss in the number of establishments that have employees (1,861 to 1,743) 16% decline in average employment (16,583 to 13,923) 16% decline in total wages paid in the quarter ($150,657,979 to $127,272,147) 1% gain in average weekly wage ($699 to $703)

The numbers in Eagle County for the same period are: 6% loss in establishments 12% decline in average employment 21% decline in wages paid in the quarter 11% decline in average weekly wage.

The jobs Eagle County lost were likely well paying full-time jobs in energy and construction sectors. Ouch!

It is likely that with the exception of Pitkin (Aspen) and perhaps La Plata (Durango), Routt County faired better than we give ourselves credit for. Has it been tough? Again, absolutely! There is a lot of heartache and frustration out there and I do not want to minimize that. However, we have done OK all things considered.

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aichempty 3 years, 5 months ago

An easy place to run a business? Holy cow, what do YOU do for a living?

When Oakland and SF start doing without federal funding, they may change their minds.

The jury question holds water, however. On the other hand, bankrupting growers with legal defense fees is definitely a possibility. A person successfully selling pot can hardly claim that he cannot afford a lawyer.

There's always a way.

Mostly, though, I think California is going to fold economically and cease to be an important player in national politics. Civil disorder is definitely a possibility when money runs short and they cannot pay the cops.

There is a reason (several, actually) why CA is in financial difficulty, and they all come down to lack of personal productivity, too high a demand for government services, and a misunderstanding of where money comes from. They'll be lucky to keep an agricultural business base as everyone else leaves to find jobs.

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Jeff Kibler 3 years, 5 months ago

Agri-tourism? I grew up in eastern Washington. Abundant wheat, cattle, peas, asparagus, sugar beets and onions. Nobody visited for that. What changed was wine grapes: http://www.winesnw.com/wahome.html

I used to brag to folks back home that Steamboat had better dining than Yakima or Walla Walla.

That's not the case today. Wine tasting tours are a big thing in towns that were once the dregs of the Pacific Northwest.

It's the added-value of a drug (EtOH included) that brings in the agri-tourists. Once MJ is legalized, methinks that Alpine Taxi will be filling buses with folks touring the local grow houses, tasting the county's kush.

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brian ferguson 3 years, 5 months ago

The immigrants taking jobs part sounds right, but abandoned? When they all start leaving, watch out? I think this recession is the best thing that ever happened. Just think, Steamboat doesnt have to turn into a Vail or Aspen for a few years longer. O.k reem me out now for being an uneducated fool.

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Jeff Kibler 3 years, 5 months ago

Reem or Ream. Vowels are so confusing. Where is Duke_bets to moderate our improper spelling and grammar?

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Scott Wedel 3 years, 5 months ago

SB may not be an easy place to run a business, but what I was trying to say is that the city government does a reasonable job of not messing with someone's business. The issue with the Ghost Ranch and noise is because a neighbor called police and signed a complaint and so it goes to court. The city's planning commission didn't summon the owners of the Ghost Ranch. Ghost Ranch is not facing their business being shutdown by city planning or city council.

So it is all doom and gloom for the state that is the corporate and engineering headquarters for Google, Apple, Oracle, Intel, Cisco and so on?

It is counterproductive for the Feds to fight local law enforcement. DEA wants to go hogwild and threaten overall federal funding? Great, now try winning a local case in front of a jury. And the pressured government would do the old slow walk style of cooperation where the official policy is cooperation, but it takes two weeks to arrange a meeting between DEA and local police and then three weeks to get the requested information and so on.

And state's rights Republicans are going to argue Federal supremacy regarding local production and local selling of a legal local product?

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ybul 3 years, 5 months ago

--Everybody in the county would have to increase their spending by $10,000 per year to make up for it.--

A dollar spent on local food recirculates about much longer than a dollar spent on a dollar spent at the chain grocery store. so that figure would be cut by a quarter as the economic impact of local food has a large multiplier.

Though the original point was where do you stop measuring local agriculture. If there was a processing plant that would probably not be considered ag but would be manufacturing. Nor are the dollars spent at the equipment shop.

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