Free virtual discussion covering infrastructure investment opportunities for distressed rural places on Jan. 15

Pipa will be joined by Prof. Stephens, right, for
 discussion on infrastructure in rural places.

Chronic underinvestment in infrastructure plagues distressed rural communities throughout the United States. And while several programs offer solutions specifically for distressed places, these communities have to know what's available and how to apply.

To help, Brookings is hosting a a free virtual session: "Unlocking infrastructure investment in distressed rural places," on Wednesday, Jan. 15, from 3:30 to 4:30 p.m. E.T. Get the details here.

The session will be led by Tony Pipa, the host of Brookings' "Reimagine Rural" podcast, who will be joined by West Virginia University professor Heather Stephens. The two will talk with leaders of the Appalachian Regional Commission (Gayle Connelly Manchin), Delta Regional Authority (Dr. Corey Wiggins), and Northern Border Regional Commission (Chris Saunders) on the insights offered by an upcoming report from Brookings that tackles the ins and out of investment in distressed rural places.

The experts will share their experiences and thoughts on the best practices for directing investment to distressed rural places.

Viewers can submit questions for speakers by emailing events@brookings.edu or via X (Twitter) @BrookingsGlobal using #RuralInvestment.

Athletes invest in Iowa farmland, which rose 17% in value in 2022, partly due to investors, who made 27% of purchases

Joe Burrow (Photo illustration by Front Office Sports)

Cincinnati Bengals quarterback Joe Burrow, who advanced his team's defense of its Super Bowl title on Sunday, is investing some of his money in Iowa farmland, along with other professional athletes.

Burrow was part of "a group of about 25 athletes [who] pooled $5 million for an agricultural investment fund to purchase farmland," Abeer Allam reports for Successful Farming. "The first purchase was a 104-acre corn and soybean farm in northern Iowa, Front Office Sports reported this month."

The athletes "will lease the land to farmers and seek a single-digit-percentage annual return on the total investment, FOS reports. "The group — which will purchase four additional farms within the next few years, seeking a diverse set of agricultural assets — have looked into watermelon farms in Oregon, which tend to be smaller and offer higher per-acre rent." Allam reports the move was prompted by "investment in farmland by high-profile billionaire buyers like Bill Gates and Warren Buffett . . . to diversify their investment portfolio and hedge against inflation, experts say."

“Beyond the traditional reasons of buying recreational land, many investors see farmland as a stable asset that could generate robust returns,” Wendong Zhan, leading researcher of the Iowa Land Value Survey at Iowa State University and assistant professor at the Dyson School of Applied Economics and Management at Cornell University in Ithaca, N.Y., told Allam. “The declines during downtimes tend to be less drastic.”

The Land Value Survey found that the average value of Iowa farmland "increased 17% to $11,411 an acre in November 2022 from November 2021, the highest nominal value ever since the 1940s," Allam notes. "The value growth has been driven by several factors including high commodity prices, bumper crop yield, low-interest rates, limited land supply, and strong demand from investors. . . . Investors represented 27% of land sales in Iowa, split between local and non-local investors, while new farmers accounted for 4% of sales in 2022, according to the survey."

Higher land value is good news for owners, but "Farmers who still have farmland mortgages and/or rent many acres from others, face a much higher cost of financing and cash rents," Allam notes.

Hedge funds and other private-equity firms degrade local journalism, but may have kept some newspapers from dying

Chart by The Economist

By Al Cross
Director and Professor, Institute for Rural Journalism and Community Issues, University of Kentucky

The conventional wisdom about hedge funds and other private-equity companies buying newspapers is that they're bad for journalism. But might they also be good for papers, by keeping them afloat?

So argues some research in progress at the California Institute of Technology and New York University, and reported by The Economist, which states flatly, "Private equity is keeping newspapers in business." That's based on the researchers' analysis of papers that have been bought by private-equity firms compared with those that were not. "They found that newspapers that were bought were 75% less likely to shut down. Daily papers were also 60% less likely to become weekly publications."

The paper is still in progress, so it's not published, much less finished with the peer-review process of an academic journal. The researchers and reviewers might want to consider other reasons that papers bought with private equity would be less likely to close, such as a stronger cash flow, which made them more attractive than weaker papers to private equity. As for conversion to weekly, there could be a similar reason, that the papers in smaller markets are less attractive to private equity.

The authors should have considered those factors, said Northwestern University Visiting Professor Penny Abernathy, who has done the most comprehensive studies of newspaper ownership and trends. She told me in an email that there's also a question about the definition of a newspaper: "Is it a stand-alone newspaper, or has it been merged with another newspaper and become merely a zoned edition of another paper? Both Alden [Global Capital] and Gatehouse have extensively merged smaller newspapers with one another and with a larger paper. As a result, when we do our annual survey, we often find between two, three or even more newspapers published under separate banners, but carrying identical 'local' news stories – even though they may be located miles apart or in different counties."

Also, what is private equity? "Are they including the large private regional chains (Adams, Paxton, Ogden, Hearst), as well as the large national chains (Gatehouse, Alden, Civitas, CNHI)? The large national chains have a very different focus and management philosophy. As I have pointed out in all my reports, dating back to 2016, the family-owned chains tend to have journalistic roots and mission (balanced with shareholder return), whereas the large national chains are solely focused on shareholder return. The large private regional family-owned chains tend to have tended to have many fewer closures." For Abernathy's full email, click here.

The Economist reports, "The authors caution that they cannot estimate the general causal effect of private-equity buy-outs, but only the effect on the newspapers in their sample. Private-equity firms do not purchase newspapers randomly. They target failing newsrooms with potential for turnaround; papers with low circulation but high advertising rates were more likely to be bought, they found."

What seems more certain is that the researchers have latched onto a very worthwhile topic and are rendering some useful facts, as described by The Economist: "After private-equity buy-outs, papers laid off reporters and editors. Across a sample of 766 American newspapers (accounting for around 45% of total circulation), the researchers found that payrolls were about 7% lower at papers with new private-equity capital than if they had not been bought out. They also found a 16.7% relative decline in the number of articles written within five years of the buy-outs (though, admittedly, that is better than going out of business). And they identified a change in focus from local to national news: the share of articles on local politics dropped by about a tenth."

So, private equity appears to be bad for local journalism, which is in trouble not just because newspapers are in trouble but because Americans have become less interested in local news and more interested in national news in the era of social media that make geography less meaningful, and at a time where the intensity of national politics is having deleterious effects at the local level.

"Local reporting is expensive, because it requires journalists on the ground and cannot be syndicated," The Economist notes. "In a study published last year, researchers at Colorado State University, Louisiana State University and Texas A&M University concluded that when readers consume national news their views become more polarized. Poor local coverage is also associated with less competitive mayoral elections, and newsroom staff shortages are linked to lower voter turnout."

Investment firms buy trailer parks, squeeze them for profit

Mobile homes as a share of each county's housing units as of 2017. Washington Post map; click the image to enlarge it.

Mobile-home parks are a critical source of affordable housing, especially in rural areas. Increasingly, investment companies are buying them up and, in efforts to extract maximum profits, making it harder for the poor to afford living in them.

About 20 million Americans, many seniors, veterans, and people with disabilities, live in mobile homes. Manufactured housing, common in rural America, is one of the largest sources of unsubsidized low-income housing in the U.S. Sheelah Kolhatkar reports for The New Yorker. 

"According to a report by the National Low Income Housing Coalition, there isn’t a single American state in which a person working full time for minimum wage can afford a one-bedroom apartment at the fair-market rent. Demand for subsidized housing far exceeds supply, and in many parts of the country mobile-home parks offer the most affordable private-market options," Kolhatkar reports. "In the past decade, as income inequality has risen, sophisticated investors have turned to mobile-home parks as a growing market. They see the parks as reliable sources of passive income—assets that generate steady returns and require little effort to maintain. Several of the world’s largest investment-services firms, such as the Blackstone Group, Apollo Global Management, and Stockbridge Capital Group, or the funds that they manage, have spent billions of dollars to buy mobile-home communities from independent owners."

Absentee investors that buy mobile-home parks often extract more profit by raising the rent on lots, charging residents for services that were once included, and requiring residents to be responsible for more upkeep on the grounds. One seminar for potential trailer-park owners, Mobile Home University, "recommended that owners regularly raise rents, but not so much that it would drive out desirable tenants," Kolhatkar reports. "They also told investors to avoid 'tenant-friendly' states such as California and New York, where evictions can take months, and urged them to concentrate on areas where there is a shortage of reasonably priced rental apartments." 

Esther Sullivan, author of Manufactured Insecurity: Mobile Home Parks and Americans' Tenuous Right to Place, attended one of the seminars and told Kolhatkar its advice can be summarized as: "Look for a park that’s got high occupancy and that doesn’t need a lot of investment. Take out any possible amenity you’d ever need to invest in, such as a playground or a pool that’s going to need insurance. Make sure it’s got a nice sign, and pawn off any maintenance costs onto your tenants." HBO's John Oliver was more frank, describing the program as "a crash course in how to be an asshole."

Because mobile-home dwellers usually own their home but rent the land it sits on, they're often excluded from basic legal protections for renters, Kolhatkar reports. In theory, such residents can simply move their home if they don't like conditions in a trailer park, but in practice it can cost as much as $10,000 to move a mobile home, leaving residents hostage to predatory lot owners. Some states have passed laws closing those loopholes, but trailer-park residents in many states remain vulnerable.

Steve Case, J.D. Vance try to lure venture capitalists to rural America with $150 million investment fund, bus tour

Steve Case and J.D. Vance (CBS image)

Steve Case, the billionaire co-founder of America Online, is trying to get more venture capitalists to invest in often-overlooked smaller towns and cities in the middle of the country. His main weapons: a $150 million investment fund and a "Rise of the Rest" bus tour designed to lure news coverage, Sharyn Alfonsi reports for CBS's "60 Minutes."

Most venture capital is invested on the coasts, Case said: about 75 percent in California, New York and Massachusetts. In an effort to bring more attention to "flyover" states, Alfonsi reports, he and his team have traveled to dozens of cities in 26 states on a bright red tour bus, looking for promising ideas that Silicon Valley has overlooked.

In the past year the fund has invested in more than 100 companies in 63 cities and towns. Not only that, a few big names in business have offered funding and advice to entrepreneurs, including members of Walmart's Walton family, former Facebook president Sean Parker and former executive chairman of Google Eric Schmidt, Alfonsi reports.

People in the middle of America "have been forgotten," Case told Alfonsi. "It's not about a feeling about being left behind, they have been left behind. We have to kinda level the playing field so everybody everywhere really does feel like they have a shot at the American dream. Right now, they don't."

The Rise of the Rest tour bus (CBS image)

J.D. Vance, who wrote the bootstrappy bestseller Hillbilly Elegy, agrees with Case so much that he helped develop, run and raise money for the Rise of the Rest Fund. Vance told Alfonsi that many people who live on the coasts seem to assume that small-town residents are stupid and that "the only people who live here are the people who are forced to live here," which he said is not true. And though Vance doesn't think the tour will transform any town's economy, he said the initiative is part of a larger movement to bring more economic prosperity to the middle of the country.

That means places like Pikeville, a town in far Eastern Kentucky that has been hit hard by the opioid epidemic and the decline of coal. Rise of the Rest invested in a project there to build high-tech greenhouses on top of former strip mines, Alfonsi reports. The greenhouses, which will be staffed by well-paid recovering opioid addicts, will supply fresh, affordable produce to surrounding areas. That ticks several boxes: it helps keep addicts productive so they won't be tempted to use again, it pumps money into the local economy, and makes it easier for locals to access affordable fresh vegetables.

A local high school student told Alfonsi he hopes the project takes off: "There's not anything here right now. And I hope and pray for our community that something does come back here, but as of now it's impossible for all of us to stay even though 90 percent of us want to, and be able to live the kind of lives where we could support ourselves and our family too."

Vance said he hopes so too, and hopes that projects like the one in Pikeville will show outsiders that investing in such communities is worth it. "We shouldn't just accept that the story should be one of decline," Vance told Alfonsi. "And that's what I think -- you know, at its core, what Rise of the Rest is about is refusing to see the worst in any place. We want to see the best."

UPDATE, March 27: The publisher of the Appalachian News-Express in Pikeville, Jeff Vanderbeck, had some problems with the report. Here is his column.

Georgia governor signs rural jobs law; similar laws fail to see promised revenue

Georgia Republican Gov. Nathan Deal on Tuesday signed a tax credit law that supporters say will create rural jobs and boost economic development, but critics say similar laws have failed to deliver on promised jobs and tax revenues, with investors profiting from the deals even if the businesses they fund never create another job. Utah Republican Gov. Gary Herbert signed a similar law in March, while other states have proposed such laws.

Georgia's tax credit law "provides $60 million in tax credits to companies that invest in businesses in rural parts of the state," Michelle Baruchman reports for The Atlanta Journal-Constitution. "Several state lawmakers who are considered candidates for statewide runs in 2018 supported the measure as an effort to boost parts of the state that have seen rising unemployment rates and slowed growth." (Stateline graphic: Rural jobs bills)

"However, the bill narrowly escaped the chopping block," Baruchman writes. "Lobbyists for national capital companies that could benefit from the incentives pushed the bill through in the final hours of the 2017 legislative session despite criticism from Senate Democrats and Republicans who pointed to the spotty records of similar programs that made big money for the investment companies even if no jobs are created."

Similar laws have caused confusion, Jen Fifield reports for Stateline. "Economists and policy analysts say the programs are so complex, and the promises so appealing, that states typically don’t take a close look at them until it’s too late. Most state offices that have studied the programs have found that the jobs and revenue promised would not materialize, and recommended the programs be shut down, changed or not extended. In some instances, state audits found that the programs lacked transparency and accountability."

Urban investors buying up farmland in the hopes of getting long-term returns

Soybeans on LandFund Partners' property. The Nashville
firm manages 25,000 acres worth more than $100 million.

Investors are increasingly turning to farmland to generate profits, Getahn Ward reports for The Tennessean. "Investing in farmland is seeing growth as a vehicle for taking advantage of the long-term need to feed a growing world population. More wealthy individuals, pension funds and other institutions also see that emerging asset class as a way to reduce risk in their portfolios."

Farmland, a safe bet for investors, "is a $2.4 trillion sector in the U.S., which is the world's leading agricultural exporting country," Ward writes. "Generally, as the price of goods produced using agricultural commodities rises, the value of farmland also increases. And with the average age of U.S. farmers around 58 and less than one percent of the nation's farmland owned by institutional investors, companies see a lot of opportunity to expand their portfolios."

Since 1970 "farmland produced an average return of 10.27 percent, which according to the TIAA | Center for Farmland Research at the University of Illinois, reflects cash rent plus capital gains less property taxes," Ward notes. "Comparatively, the S&P 500 returned 6.79 percent during that period, while the NASDAQ gained 9.63 percent."

Todd Kuethe, an agricultural economist at the University of Illinois, "cautioned that investing in farmland isn't for everyone," Ward reports. "That's in part because farmland is expensive to buy and sell in transactions that require a large amount of time to identify a buyer and complete a sale." Kuethe told Ward, "There's an old joke: 'It's a get rich slowly investment.' It's a way of managing wealth across a couple of generations."

While land prices have dipped in recent years along with the global downturn in commodity prices, "Kuethe still sees a positive long-term outlook for land prices and growth for investing in farmland,'" Ward writes. He said, "By 2050, we will have nine billion people on the planet. Globally, we'll have to almost double our food producing capability. As people get wealthier, they get more of their calories from protein, which means more feed is required for livestock and also means that more crops has to be grown."

Rural jobs schemes not as successful as promised, but tax credits still flow to investors

Investment companies are cashing in on rural jobs bills that often fail to deliver on promises, Jen Fifield reports for Stateline in the first of a two-part series. "Under the bills, state tax credits are awarded to companies that agree to invest in or loan money to funds set up by investment firms or other brokers. The funds then invest the money in rural businesses. But states that have evaluated the multilayered subsidized lending programs—originally CAPCO (certified capital companies) programs and later New Markets Tax Credit programs—have found that they failed to deliver promised jobs and tax revenue."

This year 11 states have proposed rural jobs bills and Utah Republican Gov. Gary Herbert signed one into law last week, Fifield writes. "Three firms—Advantage Capital Partners, Enhanced Capital and Stonehenge Capital—have led the lobbying for the programs and have been the main participants in several states. The laws, through which states have awarded billions in tax credits, are generally structured in such a way that these and other firms that participate can profit from the deals even if the businesses they fund never create another job." (Stateline graphic: Rural jobs bills)

"The programs are so complex, and the promises so appealing, that states typically don’t take a close look at them until it’s too late, according to 10 economists and policy analysts who have studied them," Fifield writes. "Many critics, such as Steven Miller, senior vice president of the Nevada Policy Research Institute, call the programs 'schemes.' Miller says he expects a public backlash once they 'have gone belly up and taxpayer dollars have been used for private benefit.'"

"Under the new rural jobs bills—being considered in Arizona, Georgia, Kansas, Kentucky, Massachusetts, Minnesota, Missouri, New York, South Carolina and Washington state—investments would be made in small, rural businesses," Fifield writes. "The idea behind the programs is that they will generate economic activity that exceeds the cost of the tax credit. Unlike many other economic development programs, in which the state directs the flow of money, these programs rely on private firms or nonprofits—often investment firms or their affiliates—to act as brokers, directing the investments and loans made under the program."

State reports from Alabama, Colorado, Missouri and New York found that programs failed to create as many jobs or as much state revenue as promised and recommended they be shut down, Fifield writes. Only one state, Maine, "has concluded that the economic benefits of a program outweighed its costs." That study found "the state’s New Markets program would generate millions more in tax revenue than the state offered in tax credits. But some analysts cast doubt on its conclusions, arguing that the authors used methods for counting jobs, backed by the investment firms, that overestimate the number of jobs directly linked to the tax-credit program."

Millionaires are investing in farms as a safe bet in an economy that they think may collapse

Financial whiz kid Brian Luftman has been
investing in farms (Courier-Journal photo)

Millionaire investors are purchasing farms as a safe bet in what they think is an uncertain economy, Jere Downs reports for The Courier-Journal in Louisville. For example, Mississippi's Barry Gollott, a self-made millionaire, has bought farms in Alabama, Kentucky and Chile. He told Downs, "In a doomsday economy, farms are where the food has to come from. The way we are going, I think default is inevitable."

Conservative investors like Gollott "are finding safety for their assets in the farmland investor pools assembled by American Farm Investors, a Lexington, Ky. investment firm conceived in the ashes of the 2008 Great Recession," Downs writes. American Farm Investors was created by Brian Luftman, "a financial whiz kid who once traded derivatives in the cattle pit of the Chicago Mercantile Exchange," sometimes making as much as $200,000 a day.

Luftman, who said he bought an Illinois farm in 2008 for $4,800 per acre and sold the farm three years later for $8,800 an acre, told Downs, "Because the market was so scary, so tumultuous, and the banks were on the verge of collapse, I bought a farm." Luftman, who now acquires one to two farms annually, said that "when he looked around for a company that managed farmland for investors like himself," he couldn't find one. So he created American Farm Investors in 2011.

"To date, the annual financial returns on the nine farms purchased and managed by AFI mirror or exceed results achieved by investors in the bond market," Downs writes. "Unlike stocks and bonds, farmland is something an investor can touch, or visit. Unlike volatile securities, farmland's been appreciating in value an average 5 percent annually." (Read more)

Investment in agriculture technology skyrocketing; The Economist takes a deep dive into it

Investment in agriculture technology nearly doubled from 2014 to 2015, from $2.4 billion to $4.6 billion, Rob Leclerc reports for Forbes. Michael Macrie, chief information officer at agriculture cooperative Land O’ Lakes said he counted only 20 ag-tech companies as recently as 2010. Currently, there are at least 503 individual companies raising funding. "The opportunity to bring agriculture, a $7.8 trillion industry representing 10 percent of global GDP, into the modern age has caught the attention of a growing number of investors globally." (Chart from AgFunder’s AgTech Investing Report: 2015: Investment in ag tech)

"There is huge potential, and need, to help the ag industry find efficiencies, conserve valuable resources, meet global demands for protein, and ensure consumers have access to clean, safe, healthy food," Leclerc writes. "In all this, technological innovation is inevitable. It’s a complex and diverse industry, however, with many subsectors for farmers, investors, and industry stakeholders to navigate. Entrepreneurs are innovating across agricultural disciplines, aiming to disrupt the beef, dairy, row crop, permanent crop, aquaculture, forestry, and fisheries sectors. Each discipline has a specific set of needs that will differ from the others."

The Economist magazine's latest Technology Quarterly insert last week was titled "The Future of Agriculture" and carried this intriduction: "If agriculture is to continue to feed the world, it needs to become more like manufacturing, says Geoffrey Carr. Fortunately, that is already beginning to happen." Some of the subheads capture the narrative:
"In various guises, information technology is taking over agriculture"
"Farms need better products. Genomic understanding will provide them"
"Farming marine fish inland will relieve pressure on the oceans"
"Technology can improve not only productivity but animal welfare too"
"Technology will transform farmers’ lives in both the rich and the poor world"

Walla Walla venture capitalists invest in nonprofits, creating another form of rural philanthropy

Wikipedia map: Walla Walla County

A growing venture-capital firm is turning investments into philanthropy in the Washington's rural areas, Sheila Hagar reports for the Walla Walla Union-Bulletin. The business, Intermountain Impact Investments, "puts its money into enterprises that strengthen and sustain rural communities, in a strategy known as impact investing. Soon tangible signs of that philosophy will be on the roads, in physical therapy settings and on the dinner tables of residents in Eastern Washington."

Co-founder Lawson Knight "said investing works much like a mutual fund does," Hagar writes. "His office builds a portfolio of low-risk transactions grouped into a fund. Those who invest in a fund do so with the expectation of return, socially and financially, he added. Via its recently established rural asset replacement fund, Intermountain takes the money and creates equipment loans at lower rates, typically 4 to 6 percent. Nonprofit groups who need to make large-ticket equipment replacements can take out those loans, he said. As the nonprofits repay their loans, the money returns to the revolving fund that can help another nonprofit."

"Through Intermountain’s newly established rural asset fund, service-centered nonprofits can replace aging equipment or buy new medical devices," Hagar writes. "Items might include multi-passenger vans for transporting clients, refrigerated trucks to haul food donations, supplies to create safe housing for people with mental illness and pool equipment for rehabilitation needs. Often, agencies must address old or missing equipment through fundraising, loans or charge cards." Knight said "Intermountain expects to invest up to $2.5 million in its first rural asset fund venture." The organization currently has about about 10 percent of that money. (Read more)

Fraudulent oil schemes are again a booming business in Southern Kentucky

Last week, Mark Cornell "pleaded guilty to securities fraud in U.S. District Court in Eastern Kentucky, admitting his role in a scheme that defrauded investors out of $3 million," Justin Story reports for the Bowling Green Daily News. Cornell acknowledged acting as operator of oil wells in southern Kentucky "while others sold investments in the wells. Court records show his co-defendants misled investors with false information about the wells to make it appear they were producing substantial amounts of oil."

Kentucky Geological Survey map (TORIS is tertiary recovery)

Several similar cases returned guilty pleas in recent years, and several more cases are pending. Southern Kentucky has long been known as a “promoter’s paradise” because its oil production comes mainly from shallow wells that produce strongly at first but quickly decline.

Bowling Green attorney John Caudill told Story, “Frequently, what you get is an operator that advertises on the Internet that they have a very lucrative prospect . . . what typically happens is there’s no prospect at all. It seems very lucrative unless you do your due diligence and look into the prospect, but unfortunately, some people don’t, and they wire large sums of money as investors in exchange for a royalty interest in the project.”

Hedge funds target distressed coal companies

"Hedge funds are betting that some of the largest U.S. coal companies are heading for the financial slag heap," report Timothy Puko, Matt Wirz and Matt Jarzemsky of The Wall Street Journal. (WSJ illustration)

"The coal industry is in a prolonged slump with a long list of causes topped by sluggish demand and competition from cheap natural gas, which have pushed prices to historic lows," the reporters write. "Many investors have abandoned the sector. Eight coal-mining companies traded on the New York Stock Exchange are down an average of 29 percent in the last year. The conditions are ripe for hedge funds that target distressed investments. They are first betting against the stock and debt of mining firms such as Walter Energy Inc., then snapping up the bonds when their prices fall as low as 40 cents on the dollar."

Once the hedge funds become the companies' bankers, they can exchange that debt "for controlling shares of the companies if they go bankrupt," the writers explain. "Once coal prices rebound, mines and other assets can be sold at a profit. . . Alpha Natural Resources Inc. and Arch Coal Inc. have also seen heavy interest from distressed-debt buyers, people with knowledge of the matter said. Along with Walter Energy, the companies have a combined debt of $12.2 billion, according to Morningstar."

USDA starts $150 million capital investment fund to help small, rural, farm-related businesses expand

The U.S. Department of Agriculture announced Monday the formation of a $150 million Rural Business Investment program designed "to provide investment capital to help small agriculture-related business in rural areas with cash needed to expand," David Pitt reports for The Associated Press. As part of the program the USDA has created the Rural Business Investment Co., "a for-profit firm licensed by the USDA to invest in businesses that otherwise might not have the capital to increase business opportunities."

The Rural Business Investment Co. receives money from Farm Credit Banks and sets up an investment capital fund "that will be managed by Advantage Capital Partners, a New-Orleans-based firm with experience in investing in small rural businesses," Pitt writes. Money comes from eight Farm Credit banks headquartered in Minnesota, Texas, Colorado, Nebraska and Kentucky. The USDA is seeking applications from more companies, which "must be newly formed for-profit venture capital companies seeking to be licensed as an RBIC and intending to raise a minimum of $10 million in private equity capital." (Read more)

Some investment funds are dumping coal stocks

Will the coal industry run short of capital because too many investors are concerned with the greenhouse gases that mining and burning it will generate? Jesse Riseborough and Thomas Biesheuvel of Bloomberg News explore the possibility, suggested by a Norway investment fund's sale of coal and oil-sands stocks and a proposal by the country's opposition party to keep its sovereign wealth fund, the world's largest, from investing in coal.

The story notes that coal generated 30.3 of the world's primary energy last year, the biggest share since 1969, but quotes Nick Robins, head of HSBC’s climate change center of excellence in London: “There is the beginnings of divestment out of pure-play coal by some investors. There’s been a very marked rise in concern about this issue. There’s a recognition that as you move to a low-carbon economy that coal is potentially most vulnerable.”

Torklep Meisingset, head of sustainable investments for Norway's Storebrand ASA, which unloaded its coal stocks, told Bloomberg: “There could be an interesting parallel to tobacco,” which lost capital because of its health impacts and cigarette companies' perfidy about it. "The movement is an offshoot of a campaign by more than 70 investors to pressure all fossil-fuel industries on climate change," the reporters write. "It harks to the 1990s anti-tobacco push and is gaining help from unlikely partners. The International Energy Agency, a 28-nation group promoting energy security, is lobbying increasingly to limit the release of heat-trapping gases." (Read more)

Finding, developing and helping entrepreneurs could be key to economic revival in Central Appalachia

Appalachian Regional Commission
map shows in red the counties that it
considers "distressed," orange those
it considers "at risk," white those it
considers "transitional" and blue
those it considers "competitive."
For full map, click here.

With its main industry, coal, facing continued decline, there is a renewed sense of urgency in Central Appalachia about building a more diverse and sustainable economy in the region. Some think the key is developing entrepreneurship, so people in the region can create homegrown jobs. That's a complex process, and "Many of Appalachia's talented and ambitious entrepreneurs have left for better opportunities elsewhere," Lexington Herald-Leader columnist Tom Eblen writes in a column that spotlights the entrepreneurship ideas of Thomas Miller, a retired Ford Foundation officer who was earlier president of Kentucky Highlands Investment Corp.

"More important than having capital, he said, is having people who know how to successfully put capital to work," Eblen writes. "Miller proposes creating an Eastern Kentucky Venture Fund, led by a half dozen or so senior Kentucky business people with exceptional talents. They would need to raise at least $250 million in public and private equity and debt to create and nurture entrepreneurs and to invest in new businesses, often through existing organizations such as Kentucky Highlands. And an important focus would need to be creating businesses that bring new money into the region by producing products sold elsewhere."

Miller, left, who lives in Berea, Ky., told Eblen that logical investors include utilities, foundations and regional corporations. Government can play a role, but can't lead the effort, Miller says: "Government is about trying to please a lot of constituencies. Private investment is about saying 'no' 99 percent of the time." He also cautions that his is "probably a 50-year strategy, and the first 10 years aren't going to be pretty." Miller put his ideas in writing in January; you can read them here.

Eblen warns, "This effort would require culture change in a region where work has often meant working for someone else. And it would require extensive training in economics, entrepreneurship and business skills, from elementary school through college, both in the classroom and through extracurricular activities such as Junior Achievement." (Read more)

Read more here: http://www.kentucky.com/2013/07/21/2725406/tom-eblen-motivating-entrepreneurs.html#storylink=cpy

Read more here: http://www.kentucky.com/2013/07/21/2725406/tom-eblen-motivating-entrepreneurs.html#storylink=cpy

Read more here: http://www.kentucky.com/2013/07/21/2725406/tom-eblen-motivating-entrepreneurs.html#storylink=cpy

Humane Society looks to Wall Street to prompt change in pig-production practices

The Humane Society of the United States has bought shares in four major financial services companies in a bid to use shareholder pressure to force two of the nation's largest pork producers to stop housing pregnant sows in gestation stalls. The animal rights group said that its small investment is large enough to introduce proposals during shareholder meetings. The group, reports P.J. Huffstutter of Reuters, has successfully used such shareholder advocacy in the past to pressure food and agriculture companies to change corporate buying habits and production practices. (Wikipedia photo)

"By not changing over to alternative animal housing, claims the group, Tyson Foods Inc. and Seaboard Foods are putting their lucrative contracts with these customers at risk," reports Huffstutter. "McDonald's, the nation's top hamburger chain by sales, vowed in May that its U.S. business would only buy pork from farmers and other sources that do not use gestation stalls for housing their pregnant sows by 2022. Such stalls are used to confine sows during the breeding and post-birth process."

Seeing little success from the producers, "the Humane Society decided to a less-direct route and press its case with Tyson investors: JP Morgan Chase, , the biggest U.S. commercial and investment bank by assets; BlackRock, the world's biggest asset manager; Jennison Associates, a subsidiary of Prudential Financial, the second-largest U.S. life insurer; and Ameriprise Financial, a financial services company," Huffstutter reports. Tyson told her in an email that it is committed to humane animal treatment at all stages of food production, and expects the same from those farmers who supply products to it. Seaboard, the nation's third-largest pork producer, could not be reached for comment. (Read more)

Warren Buffett buys 63 newspapers, most of them community weeklies

Billionaire Warren Buffett is now one of the largest newspaper publishers in the U.S., and one of the larger community publishers. His company, Berkshire Hathaway Inc, bought most of Media General Inc.'s papers for $142 million this week, giving his conglomerate 17 daily and 46 weekly newspapers. Buffett said he made the deal because "there is no more important institution than the local paper" in small communities, and most of the newspapers his company bought serve small communities. He told shareholders he still views newspapers "as the primary source for local information," Reuters reports.

The deal gives Berkshire Hathaway subsidiary BH Media Group newspapers in the Southeast, including the Richmond Times-Dispatch, and three other Virginia papers: The News & Advance, New Era-Progress and Nelson County Times. Most of the papers acquired by the company are in Virginia, North Carolina, South Carolina and Alabama, reports The News & Advance, of Lynchburg. Last year Buffett bought the Omaha World-Herald, for which he was one a paperboy. He also owns the Buffalo News and is a major shareholder of The Washington Post Co. For the World-Herald's story, with a list of the daily papers being bought, go here.

Benchmark Capital analyst Edward Atorino told Reuters that "Berkshire Hathaway is clearly taking a vote of confidence in small-town local newspapers" because they didn't buy Media General's struggling Tampa Tribune, which is a large daily in a limited competition with the foundation-owned Tampa Bay Times, formerly the St. Petersburg Times.

It may seem hard for some to understand Buffett's investment in what many have said is a dying industry, but Jeff John Roberts of Paid Content says the deal makes a lot of sense for Buffett, who will make much money from the deal. The deal establishes a loan and credit line to Media General in which Berkshire Hathaway will earn 10.5 percent, and Roberts says the lack of competition, both in print and online, for small community newspapers keeps them profitable. (Read more)

UPDATE, May 21: Channeling Bill Freehling in the Free-Lance Star of Fredericksburg, Va., and others, Andrew Beaujon of the Poynter Institute gives other reasons for Buffett's purchase, and those of newspapers by other wealthy people.

The news was greeted with enthusiasm in Bristol, Tenn.-Va., where the Bristol Herald Courier won the Pulitzer Prize for public service in 2010. Virginia-side City Manager Dewey Cashwell told the paper, "This is like Zeus coming down from Olympus." (Read more)

Farmland price boom sparks worries of a bust

Farmland has been rapidly selling at premium prices, and though some have feared a farmland price bust similar to the housing industry bust of the past decade, high prices of corn, wheat and other crops, low interest rates, investors seeking higher returns and predictions about demand for food in Asia and elsewhere keeps buyers from borrowing more than in the 1970s and '80s when there was a "massive exodus of bankrupt farmers," reports Chuck Raasch of USA Today.

Wealthy investors say they've "lost faith" in the stock market and are instead putting money into farmland. While the market struggles to recover, average farmland price increased by 31 percent from 2006 to 2011, more than $3,000 an acre, according to the U.S. Department of Agriculture. In some places from Ohio to Iowa, the Eatsern Corn Belt, prices doubled to $10,000 or more an acre. As a result,  USDA predicts net farm income this year to be the second-highest ever, at $91.7 billion. Farm economists say most buyers are life-long farmers who want to expand production, not get rich buying and selling land.

Some experts are urging caution. Federal Deposit Insurance Corporation Chair Sheila Bair said during an FDIC conference last year that the farmland boom "should not dissuade us ... from asking hard questions and articulating our concerns before a crisis is upon us." Land-auction veteran R.D. Schrader said talking about a bust might help prevent one. "Right now, the moon and the stars are lining up in favor of farmland values. Odds are that will change in the future. When that correction comes, it is tough to say." (Read more)

Investors see promise in America's farms; some bankers see a possible bubble

Money continues to pour into America's farmland, but not by those who actually till the dirt and plant the crops. The continually rising price of food worldwide and the lack of arable land on which to plant is driving the cost of corn, soybeans, wheat and other crops up, something rich investors who have never planted a seed say makes buying this land a sound investment. (Photo by Joe Raymond, The Associated Press)

In Iowa, the value of farmland has almost doubled in six years, while values of farms in Nebraska and Kansas are up more than 50 percent, reports AP's Bernard Condon. The price of corn in Iowa was at $4 a bushel one year ago. Now, it's at $7. Condon also writes that investors can collect money on farms while they own them, unlike owning other things like gold, art and oil, making land ownership more appealing.

Out-of-state investors are becoming commonplace at farmland auctions, especially in Iowa, where they make up 25 percent of buyers, double the figure from 20 years ago, Condon reports. Marisa Dallman, owner of Kansas Land Brokers, writes for landthink.com that this is the first time she's seen an entire article devoted to farmland, which is usually left out of real-estate industry news, in the National Association of Realtors magazine. She reports that most farmland never sees the open market because it's passed from neighbor to neighbor and down through generations. She also says one sector of investors are buying small tracts of land for possible use in future development opportunities.

There is also a danger that farm prices may be inflated, warns Thomas Hoenig, head of the Federal Reserve Bank of Kansas City. He told Condon that current prices may be in an "unsustainable bubble." Others don't see it that way. Perry Vieth, a veteran bond trader and owner of Ceres Partners, a private investment fund, told Condon he is buying for 71 investors. His company owns 65 farms and he has returned 15 percent annually to his investors. (Read more)