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Old 10-01-2012, 12:56 PM
 
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2012 began with some glimmers of hope in the rural Colorado economy. Agriculture, for the most part, had a very good year in 2011—good production and generally good commodity prices. The early winter started with some promising storms. Fuel prices appeared to be moderating. In some places, the real estate market seemed to be stabilizing. Cautious optimism seemed prudent.

Well, what the hell happened? In short, just about everything bad possible.

Let’s start with weather and water. Much of Colorado suffered one of the mildest and driest winters in half-a-century or more. Agricultural water supplies were severely curtailed in much of the state. What resulted was a very uneven agricultural economy in 2012. The farmers and ranchers with the most senior water rights are enjoying a very good year, with good crop production and high commodity prices making them big profits—but they are the minority. Farmers and ranchers with junior water rights (and even some senior right holders, especially in some very water-short areas) are suffering from greatly reduced production and yields. Those having to buy feed and hay are being decimated by high prices; hay hitting up to $375/Ton in many areas of the state—by comparison, $100/Ton was considered “exorbitant” just a few years ago. (As a side note, expect plenty of pleasure horses to starve to death in Colorado this winter, as their owners won’t be able to afford to feed them.) All of that is not the worst news for agriculture. If we have another dry winter this year, the effects will even be more disastrous and a lot of farmers and ranchers will simply go out of business—they simply cannot financially endure another year like this one.

In the energy patch, the year was uneven at best. The big boom area was the Wattenberg Field in northeast Colorado, where oil and gas liquids production is roaring in response to high oil prices and the increased use of “enhanced” recovery techniques, including frac’ing. “Dry gas” (methane) drilling slowed considerably in western and southern Colorado, as natural gas prices stayed low. Coal production improved somewhat from a fairly dismal 2011, but several Colorado coal mines remain in precarious financial condition and further increases in production for 2013 appear fairly unlikely. (The Obama Administration has a clearly “anti-coal” agenda, so an Obama re-election would throw considerable doubts toward future coal production in Colorado for at least several years.)

Tourism in rural Colorado (in the areas away from the I-70/I-25 corridors and the very high-end resorts in Colorado) appears to largely be a “bust” for 2012. Increasing fuel prices—most occurring in the second half of the summer when the larger percentages of families travel—were damaging. Fires, smoke, and drought publicity also hurt. However, probably more important and more disturbing for the longer term, is the continuing erosion of discretionary spending ability in the middle class. This showed very clearly this summer, especially in the places more reliant on middle and lower class tourists. In town after town, business failures of tourist-dependent businesses escalated this summer, with a lot more predicted to close for good after the 2012 summer tourist season.

In some locales, sales tax revenues were up from year-ago levels, but the increases were often little more than the underlying rate of inflation. Some locales reporting increases were also ones that have a sales tax on food (grocery store food is exempt from state sales tax, but may be taxable at the county and/or local level)—and food price inflation has generally exceeded the government-reported inflation numbers.

In many places, the real estate crash continues, though getting good data is difficult. There is a lot of “number-cooking” going on by the real estate husksters to make things look better than they are—for example, not counting bank REO sales in average real estate sale price calculations, or reporting increased sales volumes from 2011 without disclosing that a majority of 2012 sales may be foreclosure sales. What is certain is that , in most areas of rural Colorado, sales volume still hovers near historic lows, distressed sales comprise a considerable percentage of the sales that do occur, and that there is a huge overhang of unsold properties remaining on the market with more being added all the time. All of this despite record low interest rates for loans. Much of the poor real estate market can be attributed to the fact that rural Colorado real estate remains essentially unaffordable for much of the local working population and that the employment picture in most of rural Colorado continues to worsen. As a friend of mine, a long-time rural Coloradan, summed it up with this pithy comment, “The only way you can get a loan to buy a house here is to prove that you don’t need the loan, and the only people who can afford to live here are the people who really don’t have to be here.”

As for 2013, things do not appear rosy. The weather, as much as anything, will dictate whether or not the agricultural economy improves. Gasoline prices will impact the tourist economy somewhat. So, too, will energy prices impact the rural Colorado economy. The best case scenario for rural Colorado (outside of the Wattenberg Field area of northeastern Colorado) would be a moderation in oil prices and strengthening natural gas prices; the worst would be increasing oil prices and stagnant natural gas prices. Unfortunately, right now the latter scenario appears to be the most likely. Strengthening natural gas prices would also help the Colorado coal industry, while high diesel fuel prices hurt it. Again, unfortunately, that latter circumstance--high diesel prices--appears likely to persist in 2013.

As for the “mailbox” retiree/second home economy in rural Colorado, the “one-percenters” are likely to be the only strong and/or relatively unaffected segment of that economy in 2013. Politics may severely affect the remainder of that economy. As an example, an Obama re-election and Democratic majority in the Congress would likely lead to much higher and more punitive taxes for the upper middle-class that comprises much of the second home/retiree economy in rural Colorado. A similar effect would be noted if the Bush tax cuts are allowed to expire in 2013—an event that I consider highly likely no matter who wins the Presidential election. The fiscal time bomb that is ticking away toward 2013 at the federal level promises a very likely scenario of much higher federal taxes and/or a severe recession come 2013-2014. Neither bode well for the rural Colorado economy—an economy heavily reliant on the middle class having discretionary spending ability and an economy sorely lacking a stable manufacturing base. One cannot ignore Colorado’s ticking fiscal time bomb at the state and local level, either. A declining economy only speeds up the clock as far as that looming crisis is concerned.

Unfortunately, it is easy to compare the rural Colorado economy to the sinking Titanic. The one-percenters and a lucky few in the rest of the economy may be on the top decks and get to the lifeboats, but a whole lot of people down below will likely go down with the ship.
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Old 10-01-2012, 06:20 PM
 
Location: Pueblo - Colorado's Second City
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I have to say I am not happy with the economy in the rural areas or the urban areas (Pueblo has a little of both so I see it first hand) and that is why I am undecided as to who to vote for in the presidential election. I am going to watch the debate this week and see their plan on how to improve the economy then base my vote on that.
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Old 10-01-2012, 06:56 PM
 
Location: IN
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The drought has been unbelievably horrible in so many places this year. If those locales don't get much winter precipitation it will be even harder to recover by the next growing season. The latest update from the Climate Prediction Center spells more bad news for the drought. This could severely cripple the rural economies in many places unfortunately.

US Drought Monitor

Climate Prediction Center - Expert Assessments: United States Seasonal Drought Outlook
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Old 10-02-2012, 09:17 AM
 
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I watch the drought predictions from the CPC pretty religiously. What I see on the ground in the southern Rockies pretty much mirrors the prediction. The end of the Southwest Monsoon has led to a dry fall. I should note that a dry early fall and winter (until the end of December) is not unusual in the southern Rockies and is not a reliable predictor of the precipitation pattern in the critical snowpack months of January-April. What a dry fall does do, however, is further lower soil moisture, which can lower stream runoff the following spring. Also, if cold weather hits before there is snowcover and the bare ground freezes, it can lower moisture absorption into the soil. That can create dry range conditions later, especially if winter snows are lower than normal.

On Colorado's Eastern Plains, a dry fall can really raise hell with the winter wheat crop--if conditions are dry enough, it won't even sprout.

The other "victim" of a dry fall and early winter are the ski areas, especially in southern Colorado. Decent snowpack for skiing on Thanksgiving weekend (and the reason locals often call it the "out-of-state sucker" weekend for skiing) is really "iffy"--even in normal years, but a dry fall can often mean that the areas are not able to open at all for the Thanksgiving Holiday. If the Christmas holiday also offers dry and poor ski conditions, it can often mean the difference between a profitable or losing ski season for the ski areas, no matter what happens later. I will go out on a limb and predict that, if Colorado has another dry winter, the real possiblity exists for one or more ski areas in the state to fall into bankruptcy. As an aside, if the climate warming theorists are right, climatic conditions would spell the end of the ski industry in New Mexico and southern Colorado, and would shorten the ski season by 30-60 days in the northern portions of Colorado. Studies made of the industry show that would be enough to essentially make the industry financially non-viable in northern Colorado, as well. Also, by the way, the very dry year this year means that some of the ski areas--which have junior water rights--may not have access to water for snowmaking.

On a bigger "macro" scale, the very dry year in the Farm Belt is going to lead to exploding food prices, especially for meat and dairy products. That is going further diminish the discretionary spending capacity of the lower and middle classes, especially those with families. That will have a negative impact on the 2013 tourist season, without doubt.
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Old 10-02-2012, 10:11 AM
 
Location: Pueblo - Colorado's Second City
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The good news is the drought is expected to end at least for the the next few years as precipitation should return to the 1970's levels.

This is from today's Pueblo Chieftain:

Despite occasional rainstorms, 2012 is shaping up to be one of the hottest, driest years on record for Colorado. That could be changing, as long-term forecasts predict the Eastern Plains of Colorado, at least, could see more rain from now until March 2013.

The link: Dry spell deepens: Forecasts say it could get wetter on the plains - Pueblo Chieftain: Local News

Now as the article says nothing is guaranteed but most of the news articles I see show that for the next few years we will have some nice wet years that should replenish the lakes.
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Old 10-02-2012, 01:59 PM
 
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I think rural Colorado is going to have to find a new paradigm to survive.

After the city lefties and environMENTALists have extinguished much of the agriculture and mining industry, starting back in the 1970's, rural Colorado turned to land sales and 2nd home or tourist oriented construction to make ends meet.

But I think that is dead for a generation. The market is deluged with land and homes for sale and everyone that wanted such a property has it now and many also found they couldn't afford it either. The market needs have been satisfied.

So it's going to have to find something else.

The water issue, well, Colorado has always had wet and dry years, so it's just part of the state.
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Old 10-02-2012, 03:09 PM
 
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Quote:
Originally Posted by wanneroo View Post
I think rural Colorado is going to have to find a new paradigm to survive.
I agree, and I'd add that this fact puts rural Colorado in the exact same boat as virtually all humans in nearly all times and places. Change is constant, whether we like/want it or not. I had to find a new paradigm to support my family than the way my father (govt lawyer) did it. My father had to do it differently than his father (small business owner; dry cleaning) did it. My grandfather had to do it differently than HIS father (CO homesteader / rancher) did it. So it goes. Right?
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Old 10-02-2012, 03:21 PM
 
Location: Pueblo - Colorado's Second City
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Quote:
Originally Posted by smdensbcs View Post
I agree, and I'd add that this fact puts rural Colorado in the exact same boat as virtually all humans in nearly all times and places. Change is constant, whether we like/want it or not. I had to find a new paradigm to support my family than the way my father (govt lawyer) did it. My father had to do it differently than his father (small business owner; dry cleaning) did it. My grandfather had to do it differently than HIS father (CO homesteader / rancher) did it. So it goes. Right?
Actually change is not constant but increases at a exponintal rate. So the changes we will see in the next 20-30 years will cause a major shift in how we live. That includes rural and urban residents.
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Old 10-02-2012, 05:16 PM
 
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Originally Posted by Josseppie View Post
Actually change is not constant but increases at a exponintal rate. So the changes we will see in the next 20-30 years will cause a major shift in how we live. That includes rural and urban residents.
Wouldn't count on it as it stands now. The regressive barbarians are at the gate. Anti mining, anti agriculture, anti energy, anti transportation, anti children, anti family, anti everything. These people have worked their way into the 4th branch of government, the bureaucratic branch and every day new regulations get handed down by people who have no idea what they are doing and it's gradually strangling the life out of the country.
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Old 10-02-2012, 05:48 PM
 
Location: Pueblo - Colorado's Second City
12,174 posts, read 20,966,911 times
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Quote:
Originally Posted by wanneroo View Post
Wouldn't count on it as it stands now. The regressive barbarians are at the gate. Anti mining, anti agriculture, anti energy, anti transportation, anti children, anti family, anti everything. These people have worked their way into the 4th branch of government, the bureaucratic branch and every day new regulations get handed down by people who have no idea what they are doing and it's gradually strangling the life out of the country.
Won't matter. People can stop certain projects but if you look at the overall trend humans have been advancing exponentially since we first started speaking about 200,000 years ago. So as much as we might like the past, and I love to study history of Colorado, Pueblo, and humans in general, none of us have to power to stop us from advancing in ways we cant imagine now. That means that the economy of rural areas and even urban areas will change and we will have to change with it to be successful.
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