Ogallalans decline to flaunt their prosperity on Front Street
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By KEVIN HELLIKER/The Wall Street Journal
OGALLALA — One day recently, a farmer walked into Cox Chevrolet & Buick in this western Nebraska town and ordered a new truck of precisely the same model and color as his old one. “He doesn’t want anyone to know he has a new truck,” says Craig Cox, the dealership’s owner.
In urban circles, wealth tends to be enjoyed, flaunted and admired. But in much of rural America — even amid a boom in the agricultural economy — there’s a deep suspicion of consumption, particularly the conspicuous variety. If the face of urban wealth is Donald Trump, with his glitzy condo towers and television shows, then the face of rural wealth belongs to some anonymous farmer whose battered pickup and tattered clothes belie a fortune in land, equipment and investments.
At Reichert’s of Ogallala, a jewelry shop in this community of 4,700, engagement-ring sales average $1,500 each, half the national average, and not just because of fiance frugality. “Even the women here say, ’I don’t want anything flashy. I don’t want anything big,“’ says Madeline Palmer, the store’s sales manager.
This cultural distaste for showiness is notable at a time of rising farm income. Here in Ogallala, farmers are poised to reap the richest corn harvest in memory, and last month’s record-breaking wheat crop has already infused the local economy with cash. Meantime, the nation’s growing appetite for ethanol, the alternative fuel derived from corn, is supporting the price of that crop, prompting farmers to plant more of it. And the move away from wheat and other grains is boosting their prices by limiting supply. You might say the future of American agriculture has never looked brighter.
Yet no matter how much prosperity the ethanol and crop-price booms bring to rural America, don’t expect big-city-style spending on fancy cars, foreign travel or designer clothes in Ogallala.
Instead, the rural embrace of ethanol plants — two of which have opened within 50 miles of here — indicates a powerful desire for jobs, high-priced corn and industrial taxpayers. Hopes are soaring that the ethanol industry will help reverse population loss and attract new employers — high hurdles for a town so isolated that catching a commercial flight typically involves a 200-mile drive to Denver or 300-mile drive to Omaha.
But any suggestion that prosperity could start Ogallalans behaving like Omahans causes alarm. “I call Omaha ’Sin City,“’ says Doug Havermann, financial adviser at the Edward Jones investment office in downtown Ogallala. “Individuals there are concerned about having a half-million-dollar house, two $50,000 vehicles in the drive, designer clothes, a hairdresser and somebody to do your nails.”
Shaking his head, he says: “Individuals there go out to eat twice a day seven days a week.”
Amid the subprime mortgage fiasco that is shaking world financial markets, a recent study of foreclosures in Nebraska found a strong correlation between urban markets and troubled mortgages. “It’s not as big an issue in rural areas,” says Kelly Edmiston, a senior economist at the Federal Reserve Bank of Kansas City, who conducted the study.
That doesn’t surprise Paul Foy, an Ogallala veterinarian whose clients, ranchers mostly, rarely use credit. “People out here don’t buy $750,000 houses with no money down,” says Dr. Foy, a former mayor of Ogallala.
An agricultural force since the 1870s, when cowboys across the West drove their herds to the Ogallala rail yards, this town has rarely seen a more-prosperous year than 2007. The region’s three main commodities — beef, corn and wheat — are fetching high prices simultaneously, which may be unprecedented. To add to the blessing, an extraordinary level of rainfall has produced magnificent yields.
Then there are the dividend payments that will start arriving soon from ethanol plants, some owned largely by local farmers. “Ethanol is going to help a lot,” says Ogallala farmer Ralph Holzfaster, a lead investor in an ethanol plant in nearby Madrid.
It’s the perfect recipe for prosperity, yet few signs of it are sprouting. No mansions are under construction — building permits actually have fallen this year. There’s no retail renaissance. In fact, Wal-Mart Stores recently included Ogallala on a list of planned openings that it is postponing.
County sales-tax receipts have risen this year. But town officials primarily attribute that increase to restaurant-and-hotel patronage by workers brought to Ogallala to construct a natural-gas pipeline. One category undeniably booming along with ethanol is business equipment, including pickup trucks, the purchase of which can reduce a farmer’s taxable income. Summers-Zoellner Ford here in Ogallala is predicting it will sell more than twice as many trucks this year as in 2006.
Despite their modest lives, residents here don’t deprive themselves entirely. Most kids have cellphones and iPods, according to a gang of fifth-grade girls on bicycles who were interviewed downtown last week. Among grown-ups, one luxury category whose sales suddenly are skyrocketing is boats.
“Around here, a fishing boat isn’t a luxury. It’s a necessity,” jokes farmer Jon Holzfaster, who is Ralph Holzfaster’s son.
Agricultural economist Michael Swanson of Wells Fargo & Co. says farmers aren’t likely to buy a Rolex watch but might overextend themselves with land and equipment. “A lot of farmers have gone bankrupt because they wanted to impress the neighbors with two big combines when one would do,” Swanson says.
But at the Ogallala headquarters of Adams Bank & Trust, Chief Executive Todd Adams says his customers are using their fatter commodities proceeds primarily to pay down loans, a strategy he encourages even though it reduces his bank’s earnings. Unlike many big-city lenders, he says, “I see my customers at church, at school, at the store. I have to look out for their interests.”
As a principal shareholder of one of the region’s largest agricultural lenders, Adams says he understands the plight of farmers who are land rich but cash poor.
The nature of his institution’s ownership structure means that he, too, doesn’t have a lot of spendable wealth. “Private bank stock isn’t liquid,” notes Adams. So he drives a 12-year-old Chevrolet Suburban and lives in the same modest home he bought in 1985. A hunter, he frowns at the trend toward purchasing high-end hunting suits from rural retailers such as Cabela’s. “Who knew that a deer wouldn’t step out of the brush unless you were wearing designer apparel?” he says.
Talk of ethanol-fueled agricultural prosperity bothers farmers such as Ron Kalkowski. Such talk could intensify growing public rancor about government subsidies to farmers, he worries. More to the point, he says, it isn’t accurate: As commodity prices have jumped, so have costs ranging from fuel to fertilizer. Unable to retire at age 76, Kalkowski says rising commodity prices are abetting survival, not prosperity.
Still, a banner wheat crop this summer helped him purchase two new vehicles, a truck and car. About the car he is sensitive: It’s a Cadillac. Explaining that it replaced a five-year-old model with high mileage, he says he always drove Buicks until that brand shrunk in size, hurting his knees. Another sensitive subject for Kalkowski is the size of his farm, which at 6,000 acres is large but he prefers to characterize it as “medium-sized.” Kalkowski’s condition for granting an interview to a journalist: “I don’t want to be blowed up or made to sound anything other than common and ordinary.”
In rural areas, sensitivity about conspicuous wealth arises in large part from the inability of the rich to seclude themselves in exclusive clubs, private schools or gated communities. Out here, where the average house is valued at about $70,000 and the average household income less than $33,000, the haves attend the same schools and reside on the same blocks as the have-nots. Out here, fences exist only for livestock. “Our communities are gated with barbed wire,” says Adams, the banker, adding that he hopes his fellow Ogallalans judge him for his character rather than his net worth.
In a town too small for any extravagance to go unnoticed, grand gestures could be bad for business. Cox, the Chevrolet dealer, says that if he and his wife were to build a new house, “people here would think I must be making too large a profit.”
Likewise, Havermann, the investment adviser, adds that while he could afford a new car annually, he buys one only every five to six years. “If you strut your feathers in a small town like this, it will backfire,” he says.
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