The Recession's Impact on Dyersville, Iowa

Posted by: Phil Mintz on June 23

The Midwest’s farms and factories are being hit hard by the recession. BusinessWeek recently asked students in the business journalism program at the University of Missouri School of Journalism to see how communities in the region have been affected by the downturn. Here’s one report, in text and video, about Dyersville, Iowa, home of the baseball field created for the movie Field of Dreams.

Story by Chris Dieterich and Katy Steinmetz

Video by Boris Korby and Angela Chao

"Is this heaven? No, it’s Iowa."

In Dyersville, Iowa, at the Field of Dreams gift shop, kitschy slogans on turquoise magnets ring surprisingly true. And though it’s not exactly heaven, Dyersville’s 4,000 residents are faring better than most of the Midwest during the current economic slide.

Local officials attribute this in part to Dyersville's diverse economic base. In addition to core industries such as agriculture and manufacturing, Dyersville draws tourists to its Gothic-style Basilica of St. Francis Xavier, the baseball field created for the movie Field of Dreams, and its renowned farm toy shows.

But no place is recession-proof. Combined average unemployment in Dubuque and Delaware counties, which Dyersville straddles, has risen to 5.9%, up from 3.8% in April 2008. That's higher than Iowa's 5.1% average, but well below the national rate, 9.4%; it's also lower than in neighboring Minnesota, Illinois, and Wisconsin, where unemployment levels top 8%.

Perhaps Dyersville's most glaring monument to the down economy is the state-of-the-art ethanol production plant that sits idle on the outskirts of town.

Iowa, which grows more corn than any other state, has more than 40 ethanol refineries. Back in 2007, the future of ethanol looked bright. Federal mandates dictate that oil refiners more than double the amount of ethanol blend in gasoline, from 4 billion gallons in 2006 to 36 billion gallons by 2022. Rising oil prices made ethanol a cost-effective as well as feel-good fuel additive.

In 2007, local economic developers successfully courted South Dakota-based US BioEnergy. The expected benefits were hundreds of thousands of dollars in new tax revenue, a local market for corn farmers, and a boon to local construction and businesses.

South Dakota-based VeraSun Energy announced plans to acquire US BioEnergy in December 2007, and when the deal was finalized in April 2008, VeraSun inherited the Dyersville plant, then still under construction.

But by the summer of 2008, volatile commodity prices were taking their toll on the ethanol industry. VeraSun had locked in prices for corn to hedge against future fluctuation, but the market value of corn abruptly fell along with oil prices. Meanwhile, rapid growth in ethanol production created a glut in the market, and the price that ethanol producers received fell along with global demand for oil. Margins shrank dramatically for VeraSun.

The 110 million-gallon-a-year Dyersville plant started production in September 2008, but VeraSun was hemorrhaging. The company lost $476 million in third quarter 2008, and filed for Chapter 11 bankruptcy in October. The Dyersville plant was idled after just two months.

Local farmers who had contracts to deliver corn to VeraSun faced the possibility of having those contracts voided. "They had corn sold for $7 a bushel, possibly, and they're going to get $4," said Mike Rea, a Dubuque County farmer and seed vendor. "If they had that money already spent, yeah, that's going to be tough."

In March, Texas refiner Valero (VLO) purchased four of VeraSun's Iowa facilities at a steep discount of 30¢ on the dollar. But the Dyersville plant was purchased by AgStar, a finance group that won six of VeraSun's plants at auction and is currently seeking another buyer.

"The likelihood of those contracts ever being honored is very slim," said Ron Litterer, chairman of the National Corn Growers Assn.

But it's not all grim news in the area. Industrial manufacturer Mi-T-M employs about 350 workers in Peosta—some 15 miles east of Dyersville—and has no plans to cut jobs. Orders for the first three months of 2009 rose from the same period in 2008, said Karen Anderson, Mi-T-M's marketing director. She credits product diversity for the gains.

"When the pressure washer season is slow, we have our generators or air compressors to sustain us," Anderson said. "Our peak times for some of our other products are hurricane or flood season. Whenever those things happen, our sales will jump."

The region also scored a major victory when IBM (IBM) announced in January it will bring 1,300 information technology jobs to downtown Dubuque, 30 miles east of Dyersville.

"It's the biggest thing to happen to Dubuque in more than 60 years," said Rick Dickinson, executive director of the Greater Dubuque Development Corp. "It's big for the entire state. It will be the largest IT center in Iowa's history."

Dickinson anticipates about 30% of the new jobs to draw from the local labor force. IBM has received more than 5,000 applications so far. "It puts us on the map," Dickinson said. "We hope it will create a ripple effect for the region."

See the video.