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Located in the Palouse Valley, a four thousand–square mile region found in northern Idaho and eastern Washington, Moscow serves as the county seat of Latah County. The area's grasslands served as an attraction to some of the earliest settlers. However, the fertile soil of the nearby hills and the abundant timber also attracted pioneers. Due to the abundant grasslands, many of the early settlers raised cattle, and for much of the first decade of settlement, this proved to be a feasible occupation, as many of the prospectors in the area purchased the beef. However, several severe winters, coupled with overgrazing, led to the collapse of this industry. Furthermore, the expansion of sheep ranching and homesteading reduced the open range available for cattle raising. Consequently, this industry became unprofitable by the end of the 1870s, and early settlers turned to subsistence farming.

The relatively isolated location of the town proved to be the greatest challenge in the early years of settlement. Although Walla Walla was more than one hundred miles from Moscow, farmers preferred sending their goods to Walla Walla in the 1870s rather than Lewiston, which was only twenty-seven miles away. The Mullan Road made the longer journey more manageable than the undeveloped road to Lewiston. Accessibility improved in the second half of the 1870s, as the Oregon Steam Navigation Company built shipping centers at ports along the Columbia and Snake Rivers, but the journey to these ports was still difficult. However, Moscow took off economically once the Union Pacific Railroad arrived in 1885 and the Northern Pacific in 1890. These developments gave Moscow status as a key transportation hub in the Palouse, and it also became a center for storing the area's agricultural produce.

Although the discovery of gold in tributaries of the Palouse River in 1860 brought a number of prospectors, the main attraction for settlers was land. However, the prospectors also found copper, opals, mica, and vermiculite. These findings did not match the impressive mineral strikes found elsewhere in the state, but they still facilitated the growth of the city and the county. Another draw consisted of stories of buried Chinese treasure in Latah County, and many came searching for this fabled wealth. Some towns in the region did for a while appear as threats to Moscow, but most, like Paradise City, simply disappeared after the minerals strikes abated.

Despite the commercial success of the area, it was Moscow's possession of the University of Idaho that assured its existence as a viable community. The territorial legislature gave the university to Moscow in 1889 to cement the loyalty of northern Idaho after it demonstrated a willingness to secede from Idaho to join Washington. However, Moscow furthered its development with the creation of Latah County in 1888. The University of Idaho made Moscow the dominant city in the county and accounts for much of the county's current economic power. The creation of Latah County split Moscow off from Nez Perce County and the previous county seat of Lewiston, but Congress itself had authorized the creation of the new county.

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