Harvest of Heartbreak : Debts Could End Family Farm Era

In the cold courthouse square, near the stone monument dedicated to the dead of three wars, the Wayne County sheriff sold Wendell and Max Tuttle’s farm last Wednesday.

It took little more than 11 minutes to complete the foreclosure sale. Neighbors and clergy, almost 100 of them, crowded the courthouse steps to watch, standing motionless in silent requiem.

The week before, 225 miles north of here, in Dinsdale, Scott and Judy Breakenridge bundled up in near-zero weather to see their livestock and the tools of their trade auctioned off--cows, bulls, tractors, plows, wagons and planters, rakes and pitchforks, pliers, fencing, bins of nuts and bolts. It took seven hours.

‘Heritage Being Sold’

“Sixty years of farming! Sixty years! It’s our heritage being sold,” Scott Breakenridge said. “I’m dead. The auctioneer is just trying to put the corpse away.”

The Audubon County sheriff came to Elmer and Pat Steffes’ farm two weeks ago at dawn with a procession of trucks and an army of deputies from neighboring counties. He left near dusk with the family’s livelihood--repossessing the sheep and hogs they raised and the machines and tools they used to work the land.

“He took everything that wasn’t froze down,” Pat Steffes said.

But the repossessed animals and equipment will not pay the Steffes’ debts. The farm will go next.

“We’re grieving,” Elmer Steffes said.

These three Corn Belt farm families have been swept up in the greatest collapse of America’s rural economy since the Great Depression. Nationwide, as many as 200,000 full-time commercial farmers could join them before the year is over. And this is only the beginning.

“The stress will become more intense before it eases,” said Marvin Duncan, Kansas City Federal Reserve Bank vice president.

Wrenching Adjustment

“It is the most wrenching financial adjustment for agriculture in a half-century,” said Neil E. Harl, an Iowa State University economist and agricultural authority.

Economists believe that the huge losses could continue for the next few years as agriculture--the nation’s largest single industry--suffers a period of painful economic realignment as profound and dramatic as the one earlier in this decade that left the steel and automobile industries permanently restructured.

But, unlike the realignment of those industries, in which whole factories disappeared, a restructuring of agriculture is not likely to solve immediately the serious problem of overproduction. Instead, this is a shakeout of people.

Many fear that it will also mark the end of a bedrock rural institution: the family farm. Every day, more and more of these farms, which have supported entire families for generations, are being sold at auctions or foreclosure sales. They are, in the words of auctioneer Dick Dinsdale, who sold the Breakenridges’ equipment and livestock, “going once, going . . . .”

The loss of these family businesses has become an issue of social justice for urban and rural activists who see a revolutionary change in patterns of land ownership, resulting in the concentration of more and more farmland in the hands of fewer and fewer owners.

“We are losing bits of our freedom when we lose the family farm,” Des Moines Roman Catholic Bishop Maurice Dingman said in an interview. “We are losing our widespread ownership of property, and that can be disastrous. . . . We go into Central America and tell them to break up those big landed estates, while in this country we have no structural policy saying we favor saving our family farms.”

Traumatic Change

Farm families are being dislocated, their livelihoods removed, as abruptly as those of Youngstown steel workers. For them, the change is proving as emotionally traumatic as it is financially destructive.

For example, Elmer and Pat Steffes are getting psychological counseling. A week ago, they attended a daylong session on “The Grieving Process and the Loss of the Family Farm,” sponsored by a 2-month-old Catholic organization formed specifically to “help victims of foreclosure.”

Main Street businesses, agricultural lending institutions, rural churches, agribusiness and entire communities are feeling the pinch. Many will disappear along with the vanishing farmer.

And some students of the problem fear that it could trigger the fall of other economic dominoes, spreading from rural to urban America.

Stores in Trouble

“Those little stores in those little towns can’t stand this,” said John Chrystal, chief executive officer of Des Moines’ Bankers Trust Co. “What happens to the farmers who are driven off the land? What happens to the lenders? What happens to the U.S. economy?

“I see a national effect,” added Chrystal, who also has interests in six rural Iowa banks and is an authority on the agricultural economy. “I think it is infectious and easily spread to the rest of the economy.”

Rural banks in the Midwest and some big banks in the West have already begun to feel the pain. Of 14 bank failures in the first two months of this year, eight have been rural agricultural banks--three of them in Iowa, where only three banks failed in all of last year. One-third of the 79 banks that failed in 1984 nationwide were considered agricultural banks.

Pain in Industry

The pain has also been felt in industrial centers where farm implements are manufactured. The United Auto Workers reported that there are 100,000 fewer workers employed in farm-equipment manufacturing now than there were five years ago, a 50% drop in employment.

The discontent in the nation’s heartland has begun to have profound national political repercussions as well. Last week, farm-state senators, angry over the relatively low level of aid that the Reagan Administration was willing to provide farmers this spring to help plant crops, staged a four-day filibuster that delayed the confirmation of Edwin Meese III as attorney general until Saturday. By then, the Administration had improved its original financial aid package and Republican Senate leaders had agreed to speedily take up emergency assistance.

But most agricultural economists see the spring infusion of money by the government as little more than a Band-Aid covering a wound that will claim many more victims before it heals.

Some political analysts believe that the current farm crisis could tip control of the U.S. Senate back into the hands of Democrats next year when 22 Republicans are up for reelection--seven from Farm Belt states.

How the senators fare next year could be determined by what position they take in what is expected to be a prolonged and bitter debate over an Administration proposal for new farm legislation, which economists and farm organizations believe will accelerate the demise of family farms.

The dislocation of families like the Tuttles and the Steffes has spawned storms of protest in rural America. Almost daily there is a demonstration somewhere, some angry enough to stop farm sales and halt foreclosures.

‘Tries to Ease the Pain’

“You can’t stop it. It’s like trying to lay down in front of a steamroller,” Agriculture Secretary John R. Block said in an interview. “You lay down in front of it, (but) you’re not doing anything to stop it. Whatever happens, happens. The government tries to ease the pain, and people adjust.

“Agriculture is being reshaped, restructured by powerful economic forces, some national, some even international in nature,” Block added. “They are just forces beyond the reach of farm programs and secretaries of agriculture and Presidents and Congresses.”

And beyond the reach of farmers being crushed by those economic forces.

Perhaps the most significant of these forces arrived on the scene Oct. 6, 1979, when the Federal Reserve Board decided to wring double-digit inflation out of the economy. The new tight-money policies sent interest rates rising rapidly.

Value of Land Fell

“The Federal Reserve slammed on the brakes, and much of agriculture went into the windshield,” Iowa State University economist Harl said. As interest rates went up, the value of land used as collateral fell.

“The policies of five different administrations let inflation come to be viewed as a permanent part of the economy when it should have been viewed as apparitional,” he added.

A second powerful force came into play in 1981 when Congress approved a tax cut and the federal deficit began to grow.

“Not cutting spending enough to match the tax cuts was the single most irresponsible congressional act in the history of the Republic,” Harl said. The deficit ensured that interest rates would remain high as the government borrowed more and more to pay its own interest bill.

Dollar Stronger

Meanwhile, and partly as a result of the interest rates, the dollar was becoming stronger in foreign markets, reducing the amount of American grain that importing countries could afford. This, coupled with bountiful harvests on top of huge surpluses in storage here and increased production by competing countries, has kept commodity prices low.

Government policies can also be blamed for some of the market-depressing surpluses of grain. In the early 1970s, the United States suddenly became a major exporter of wheat and corn, particularly to the Soviet Union.

The government urged farmers to plant every available acre. Between 54 million and 80 million acres of previously unfarmed land went into production. Farmers borrowed to put this land into production, often to add expensive irrigation systems. Now their debt load is forcing them to keep this land in production--contributing to the surpluses that are depressing grain prices.

All of these factors hurt the Tuttles, but tight-money policies and high interest rates hurt them most.

‘Express Our Sorrow’

“We’re here to express our sorrow and to express our hope and to mourn our losses,” the Rev. S. G. Hawhee, pastor of the Corydon United Methodist Church, said at a prayer service before the sheriff sold Wendell and Max Tuttle’s 334-acre farm.

“I never thought I’d see this in the United States of America. I think it’s a disgrace,” Wendell Tuttle, 56, told scores of neighbors who drove to town to stand beside him.

The Tuttles, father and son, were $261,399 in debt last Wednesday. They were paying $116 a day in interest alone.

A fourth-generation farmer, Wendell Tuttle, like many of his neighbors, has been fighting against failure for years. He borrowed increasingly more expensive money to cover losses caused by droughts, low cattle and grain prices and the 1980 grain embargo. “That alone cost us $30,000,” he said.

Land as Collateral

For collateral, Tuttle and his son, Max, used their most valuable asset, their land. During the inflationary 1970s, the worth of that land skyrocketed. Fields that Wendell had bought for $200 an acre were selling for $2,000 an acre. The more the land was worth, the more the Tuttles could borrow, at interest rates that were no higher than 7%.

But loans that cost 7% in 1979 were costing 16.5% in 1982. They borrowed from the John Hancock Insurance Co., which foreclosed last week. The land’s value had fallen to $812 an acre.

“I’m 56 years old. I’m not going to start over again,” Wendell Tuttle said.

Max Tuttle, 27, who is married and has two children, does not know what he will do. “All I know is farming,” he said.

When the sheriff finished at the courthouse, the Tuttles and their neighbors walked to a part of the courthouse lawn where 70 simple white crosses stood in the frozen ground. The crosses mark symbolic graves for 70 Wayne County farmers and rural businessmen who failed between Oct. 19, 1981, and Oct. 19, 1984.

Because another 25 farms and businesses have failed in this agriculture-dependent region of south-central Iowa since that date, on Wednesday they drove 25 more crosses into the frozen courthouse lawn.

One was for Wendell and Max Tuttle.

Most of the nation’s 2.4 million farms are not considered “family farms” by agricultural economists. About 1.7 million farms have annual sales below $40,000. These farmers tend to get some or most of their income from off-farm jobs. The number of small farms that do not depend on agriculture has been increasing steadily in recent years.

At the other end of the scale, there are about 96,000 farms that sell $200,000 or more worth of products every year, including 24,000 farms with annual gross incomes over $500,000 and average net incomes in excess of $100,000, said Susan Sechler, food and agriculture project director for the Washington-based Roosevelt Center for American Policy Studies.

In the middle are about 570,000 “family farms,” which produce 40% of the nation’s food. These are businesses run by families who earn their entire incomes from agriculture and who supply half or more of the necessary labor to run the farm. These farms have annual sales of $40,000 to $200,000 and tend to be concentrated in the Midwest and the South.

It is this group of farmers that is shrinking fastest in the restructuring of rural America.

Huge Debt

But, overall, a third of the nation’s farmers are swimming in dangerous financial waters, carrying about 85% of the $215-billion U.S. farm debt load.

“There is a real dichotomy between the haves and the have-nots,” Kansas State University agricultural economist Barry L. Flynchbaugh said. “The have-nots are no longer the poor managers. Today, good managers are losing their farms through no fault of their own.”

“We’re not talking about bad managers, drunks, poor farmers,” Des Moines banker Chrystal said. “In trouble now are community leaders, church elders, school board members.”

The Dinsdale Amity United Presbyterian Church, a congregation dominated by farmers, respected Scott Breakenridge’s skills enough to let him manage the church farm. He fitted the task in along with operating his own 700-acre farm and serving on the local school board and as the district Cattleman’s Assn. representative.

Featured in Life Magazine

Life magazine thought enough of Scott’s father and grandfather to feature the Breakenridge farm as part of a 1959 series on “the farm problem” that plagued the nation’s economy during that decade, when new technology led to enormous crop surpluses that drove prices down. Life picked the Breakenridge farm because it was run by “successful and conscientious” farmers who worked some of the most productive land on the planet. Scott was only 9 years old when the article appeared.

‘Voluntary Liquidation’

Now, at 35, he may be the last Breakenridge to farm.

His auction is the kind of sale bankers and the Department of Agriculture call a “voluntary liquidation.”

In fact, Breakenridge was forced to sell his assets because last month the local bank abruptly refused to lend him any additional operating money. At the time, he owed the bank about $200,000.

“I borrowed money on Dec. 19, and on Jan. 3 they said no more,” he said.

$5,000 Profit

The farm’s assets were pledged as collateral for the loan. As the farm economy worsened in the last two years, the value of those assets fell. Breakenridge, who paid $74,000 in interest on loans last year, could project only a $5,000 profit for 1985--not enough to satisfy the bank that its loan was secure.

Because high interest rates and low commodity prices have soaked up farm profits, farmers must borrow monthly to feed their livestock, to pay for seed and fertilizer in the spring and to put groceries on their own tables. The bank’s refusal to continue making loans to Breakenridge left him unable to do any of those.

“The bank shut me down because they thought they’d never get their money,” Breakenridge said.

He is not alone. Three of his neighbors who helped put his equipment in shape for the auction were notified last week that they too will have to sell assets because their banks no longer consider them able to repay loans.

Hoped to Keep Land

“We sold the equipment because it was the only way we could figure out to hang on to the land,” said Judy Breakenridge, who also was reared in a farm family. “We thought the material things could be replaced. But once the land is gone, it’s gone.”

Now the couple, who have a son, Joe, 6, and a daughter, Tricia, 8, are uncertain whether they can hang on to their land. The sale of assets that were once worth enough to guarantee a $200,000 debt brought in only $115,000.

“I still owe them $85,000,” Breakenridge said. “I never wanted to get rich. I just wanted to support my family. I didn’t want a condo in Arizona. I didn’t want to take a cruise. I didn’t belong to a country club. I didn’t buy land. I didn’t play the Board of Trade. I didn’t have bigger machinery than I needed.

“And I always thought I was doing the country some good. I didn’t even want a government handout, just a fair price for what I raised,” Breakenridge said. “Now I feel like my arm’s been cut off.

“We have a home. I’ve got them (Joe and Tricia) and my wife. The bank can’t take them away.

“But we’re going, going the way of the passenger pigeon, the buffalo, the cowboy.”

Researcher Wendy Leopold assisted in the preparation of this article

Two views on whether federal farm-aid programs should be continued--from an economist and from the president of the National Farmers Union. See Business, Part VI, Page 3.