Hanging On for Survival : Farm Brothers See Their California Dream Erode

Already deep in debt, Tom and Bill Berryhill--fourth-generation farmers--recently had to come up with $80,000 or lose the San Joaquin Valley farm they had cultivated for eight years.

One of the wineries they contracted with no longer wanted the variety of wine grapes they were harvesting. “We were really hurting,” said Bill Berryhill, 26, a big man with an unruly shock of hair. “But we had this one last chance, if we could just get the $1,500 an acre to graft a new variety of wine grapes on our vines.”

But no commercial bank would give them a loan, the brothers said.

“We knew that it was all over,” Tom Berryhill, 30, said as he and his brother showed a visitor their vineyards and apple and almond orchards. “We were going to lose it all if Dad couldn’t help us.”

Fortunately for them, their father, Clare L. Berryhill, was able to help. Since 1983, Clare Berryhill, 59, a lifelong Stanislaus County farmer and former legislator, has been director of the California Department of Food and Agriculture--the state’s No. 1 farmer.

His sons had purchased their 150-acre farm about 28 miles south of Modesto from him in 1977, at a time when agriculture was booming. Seldom in this century had the prospects for young American farmers seemed so bright.

“Everything penciled out,” Tom Berryhill said. “The price was right, land was appreciating and farming was hot. Unfortunately, there was no crystal ball to foretell what was going to happen.”

Tom and Bill Berryhill’s story illustrates how one family responded to the deepening farm crisis and also shows what is happening to many segments of California agriculture.

In a state with a diversified farm economy once thought to be immune to recession, the Berryhills found themselves facing the same problem as their Midwestern counterparts: They had borrowed heavily to get into farming and had no way to repay their debts. Many of their neighbors had done the same, and many were less fortunate than they.

In fact, California banks last year wrote off $240 million in bad farm loans--about 26% of all the defaulted agriculture loans in the nation. The proportion of farm loans being written off in California is three times that of other hard-hit farm states.

No one is certain why California banks are writing off more debts, but some experts theorize that since this state’s large banks lend less than 10% of their money to farmers, they are better able to write off farm losses than are small banks in the Midwest. Others warn, however, that the statistics reveal that California farmers are in more trouble than was first thought.

The Berryhills are struggling to stay clear of those grim statistics.

Farming Family

From the time they were children, there was never any question that the Berryhill brothers would become farmers. Tom Berryhill was out of college and his brother had just graduated from high school when they bought the land from their father, borrowing nearly $300,000 from the Federal Land Bank. Clare Berryhill took back a $200,000 second mortgage.

Those first years went well. Using borrowed money, they plowed and leveled a 40-acre pasture and planted almonds. Next they redeveloped one of their vineyards, pulling out 30 acres of old vines and planting more desirable varieties of wine grapes.

Bill Berryhill wanted more business training, so he enrolled in Butte College in the spring and winter quarters, returning to the farm in the fall to drive the mechanical grape harvester they had purchased. In addition to picking their own grapes, the brothers did machine harvesting for other growers, which netted them an additional $20,000 a year.

Borrowing and repaying $150,000 a year in short-term production loans, they continued to improve their land and diversify their operations, most recently by planting 12 acres of Granny Smith apples.

“Times were good,” Tom Berryhill said. “We were living well, taking helicopter ski trips in the Sierra.”

“California growers got a little bit spoiled in those good years,” Clare Berryhill said, needling his sons.

“Maybe we could have been better managers,” Bill Berryhill replied, “been more efficient by watching the little things like (extra) labor costs, that sort of thing. But we were young and learning. And looking back . . . I think we did the right things. But by the time our new trees and vines matured and were producing, the markets were going to hell.”

Because those high-rolling years had lured more farmers and investors into agriculture, production soared. And the markets for a number of crops became glutted. “The bottom just went out of the wine grape market,” Tom Berryhill said.

But it isn’t just the domestic surplus that is hurting California farmers. Many had been exporting large parts of their crops. Farmers like the Berryhills complain that the strength of the dollar overseas now makes it hard for them to compete with other countries for foreign markets and even for some domestic markets.

“The French and Italians are landing wine in New York City cheaper than California wineries can ship it east,” Bill Berryhill said.

The Berryhills did not feel the full effect of the farm crisis until 1983. Market prices again fell sharply, farming costs remained high and the brothers were unable to repay $20,000 of their annual production loan.

Their bank, the Tracy Production Credit Assn., agreed to carry over the debt. But 1984 was another bad year and their debt carry-over doubled, at 16% interest.

Grape Prices Fall

Like troubled farmers everywhere, the brothers were repaying their long-term land debt out of their annual production loan funds, hoping that crop prices would rise enough to cover all of their costs. But grapes that once brought $300 a ton fell to $100, and their almond crop didn’t return enough to make up the difference.

The Berryhills belong to Allied Grape Growers, a 600-member cooperative that used to sell its members’ grapes to the Colony Winery, owned by Heublein Inc. When Heublein was taken over by the R. J. Reynolds Co. in 1983, the new owners put the winery up for sale.

“That would have left Allied growers without a home for their grapes, so we (the members) decided we had to buy the winery if we were to survive,” Clare Berryhill said.

Because the brothers sell 350 tons of grapes a year through Allied, their share of the purchase price was $33,000, money they had to borrow. This was another setback, but they still had one ace in the hole--a second long-term contract with the Robert Mondavi Winery for 400 tons at $300 a ton.

“Our last hope was that contract,” Bill Berryhill said. “People without contracts were getting $75 a ton, so you can see what that meant to us.”

But there was a catch. Mondavi no longer wanted the variety of grapes the Berryhills had been growing. They either had to give up the lucrative contract or graft a new variety of grapes onto their vines, at a cost of $80,000.

“That’s when we figured it was all over,” Bill Berryhill said. “We were through, finished, broke. We would have lost it all if it hadn’t been for Dad.”

Although he farms next door to his sons, Clare Berryhill’s financial position is quite different. He has very little land debt on his Stanislaus County farm and, even after two destructive flood years in the orchards he owns in Butte County, he is still financing his production costs out of retained earnings, rather than borrowing.

According to the elder Berryhill, most of the state’s farmers are surviving the hard times. Some are even making money. But the 10% to 20% who borrowed heavily at high interest rates during the boom years are in trouble and may not survive.

Clare Berryhill is, however, no stranger to bad times. His father went broke farming in Fresno County during the Great Depression and had to go to work as a ranch foreman. Eventually, Claude Berryhill was able to save enough to buy another 150-acre farm south of Modesto, near the tiny town of Ceres.

After Clare Berryhill took over the “home place,” he improved the vineyards, planted almonds and raised a family in a spacious ranch house that has a swimming pool and tennis courts in the back.

By the time he was elected to the state Assembly in 1969, Clare Berryhill had doubled the size of his home place and was farming several hundred acres more in Butte County, near Chico, growing plums, walnuts and almonds. He owned part of a Modesto bank, was on two local school boards and was active in farm organizations.

Served in Both Houses

A Republican, he served one term in the Assembly and another in the state Senate, then went back to full-time farming in 1975, when the farm economy was vigorous.

By 1980 the state’s farmers were grossing an unprecedented $14 billion a year on 250 crops. The cash receipts climbed to $14.4 billion in 1982, but there were warning signs that the boom was over.

Clare Berryhill sold off a 250-acre plum orchard in Butte County before the price of land plummeted. “I made some good money on that sale,” he said, pausing and then adding, “I’ve always made good money farming.”

By the time he became director of the Food and Agriculture Department, inflation had driven farm values so high that the land he had sold to his sons for $3,000 an acre had doubled in value. Like many farmers, the brothers used their inflated land value as collateral to back up their increasing debt--something their conservative father said he had never done.

‘Had the Roof Fall’

“When land prices began to fall, those guys that were leveraged out there (deep in debt) had the roof fall in on them,” Clare Berryhill said. “That’s what happened to my boys.”

Earlier this year, the brothers were $100,000 behind in their debt repayment. Their banker--the Turlock Production Credit Assn.--couldn’t continue to carry them any longer, so they turned to their father. He stepped in to help them salvage what they could.

Because their land values have slipped back to about $4,000 an acre, not enough to repay all of their debts, the senior Berryhill said that he convinced their bankers that it was wiser to restructure the debt than to force them off the land.

“I told the PCA (credit association) people that since the land bank had the first (mortgage) and I had the second, they (PCA) were third in line, and there wasn’t enough value there for them to get their money unless we could work something out,” Clare Berryhill said.

The credit association agreed, and a deal was worked out to extend the repayment period. Then the elder Berryhill leased the 150 acres from his sons for enough to cover payment of their restructured debts. And he hired them to run the farm.

Clare Berryhill is financing the grafting of new varieties on the old vine root stock, a cost the brothers will ultimately have to repay.

“We can see that we’ll make it if we can hang on,” Tom Berryhill said. “It takes years for the new grafts to start producing, so we’ll be out that production for a while. But we’ve got a good crop of almonds, and the apples look real good.”

And Clare Berryhill, sipping a glass of red wine made from grapes he grew, added: “Some how or other most California farmers will make it. They’ll just tighten their belts another notch or two like the boys are doing. They’ll survive. They always have.”