Most Farmers Expected to Weather Hard Times : Economists Say Only Those in Heaviest Debt Are in Long-Term Danger

High interest rates and the strong dollar have helped knock the U.S. farm economy into a depression. But farm leaders, bankers and growers themselves say most farmers will make it through this crisis as they have in times past.

Indeed, some say they think critical financial problems already are easing.

It all depends on the amount of debt a farmer is carrying, experts say. California growers who bought raisin vineyards at sharply inflated prices of $10,000 or more an acre a few years ago, for instance, may be broke because the land is worth about half that now.

But farmers who kept their debt from becoming overwhelming are hanging in there and, in some cases, are prospering.

The U.S. Department of Agriculture says only about 5% of the nation’s farmers were unable to get credit to finance their planting this spring, far less than the 14% that was forecast by some farm economists early in the year.

Frank Naylor, the USDA undersecretary in charge of lending programs, said the figure was only slightly higher than the historic farmer turnover rate of 3% to 3.5% a year.

Although much of the media attention has focused on the farm problems in the Midwest grain belt, California is the nation’s leading agricultural state, and its farmers produce a wide variety of crops.

“Most will make it,” said Henry Voss, president of the California Farm Bureau Federation. “Probably 10% of our farmers--it doesn’t matter if they’re 50-acre farmers or 5,000-acre farmers--are in a stress-crisis situation, and probably have very limited chances of succeeding.

“Another 10% to 15% have severe financial problems, but if they have lenders who work with them, if they have a little luck with weather, they probably will have an opportunity to succeed.”

John Pucheu, a cotton grower on the San Joaquin Valley’s west side, said, “Prices are such now that you can pay bills if you don’t have too much debt service.”

Raisins and the companion crop, wine grapes, have been the California crops most severely hit by slumping sales and prices.

Cornelius Gallagher, farm expert for the Bank of America, said the situation is beginning to improve because farmers generally saw problems coming with high-interest credit in the early 1980s and began to adjust.

A critical feature of the crisis is a decline in the value of farm land, something not seen since the Depression of the 1930s.

“If land values would quit dropping, we’d all rest a little more comfortably about the situation,” said John Stuart, Security Pacific Bank’s senior vice president and administrator of the Central Valley division.

Voss estimates the value of California farm land has declined 20% to 25% in the past few years.

Land values plummeted because of heavy overproduction stemming from sharply declining raisin exports to Europe and a slump in winery demand for Thompson grapes.

Vineyards that sold for an average of $10,000 an acre in 1979 “can probably be bought for half that price today,” said the Bank of America’s Gallagher.

Investor’s Land Market

“If you’re a seller, that’s a problem,” he said. “If you’re a buyer who is looking to invest in the long run--realizing the risks of the market and the stress in margins--you have to say it could be a great opportunity.”

Some growers concede they expanded too much when export sales and crop prices were high.

“Some of these problems we farmers created for ourselves with help of the optimism that was there five, six years ago,” said Vincent Flynn, a diversified grower at Red Bluff, Calif.

The difference between growers in financial trouble now and in the Depression, Flynn believes, is high interest rates--below 5% then, about double that now.

“If you get behind, you never see the horizon,” he said. “The debt load continues to grow on you.”

For farmers to get their current financial ills behind them, they must sell surpluses at a profit. To do that, they say, they must increase exports.

Many contend the export slump was caused partly by restrictions in the European Economic Community and Japan and partly by the soaring value of the dollar.

Slightly Weaker Dollar

The value of the dollar has slipped somewhat in recent weeks, but it is still much higher than at the beginning of the decade.

Some farm groups are joining the demand for cuts in the federal deficit as a way to bring down the value of the dollar in relation to other currencies.

“The whole focus of our growers and many others in agriculture is on very substantial reductions in the federal deficit,” said Roger Bacigalupi, head of California Almond Growers Exchange. “If we can do that, we can solve most agricultural problems. At least, pricing becomes more realistic again.”