North Dakota Reaps Benefits of Massive Federal Drought-Relief Program

Carl Grindberg survived the drought with a $45,000 dose of federal aid. But for this farmer and others, it was a give-and-take bailout: Take the money with one hand, give it away with the other.

“The guy who sold me $5,000 of fuel, he got paid,” Grindberg said. “The business that sold me fertilizer and spray and chemicals and tires, they got paid. What I’m saying is, the farmer got the money directly, but indirectly a lot of others benefited.”

The 1988 drought-relief program poured more than $400 million into North Dakota, the nation’s most agriculturally dependent state. The money not only helped rescue thousands of farmers; many say it also kept the state afloat.

“It’s what carried us through in 1988,” said Cass County extension agent Duane Hauck. “If it hadn’t been for drought aid, the economic situation all through North Dakota would have been disastrous. It was the major source of income for most farmers.”

“I don’t think too many farmers took disaster aid and bought Cadillacs and went on vacation in my area,” Grindberg added.

A study of the $3.9-billion disaster-relief program, conducted by the Associated Press over seven months, found that outside the Midwest drought area, lax rules and requirements led to thousands of farmers’ collecting millions of dollars for nothing more serious than the normal trials of nature.

But money did reach areas Congress most intended to aid, including North Dakota, where it kept some farmers on their land and may have prevented some business closures.

“You might say it kept the state alive,” said Fred Selberg, another farmer in this Red River Valley county. “Everyone in North Dakota in some way or another was helped.”

North Dakota, where the drought evoked memories of Dust Bowl days with tumbleweed dancing along the barren horizon, received the most disaster dollars. More than 49,000 producers shared $410.2 million--about 10.5% of the total package. Almost all was for crop loss.

The state, the No. 1 producer of hard-red spring wheat, lost two-thirds of its 1988 crop; millions of normally golden acres withered to pathetic rows of shriveled brown stumps. But drought aid cut farmers’ losses from $1.1 billion to $706 million, a North Dakota State University study found.

Disaster payments reduced statewide losses to businesses, banks and households from $3.4 billion to $2.1 billion, the study said. Each farm dollar triples as it travels down Main Street into the economy.

Another university survey of 466 farmers said that without drought aid, the average farmer’s net cash income would have been just $6,300. Drought payments added $15,000.

Disaster aid and crop insurance also were critical to other drought-ravaged states, including Iowa, Illinois, Minnesota and Wisconsin. The five states together received nearly half the assistance allocated nationwide.

Disaster aid and crop insurance pumped about $500 million into Iowa’s economy, an Iowa State University study said.

“There was no question it was needed to stave off a major new wave of bankruptcies and financial problems among Corn Belt producers,” said Mark Edelman, a university economist.

“Even the drought assistance for most farmers fell well short of bringing what their income would be with normal yields, but it provided a safety net,” he said.

It was the same in North Dakota, which has struggled with an exodus of young, educated people, declining revenues, fading small towns and the loss of nearly a fifth of its farms this decade.

“From ’81 through ‘86, the bottom pretty much fell out of everything,” said Greg Schulz, who farms about 5 miles from Grindberg. Good crops the next two years started to reverse the trend, but drought stalled the recovery.

“It has a demoralizing effect when you have a disaster,” said Dwight Aakre, a North Dakota State economist. “Financial aid helps to alleviate that. The last thing North Dakota needed is more negatives to push us down.”

Despite relief and nearly $200 million in crop insurance, the state still needs “a good year to get back on our feet,” Hauck said. “We didn’t get that in ‘89,” he added, referring to continuing drought in North Dakota’s west and south-central sections.

In fact, while crops statewide are in better shape than 12 months ago, dollar losses will exceed 1988’s estimated $530 million, Aakre said. Two reasons why: More acres of wheat were planted this year, and farmers don’t have grain reserves to sell at high prices as they did in 1988 to ease their burden.

Cass County also had a better 1989 crop but expects higher losses in crop dollars. And although virtually all farmers here received government aid in 1988, far fewer will be eligible a second time.

About $19.8 million in 1988 aid was divvied up among 1,847 farms in Cass County, the state’s leader in crop acres. Wheat, corn, barley, soybeans, sugar beets and navy and pinto beans are grown here. Last year, production was 60% to 70% below normal.

For Larry Richard, a 36-year-old father of three who farms 1,000 acres near the town of Horace, $39,000 in aid, even coupled with $55,000 in crop insurance, amounted to “just enough to break even. We were able to cover all our bills. That’s all I had really hoped for.”