After Crisis, Farm Economy Growing Again

The Midwestern farm crisis, which ravaged the nation’s agricultural base and prompted an outpouring of sympathy from urban America and billions of dollars in aid from the federal government, is over.

And the family farmer, one of the most romanticized figures in the modern psyche--an American ideal who seemed threatened with extinction during the depths of the crisis in the mid-1980s--has not only survived the ordeal but is once again prospering.

“All things considered, we weathered the ‘80s a whole lot better than anyone expected back in 1985 or 1986,” said Ross Korves, chief economic policy analyst for the American Farm Bureau Federation.

Indeed, as Congress and the White House wrestle this summer with new farm legislation--which experts agree will, in the end, almost certainly maintain the current high levels of subsidies for farmers--many farmers in the Midwest’s wheat and corn belts are having one of their best growing seasons ever.

Higher oil and gasoline prices resulting from Iraq’s invasion of Kuwait could hurt farmers, who are big fuel consumers, but otherwise this fall’s harvest should provide good news in the Midwest.

“In 1990, Kansas is going to have its best wheat crop in 25 years,” noted Barry Flinchbaugh, an agricultural economist at Kansas State University.

In addition, farm land values, livestock prices and overall farm incomes have been soaring over the last two or three years, so farmers are now more financially stable than they have been in more than a decade, agricultural economists say.

“We’ve had record-setting farm income in Iowa over the last three years,” observed Neil Harl, an agricultural economist at Iowa State University.

In Nebraska, farm land prices have risen 40% over the last three years, and farm incomes in the state have set new records in three out of the last four years, noted Roy Frederick, an economist at the University of Nebraska and a former director of the Nebraska Department of Agriculture. “That’s a story that doesn’t get told very often,” Frederick said.

Farmers have been using their extra cash to get out from under the mountain of debt that nearly crushed them in the mid-1980s. Nationally, total farm debt--the crucial economic ingredient that led to the crisis--is only about two-thirds of the peak levels of five years ago, experts say.

In Indiana, for instance, 45% of the state’s newly flush farmers have been making extra loan payments--over and above their scheduled payments--to reduce the principal amounts of their mortgages and machinery loans, according to Purdue University estimates.

Now, even the most militant farm activists, who led protests against federal farm policies during the mid-1980s and demanded greater protection for family farmers, grudgingly admit that the crisis has generally passed.

“I think the sharp edges of the crisis have been taken off,” Dave Ostendorf acknowledged. He is the director of Iowa-based Prairiefire, which organized some of the most militant farmers during the crisis.

Many farmers here in Iowa, the nation’s leading corn- and hog-producing state, say that they are in their best financial shape since the late 1970s, when runaway inflation led to soaring crop and land prices. Iowa State University estimates that only 18% of Iowa’s farmers are still in financial trouble, down from 33% in 1985.

“In 1985, my world was at an end,” recalled Craig Hill, a 34-year-old corn and soybean farmer here in Milo. “In 1985, I was so close to going to town to work in a factory it wasn’t funny.

“But now, I’m back to where I can relax and not feel threatened,” Hill added. “I’m set so I can handle things as they come along. For me, things are 180 degrees better.”

But today, after surviving a deflationary depression in the early and mid-1980s, farmers are more prudent than ever before, still wary of borrowing money and bitter about the losses that farming suffered.

“The farm economy is better for the ones that are left, but you are forgetting the ones that we lost,” said Don Sutter, a farmer in Pleasantville, Iowa, who just barely survived the crisis by selling all his livestock and farm equipment. “Our farm went from 800 acres during the crisis to 2,300 acres today, so you know some farmers are out of business,” Sutter added.

Indeed, the crisis hit virtually every sector of Iowa agriculture. Even Iowa’s governor, Terry E. Branstad, was forced to sell one of his two farms in northern Iowa to meet his debt payments.

But, despite the suffering, the family farmer survived and today still dominates Midwestern agriculture. Although thousands of farmers were forced out of business, nearly all of the land they gave up was taken over by other family farmers like Sutter, economists and government officials say. In Iowa, Nebraska and other Midwestern states, they say, at least 80% of the land held by family farmers who went through bankruptcy proceedings or foreclosure was bought by other family farmers.

As a result, the great fears that huge conglomerates and foreign investors would gobble up distressed farmland and begin to dominate Midwestern agriculture--fears voiced in the mid-1980s by populist farm advocates and given nationwide play by sympathetic celebrities--proved unfounded.

In fact, there was never any real chance of that nightmare happening. Almost all of the states in the corn and wheat belts have longstanding laws--some dating to the Great Depression of the 1930s--prohibiting non-family corporations or foreigners from buying farmland. Nebraska even has a constitutional amendment barring such purchases.

“The one thing that was misleading (in the media coverage of the crisis) was (not explaining) that the bulk of all that land did go back to family farmers,” Merlin Plagge, president of the Iowa Farm Bureau Federation, observed.

So corporate farms, which play such a big role in California agriculture, are still virtually non-existent in the Midwest.

In addition, many Midwestern states imposed temporary moratoriums on farm foreclosures during the crisis and created new credit-arbitration systems, forcing bankers and farm credit agencies to negotiate with farmers and write down their loans so that family farmers could stay in business.

“In a lot of cases, these people were able to go through bankruptcy and then start over again,” Harl of Iowa State said.

For example, Gary Barrett, a small farmer in Stuart, Iowa, is poised to emerge from bankruptcy after restructuring much of his debt with the Farmers Home Administration. The FHA wrote down his loans from $320,000 to $130,000, making it possible for him to remain on his farm. “We went into reorganization (Chapter 12 bankruptcy proceedings for farms) in early 1987, and we’ve had good luck ever since,” Barrett said. “The crops look real good this year.

“The guys that had it hard like me are just getting ready now to get back on their feet and walk again,” Barrett added.

To be sure, by the end of the 1980s, there were fewer family farmers in the region. But, at least in some states, the decline actually came at a more gradual pace than in the previous decade. In Iowa, one of the states hit hardest by the crisis, 14,000 farms went out of existence during the 1980s, with the total number of farms falling from 119,000 in 1980 to 105,000 by 1989, according to statistics compiled by the Iowa Farm Bureau.

But that actually represented a smaller decline than had been experienced during the 1970s, when the number of Iowa farms fell by 26,000--from 145,000 in 1970 to 119,000 by 1980.

As a result, the size of the average farm in Iowa grew only slightly during the decade, from 284 acres in 1980 to 319 acres last year.

“We still have the family farmer,” said Dale Cochran, Iowa’s secretary of agriculture. “He’s just getting larger.”

Much of the credit for the recovery in Midwestern farming must go to federal farm subsidies, which ballooned to unprecedented levels under the 1985 farm bill--legislation that was hammered out by Congress during the worst days of the crisis. Although many farm activists assailed the bill at the time, virtually all farm experts now agree that the five-year legislative package gradually brought the crisis to an end by pumping billions of dollars into farmers’ pockets.

At its peak subsidy levels in 1986, the bill sent a staggering $26 billion in federal money to the nation’s farmers. The bill’s price-support levels have gradually declined since then, but, in 1990, the legislation’s last year, the government will still provide between $10 billion and $11 billion in payments to farmers.

“You can’t overestimate the effect of the 1985 farm bill,” said Bruce Johnson, an agricultural economist at the University of Nebraska. “We had megabucks coming in.”

The new government subsidies provided by the 1985 bill for producers of corn, wheat and other grain products were so rich that, by 1988, 83% of net farm income in Iowa came from payments to farmers from the federal government, according to Harl of Iowa State.

And the legislation had dramatic, positive side effects for Midwestern farmers. The massive government subsidies for the production of cheap corn and other grains--which are the main raw materials needed for raising cattle and hogs--made it possible for farmers to reap enormous profit margins on their livestock.

Also, the bill, for the first time, provided farmers with a long-term source of steady cash by creating a 10-year land conservation program. Under the program, about 34 million acres of marginal cropland nationwide were taken out of farm production for 10 years, beginning in 1986. Farmers who participate receive cash each year in exchange for letting the land sit idle. Nearly 2 million acres of land in Iowa alone has been taken out of crop production under the conservation plan--which supplemented existing federal land set-aside programs.

“I know one guy who put his entire 600 acres into (the conservation program) and moved to town to collect his checks,” farmer Craig Hill said. “That program retired a lot of farmers.”

It is no wonder, then, that farmers and the farm lobby have been pushing hard in Washington for a continuation of the 1985 bill’s provisions in the 1990 bill, which has been under debate this summer in Congress.

And, despite rising resentment from some urban critics of farm subsidies, farm experts say that the new legislation probably will maintain subsidies and price supports for Midwestern family farmers at roughly the same level provided for 1990 under the 1985 bill.

“When all is said and done, we will probably just fine-tune the ’85 farm bill without much change in target prices,” Gene Maahs, executive director of the Iowa Farm Bureau, said.

Farm experts defend the increasingly controversial government subsidies and say that, despite the farm recovery, federal support is still needed to provide stability to agricultural markets. “It’s not welfare for the rich; it’s a way to control production,” Cochran, Iowa’s agriculture secretary, said.

Meanwhile, farmers are already gearing up for a fight with the Bush Administration over the President’s dramatic new trade initiative to seek an end to farm subsidies in every major nation around the world.

The world’s--and America’s--farmers, they warn, are not ready for such a free market.

Complained farmer Don Sutter: “Bush wants to break the back of every farmer in the world.”