Harvest of Plenty Reaps Cashless Crops for Growers

The pictures this time are not of drought--no land baked dry, no crops seared black. There are no pictures, either, of flood.

But disaster has struck here nonetheless. It’s taken the form of bounty.

Call it the paradox of plenty: Crops are so good throughout much of the heartland that farmers are in crisis. Supply is up, not only in the U.S. but around the world. Demand is down, especially overseas. So prices for wheat and corn and soybeans have tumbled into catastrophe.

It’s that simple. And yet, it’s not. For this summer’s agricultural meltdown--the latest in a frustrating series--has raised profound questions about national farm policy that growers and politicians alike are struggling to answer.

Three years ago, Congress ended a program that held supply down and prices up by paying farmers to leave land idle. The policy that replaced it, dubbed “freedom to farm,” is supposed to wean growers from public subsidies. But pushing agriculture into the free market has proved exceptionally tough.

The result: Though farm payments are supposed to be dwindling, taxpayers will front a record $14.4 billion in direct aid to growers this year.

Some of those billions take the form of “transitional” payments designed to ease farmers into the free market slowly. Others are deemed emergency aid.

Then there’s the program that lets farmers borrow money from the government on each bushel they expect to harvest. The U.S. Department of Agriculture authorizes these loans at a fixed rate, say, $1.90 per bushel of corn. But when the price of corn dips unexpectedly low, farmers don’t have to repay the whole loan. Rather, they repay only as much as they can get for their crop on the market. So if corn sells for $1.70, they pocket the extra 20 cents a bushel. In a year like this, that subsidy amounts to good money.

A Record Yield From Washington

All told, government checks will make up nearly one-third of total farm income this year. That’s another record. And it’s not one folks out here are proud of.

“That’s a lot of money for a sector that’s supposed to be deregulated,” said Neil Harl, an agricultural economist at Iowa State University.

The worst of it, though, is this: Despite these bailouts, farmers are still going under, and fast. That’s because even by the standards of the oft-victimized farm community, today’s prices are horrendous.

Hog prices collapsed so severely last fall that farmers were giving away their pigs. Now other commodities have tanked. Corn has not fetched so little money since 1986. Cotton prices, which affect California farmers among others, have not been this low in a quarter century. And soybean prices this soft were last seen in 1972.

“There isn’t a cent of profit in any enterprise. The economic engine has been killed out here,” said Roger Allison, who farms on lush, hilly land near Armstrong, a speck of a town in central Missouri. “If Freedom to Farm works any better,” Allison added sourly, “there won’t be any of us left.”

Sen. Kent Conrad (D-N.D.) heard that same bleak mantra over and over when he met with constituents earlier this month. “There was a sense of hopelessness I had never seen before.”

To be sure, the agricultural crisis does not seem likely to drag down the humming national economy. Less than 2% of the population live on farms. And farmers account for only a percent or two of the gross domestic product. So even in the Midwest, where farms stretch to the horizon outside nearly every city, their woes do not translate into broader economic distress. In fact, low prices for farmers keep a lid on food prices for consumers--and low inflation is fueling today’s robust economy.

That isolation only makes farmers more bitter.

“It’s like people are in shell-shock,” Conrad said. This summer’s prices, he added, are “confiscatory.”

Take corn. Bill Christison, a tall, weather-roughened farmer with soft blue eyes, estimates it costs him at least $3.20 to raise a single bushel of corn on his farm near Chillicothe in northern Missouri. Nowadays, he’s lucky to sell that same bushel for $1.80. Even factoring in government help, he says he won’t break even.

In normal years, Christison would make up the difference by selling his other crops for profit. But not this summer. There’s simply no market for anything he grows.

“Do you ever remember soybeans selling for $3.60 a bushel?” his friend Rhonda Perry, Allison’s wife, asked him the other day.

“Yeah,” Christison replied. “In 1950.”

The lines on his face seemed etched in bitterness.

Three states away, in the North Dakota town of Mayville, grain farmer Daryl Johnson spoke with the same ground-to-the-bone disillusionment. He has farmed his great-grandpa’s homestead for three decades. Never has he felt so hopeless.

“This is the first year that there is no dream for tomorrow,” he said.

His voice carried no hint of melodrama. He sounded only weary.

Agricultural analysts blame the price plunge on problems with both supply and demand.

Part of the supply problem is simply an abundance of good luck: The weather was fine throughout much of the Farm Belt, and diseases were held at bay. As Harl put it: “The only thing worse for a farmer than bad weather is good weather.”

But there is more to it than that. “Freedom to farm” also means freedom to make mistakes.

With no more incentives to keep land idle, farmers have planted millions more acres over the last few years--just as the Asian financial crisis erupted and sent commodity prices tumbling worldwide. After last year’s excellent harvest, many growers held off selling their crops, stashing them instead in warehouses to await higher prices. That tactic, however, backfired.

Add this year’s bumper harvest to last season’s surplus and you have true glut. And this time, farmers have no choice but to sell, even at a loss. There’s no room in the warehouses. Their loans have come due. They need any cash they can get.

The demand side of the equation looks equally gloomy. Though the volume of ag exports should edge up this year, reversing a three-year slide, the revenue from those sales will be low. The USDA estimates revenue this year at $49 billion, down from a peak of $60 billion in fiscal year 1996.

The export slump hit California too; cotton, walnut and almond growers in particular have struggled. But overall, California’s diversity--the state produces 250 commodities--has buoyed the farm economy through this crisis, as through others. “Diversity has been our blessing forever,” said Jack King of the California Farm Bureau.

The Midwest has no such cushion. It’s just grain, beans and livestock out here--and lately it’s been tough to peddle any of the three.

A Dearth of Buyers Across the Globe

Russia, nearly bankrupt, isn’t buying much American wheat, and a deal to sell it 50 million metric tons of pork collapsed earlier this year. Asian countries, their budgets crimped by financial strain, are also cutting back; grain exports to South Korea fell nearly 65% last year.

Europe, meanwhile, refuses to buy the bio-engineered soybeans and corn (genetically modified to resist pests and diseases) that Americans are planting more frequently. And Europe refuses American beef raised on hormones--which means most of it.

Against this grim backdrop, politicians from both parties concur that American farmers need help badly. “A simple injection of income, to put it blatantly, from the U.S. Treasury,” said Sen. Charles E. Grassley, an Iowa Republican.

Free-market purists may cringe, arguing that taxpayers don’t bail out any other industry when it overproduces. But farming is unlike any other enterprise, as growers cannot adjust production midseason to respond to a shifting market. Once they plant 1,000 acres of corn, they’re stuck with it through harvest--and if they hope to get any money at all from it, they have to keep opening their wallets to buy fertilizers, pesticides and the like.

“That’s economic hell, I can tell you that,” Allison said.

As a quick fix for this summer’s crisis, the American Farm Bureau Federation has asked for $14 billion in disaster relief. Other proposals, including some advanced by the presidential hopefuls trooping through Iowa, range from $6 billion to $9 billion. Given the bipartisan push for aid, few doubt that Congress will appropriate a substantial sum this fall.

The question then becomes: What next?

And that’s where the consensus collapses.

Grassley favors giving “freedom to farm” a chance. He’s convinced that farmers will do better in the end without government payouts, especially if they form marketing co-ops so they can peddle their wares overseas without relying on corporate middlemen.

Conrad, in contrast, wants to pump up government involvement. He is calling on the U.S. to match, dollar for dollar, the subsidies European governments pay their farmers--a program that would cost $16 billion a year but might eliminate the need for emergency aid and other payouts. “Unless we make major changes, agriculture is headed for disastrous times.”

Farmers, meanwhile, have their own hotly argued opinions. Some want to be paid again for leaving land idle. Others would like taxpayers to buy their surplus crops as a strategic food reserve. Some want the government to boost demand for corn by backing ethanol to replace MBTE as an additive for clean-burning gasoline. Others put hope in the revival of agricultural exports to places like Libya and Iran. And many call on the government to bust big agribusiness so family operations will not be forced into impossible competition against corporate giants.

Whatever their strategies, they plead with one voice for urgency. “It sounds like farmers are crying for free money, but it’s just the reality [of the agricultural economy],” said Johnson, the North Dakota farmer.

When you live through a price collapse like this summer’s, he added wryly, “They say you’re part of history. Well, this part of the history book we’re pretty tired of. We wish we could get on to the next chapter.”