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Farmers Being Dealt ‘Glancing Blow’ from Recession With PM-Farm Recession-Iowa, PM-Farm

March 4, 1991

Farmers Being Dealt ‘Glancing Blow’ from Recession With PM-Farm Recession-Iowa, PM-Farm Recession-Income

WASHINGTON (AP) _ Farmers are planning larger crops this spring, and 1991 looks like it will be a good year for cash flow and farm income. But don’t tell farmers they won’t feel the effects of the recession.

″We out here in Oklahoma are all of a sudden hearing this great whining and gnashing of teeth in the Northeast about a recession, when it’s really nothing new out here,″ said Chris Rink, executive director of the Oklahoma Wheat Commission.

Economist Neil Harl of Iowa State University said if it is a mild recession agriculture ″will be dealt no more than a glancing blow.″ But if it is severe, Harl worries about the consequences.

Many farmers say they never really recovered from the 1981-1982 recession, when land values plummeted, market prices declined and debts grew too huge to handle.

″Farmers been in a recession long time,″ said Raymond Parish, who grows wheat, grass and cattle on about 22,000 acres in Hunter, Okla. ″The ones around here, we kind of learned how to handle it.″

The Agriculture Department said farm income around the nation will be just under last year’s record high of $49 billion. That was the highest since the mid-1970s, counting inflation.

″Cash receipts will rise with larger marketings and higher prices for a few commodities,″ says James R. Donald, chairman of the department’s World Agricultural Outlook Board. ″At the same time, production expenses will increase a bit more, in part reflecting higher energy costs.″

Economist Terry Fancl of the American Farm Bureau Federation in Chicago said the studies show the recession will have ″little, if any, impact″ on farmers this year.

That was not the case in the 1981-2 economic downturn.

″Remember, then we had worldwide recession, and we really got hurt on exports,″ Donald said. ″There were quite a few cutbacks . .. particularly by some of the developing countries″ that got into trouble with foreign exchange.

″Now doesn’t compare anything with what happened then,″ he said. ″We’ve still got fairly strong markets out there. We’ve got big supplies, obviously, but we don’t have that type of worldwide recession that we had back then.″

But there are different factors this year.

″I think everything, from our war in the Mideast to our budget at the national level to the recession we are in, has all caused farmers to be somewhat gun shy,″ says Everett Nordine, who farms near the northwest Iowa community of Albert City.

Copeland Griswold, who farms 3,000 acres of peanuts and cotton in the Florida panhandle, said the Persian Gulf War cost him $50,000. Iraq had been a major importer of U.S. cotton.

″Some idiot I never heard of, some country I never heard of, cost me a bunch of money,″ he said.

Drought also adds to the farmer’s problems.

″I think after two years of drought, things are catching up with people,″ said Brad Thykeson, a grain and livestock farmer near Portland, N.D. ″People were hoping 1990 would pay some past bills and it didn’t. Now, they’re facing average yields at these (low) commodity prices. You’ve got to look at 1991 as a break-even year.″

Thykeson said it was no easier borrowing money.

Mike Dunn, chief lobbyist for the National Farmers Union, said bankers are no longer willing to accept additional collateral - often in inflated land values - and roll over debts so farmers could borrow more.

″It’s now on cash flow - whether or not you can cash flow enough to pay bills and have some left over ... borrow in the spring and settle up in the fall,″ he said.

In Webster City, Iowa, Jeff Plagge, executive vice president of First State Bank, said loan demand remains good and cash is available. But he said customers have taken ″a more conservative approach″ to borrowing.

Farmers who have used all their credit at the local bank can turn to the Farmers Home Administration - traditionally, the government’s lender of last resort.

Billions of dollars of direct and guaranteed loans were funneled into the gasping farm economy by FmHA in the crunch of the 1980s. Congress ordered massive restructuring of loans and other aid. In all, the agency may wind up writing off at least $8 billion in bad debts.

La Verne Ausman, FmHA administrator, said subsidized interest arrangements will be available for some hard-pressed borrowers in time for the spring planting season.

″I think agriculture has been through the big part of the wringer,″ Ausman said. ″There’s always some side effects, but we’re not going to see the adjustment in agriculture that we’ve been through,″ he said. ″In fact, some segments are still strong. It depends on which one you’re in, obviously.″

In the fiscal year that ended last Sept. 30, 1.2 percent of the farmers who borrowed money from FmHA left the business because of financial difficulties, spokesman Marlyn Aycock said.

Although that was up slightly from 1989, Aycock said the 1990 exodus was much less than at the peak of the 1980s when more than 3 percent of FmHA borrowers went out of business.

In the first three months of the 1991 fiscal year, Aycock said 501 borrowers left farming. That’s slightly more than 0.2 percent of the estimated 205,000 in the agency’s farm loan portfolio.

At the Bank of Tioga, about 160 miles northwest of Bismarck, agricultural representative Leroy Lokken agrees with those who talk about farmers being in a perpetual recession.

″We’ve been so poor so long we can’t tell when there’s a recession,″ he said.

″Last year we had a little bit of crop for the first time, but prices are so low. Cattle prices have been real good, but farmers had to buy so much hay and feed it took the biggest share of their profits.″

John Mueller, who has 1,000 acres and 650 head of dairy cattle, in Clifton Springs, N.Y., also is concerned about lower commodity prices.

Milk, he said, was riding at record levels in 1990. ″This year, the prices have come crashing down, and people stopped drinking milk because the prices were high.″

Mueller said environmental issues are troublesome, too. ″My biggest problem is getting rid of my manure. Who wants manure spread out onto a field next to their house?,″ he said.

Despite expectations of near-record income, many agriculture familes still are looking for work away from the farm.

Roger Hovey raises durum wheat, barley and sunflowers near Parshall, N.D. His wife is a teacher.

″If she wasn’t teaching school, I wouldn’t be farming now,″ Hovey said. ″The first five years we were married, we were living pretty well. The last few years, my wife has put bread on the table.″

In 1989, $46.7 billion was generated by actual farming operations, according to USDA’s National Financial Summary. The off-farm income of farm families in 1989 was $57.5 billion, down slightly from 1988.

Records showed off-farm income nationally has exceeded net farm income each year since 1975.

Lisle Cook, who produces hog, cattle and corn with his two sons on almost 1,100 acres near the central Iowa community of Hubbard, thinks this recession will be easier on farmers.

″Not that we think we’re recession-proof, but we went through the wringer from 1981 to 1985,″ he said. ″I’d think there’s pretty good stability for those of us still at it. A lot of us are not here any more.″

Dunn, the National Farmers Union lobbyist, said the recession ″seems to be bicoastal″ hitting the industrial areas of the East and West coasts the hardest but he expects that to change as rural communities in other areas feel the pressure.

″By summer, we ought to be into it,″ he said.

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