MPR: Farm Crisis Review

Farm Crisis Review
By Mark Steil
December 28, 1998

Most farmers in our area will shudder when they think back on 1998. The agricultural economy moves in well defined peaks and valleys. 1998 was a valley. Nearly every farmer felt the disquieting unknown of economic hard times.

THE SEEDS OF THE FARM SLUMP were as far-flung as the Asian financial crisis and as down-home as weather, overproduction, and disease. It was a year when Minnesota farmers took home their first billion bushel corn crop, a record soybean harvest, and wagons full of red ink. The farm crisis of 1998 took hold first in the Red River Valley before rolling south as cold and unforgiving as an arctic front. It left in its wake proud farmers disillusioned at their role in the nation's food system.

Panec: You could just as well go carry groceries at Hugo's and forget about the misery and headache, 'cause that's all we're doing is beating our head against the wall out here. We employ 50 percent of the workforce in this country, feed the whole damn world, and we can't feed ourselves. There's something wrong.

Steve Panec and his father went out of business last spring, unable to get an operating loan for their farm in northwest Minnesota. Scores of wheat farmers in the Red River Valley went out of business this year, ruined by several consecutive years of bad weather and disease. The fungal blight bedeviling wheat growers has a name as repellent as its damage: "scab." Its cost northern plains farmers an estimated $1 billion this decade.

Scab was just one problem facing wheat farmers. Take Red River Valley producer Randy Awes. Beset by drought, floods, disease, and low grain prices, he's only had one profitable year in the last ten. He sold out last spring.

Awes: Now that I'm getting out of it, I wouldn't get back into it for any amount. Owing what I owe the bank by the time I clear up with those guys, I'll be glad to be out of it. All I know is every farmer I know who's quit farming hasn't regretted it.

By year's end, it was predicted 60 percent of northwest Minnesota farmers may not qualify for spring-planting loans because they were in such poor financial shape. The economic tremors in the Red River Valley were quickly followed by apprehension in southern Minnesota, where crop prices fell faster and further than anyone had seen before.

Brian Romsdahl: I feel the farm economy is pretty dismal right now with the current prices of corn and soybeans.

Southern Minnesota farmer Brian Romsdahl could only watch as the mountains of grain he and other farmers produced drove down prices.

Romsdahl: If it truly is a supply and demand market, and you're supplying more than what the demand is, it's financial suicide.

Adding to the problem was a decline in world demand for U.S. farm products. The biggest drop was in Asia, where devalued currencies made American commodities unaffordable. University of Minnesota farm analyst C. Ford Runge said the price-drop left farmers virtually no profitable refuge.

Runge: Livestock prices and grain prices often run in ways that cause them to be offsetting is not true at the moment, in that we have fairly low prices. For example, in the hog market combined with what appears to be dropping prices in the corn market.

There was one exception though to the dreary price picture.

Driven by strong butter and cheese demand, the price of raw milk soared to record levels during 1998. That was welcome news for an industry which had lost three farms a day for years. Still reeling from that disaster, Minnesota dairy farmers like Jerry Jennisen welcomed the higher prices, but were cautious about how long they would last.

Jennisen: These are really bonus times. That's when you make your improvements, you retire your debt. But you don't plan on this price forever, that's just poor business.

For most farmers, though, things got worse as the year went on. They started holding meetings and many, like this singer at a rally in Worthington, blamed the government for their problems.

Jennisen: I remember back in '96 when we got the "Freedom to Farm [Act]." The government said everything would be fine, no one should raise an alarm. But when I read the fine print, I knew we were in for a change, 'cause when you take away the farm safety net, ain't nothing going to be the same.

The "Freedom to Farm" legislation is supposed to end direct government farm subsidies and most of government's role in agriculture by the year 2002. It already has eliminated government's control over how much corn and other grain farmers grow. With controls gone, farmers planted every available acre, contributing to the grain oversupply and dropping prices. As prices tumbled, farmers like Brian Romsdahl liked to call the legislation "freedom to fail."

Romsdahl: I don't have a very rosy picture of the future, if this is kind of the precedence.

But even though low prices are driving farmers down to their bottom line, some defend "Freedom to Farm." The legislation makes direct-government payments to farmers through 2002, when the subsidies will stop. These payments are supposed to ease the transition of American agriculture from government controls to the free market. Southern Minnesota farmer David Roe said the legislation is painful but necessary.

Roe: There's an argument that we don't subsidize the hardware-store owner or the small manufacturer, why should we subsidize the person involved in production agriculture? I don't believe that you can afford to subsidize one sector of the economy to the expense of the others.

But even as farmers debate freedom to farm, steps are underway to undercut the legislation. University of Minnesota farm analyst C. Ford Runge predicts political realities will over-ride political philosophy.

Runge: Anyone who believes that the government is going to entirely walk away from intervening in agricultural prices is naïve. The fact is, if you have a substantial number of farmers in your congressional district, you see it properly as your job to respond to their concerns. And to suggest that they would have nothing to do in these areas simply goes against the nature of the political beast.

Runge's prediction came true in October when Congress passed, and the President signed, a $7 billion emergency farm-relief package. The money, along with record crops, will ease the impact of low prices, but won't cure farmer's financial ills. And as the year ends, what may be the worst of 1998's farm problems is taking shape.

Wiertsema: Right now I'm looking at 1,300 head of hogs to sell in the next four weeks. I stand to lose $65,000 to $70,000. It's time someone does something about this. There's a lot of people who have to make decisions in the next couple of weeks whether they're going to continue farming or not.

At a meeting in Marshall, Randy Wiertsema of Rushmore described the rush of red ink his farm faces. Hog prices have collapsed. Calculated in constant dollars, they may be even lower than during the great depression of the 1930's. Faced with financial ruin, farmers like Dave Overman lashed out saying the hog oversupply is caused by the rapid growth of large scale corporate-type farms.

Overman: I think them corporates are screwing us little farmers down the tubes. You should put moratorium on - nationwide - on them damn barns. Put 'em out of business, they're putting us out of business.

As the year ends, there are calls for federal help to save pork producers. For many, any help will be too late; too much debt means they can't get a loan to save their business. As the new year begins, credit will be the major concern for all farmers. Ahead are weeks of negotiation and fine-tuning as farmers work to get the money they need for another year.

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