Pulling Farms Out of the HoleBy Jim Hightower
Vol. 10, No. 2, 1988, pp. 5-8
The good news for American farmers in 1988 is that the farm crisis has officially been declared "over" by the Reagan Administration. The bad news is that their good news is a lie.
With the national media's attention recently riveted on Wall Street's problems, the Administration is trying to spread the propaganda that the 1985 Farm Bill has worked and that prosperity is just around the corner-for U.S. agriculture.
That is going to come as a surprise to the 235,000 farmers who have been squeezed out of agriculture as a result of the price-busting, surplus-generating 1985 Farm Bill, and it is going to offer mighty cold comfort to the 130,000 other farmers forecast to go under in 1988.
The Administration bases its rosy assessment of agriculture's prospects on the fact that net farm income rose in 1987 for the first time in years and that the volume of our farm exports increased. That would be happy news, indeed, except that the small increase in farm income last year came out of the taxpayer's pocket rather than from a healthy increase in commodity prices, and while export volume went up, the dollar value of those exports went down.
This Administration is proving again that figures don't lie, but liars do figure.
Our nation's farm economy still is a wreck. Last year was not quite as bad as 1986 or 1985, but it was not a year to celebrate, and 1988 looks even worse. Farmers will know that the farm crisis is "over" when they start getting a-fair market price for their commodities and a warm smile from their bankers. That day will not come until we do away with Washington's ill-conceived farm program.
The Reagan Administration promised that the 1985
Page 6Farm Bill would accomplish four goals: (1) increase farm income; (2) reduce taxpayer costs; (3) increase agricultural exports; and (4) lower crop surpluses. When Reagan signed the bill, he was quoted in the New York Times as saying the legislation "provides new hope for America's hard-working farmers and our rural communities.'"
After two years, we can see that the 1985 Farm Bill has failed miserably on each point. Just consider this:
- Net farm income rose by an average of $500 Million between 1985 and 1987, when adjusted for inflation, which is an increase of less than 2 percent. Every penny of this very small increase was due to record high taxpayer subsidies, which, for many producers, must now account for two-thirds of their gross farm income. The prices which producers were paid for most of their crops continued to fall, just as they have since 1981, often to only one-half of 1987's actual production expenses.
- As bad as prices were in 1987, they will get even worse in 1988. Under the Budget Reconciliation Act just signed by President Reagan, target prices this year will drop an additional 1.4 percent on top of the 2 percent reduction already mandated by the 1985 Farm Bill.
- Taxpayer costs increased an additional 27 percent to support these failed farm policies in 1987,when compared with 1985. The projected three-year price tag of the current farm bill is now over $68 billion--about $16 billion more than first estimated. Between 1981-88, this Administration will spend a whopping $122 billion on failed farm programs, the third largest U.S. expense behind defense spending and Social Security. This Administration has also spent nearly $50 billion more on its farm program than all that was spent for U.S. agriculture in the previous forty years.
- U.S. farm exports have declined by about one-third in the last seven years, dropping from $44 billion in 1981 to $31 billion in 1985 to $28 billion last year. The decline between 1985-87 was over 10 percent. If you subtract the Export Enhancement Program, which allowed Russian livestock producers to buy wheat at 36 cents a bushel less than the U.S. price, the decline in farm exports since 1985 was nearly 12 percent. Even forecasters at the U.S. Department of Agriculture now predict that the value of U.S. farm exports will decline by 2 percent in 1988.
- Crop surpluses have not been reduced either, as the amount of U.S. wheat and feedgrains in storage is up by 10 percent over the past two years.
The results are as ugly as you would expect. The 1985 Farm Bill forced another 235,000 farmers out of business, not because they were bad producers or bad managers, but because they had to fight bad farm policy. It's the same policy which, since 1981, has caused us to lose over 600,000 productive U.S. farmers--20 percent of our farmers shut down in a stunningly brief time.
According to the latest projections from the American Bankers Association, well continue losing 2,504 U.S. farmers per week in 1988.
These bad policies have stuck U.S. farmers with debts of nearly $175 billion, while farmland values have dropped by another 19 percent nationwide. In some parts of the Midwest. good, rich farmland is now worth less than one-third of what it was in 1981. Farm lenders now hold eight million acres in foreclosed farmland--property which they cannot sell--of which the U.S. Farmers Home Administration possesses 1.6 million acres. Sixty-seven percent of the farmland sold by FmHA was sold to speculators and agribusiness concerns which fall outside the mandate of the agency.
Both FmHA and the Farm Credit System are eager to sell only to those who can pay cash. No family farmer has the cash money to plunk down on farmland for a son or daughter, but an investment syndicate does. A real estate. developer from Mesa, Ariz., has purchased dozens of farms in Iowa. He told the New York Times that he rents the farms, sometimes to former owners, and gets up to 12 percent in return on his investment in cheap, foreclosed farmland. Since 1981, the number of acres managed by farm management companies has increased by an area the size of Colorado. The twelve largest land-owning insurance companies hold three million acres of farmland worth $2.3 billion, while commercial banks hold about 400,000 acres worth $350 million.
The misery is compounded when you consider that the 1985 Farm Bill has produced another 25 percent decline in tractor sales, has prompted the layoff of another 8,800 farm implement workers, has forced another 700 farm implement dealers to close, and has caused over 100 agricultural banks to shut their doors.
While we are now selling 28 percent fewer John Deere tractors than in 1981, sales of Mercedes Benzes in this country have skyrocketed by 57 percent. While farm prices were falling, food-processing profits were going through the roof, and the power of the food industry was being concentrated at a dizzying pace. Five companies now control two-thirds of the U.S. beef industry, and one of those companies, Cargill, also is one of five multinationals which dominate 80 percent of the world's grain trade. These are the companies that benefit from a farm policy which saw the United States, in 1986, stockpile 250 million tons of unsold grain when only 40 million tons of grain would have averted the famine taking place in Africa.
If there is any good news for American farmers for 1988
Page 7it is contained in the farm credit rescue package that Congress passed and sent to the President shortly before Christmas. This legislation is good news for farmers for two reasons.
First, it is real, tangible help for farmers who have been struggling to pay old debts while trying to survive on less income. Secondly, passage of this legislation is a victory that nobody believed farmers could win until the American Agriculture Movement, the National Farmers Union, the National Farmers Organization and the Save-the-Family-Farm Coalition stood shoulder to shoulder and demanded that the Farm Credit Act of 1987 address their credit problems as well as their bankers'.
This legislation includes debt restructuring and interest rate write-down provisions. Additionally, Congress provided up to $500,000 per state for mediation services that can help farmers work through their debt problems.
Benefitting most from this legislation are the 150,000 farmers nationwide who have been fighting for seven years with the very federal agencies that were instructed by Congress to help them.
With a victory under our belts, the farm community
Page 8again has its work cut out. Priorities for 1988 include:
Election of a Democratic President. No farm program is better than the people who administer it. This Adminstration [sic] has used its discretion to hurt family farmers at every opportunity, by lowering target prices to the maximum allowable, by failing to comply with court orders on farm lending practices, and by refusing to implement disaster programs authorized by Congress. Without a President who is committed to helping farmers, new farm legislation will be an impossibility.
Strengthen the Democratic majority in the Senate. By retaining the Democrats we now have, such as Sen. Lloyd Bentsen from Texas, and winning contested seats in Missouri, Minnesota, Washington, Pennsylvania and Nebraska, farmers can gain additional clout for passing an effective successor to the 1985 Farm Bill.
Tinker with the '85 Farm Bill. An example is eliminating penalties for farmers who try to cut production costs and protect the environment by reducing pesticides.
Develop rural economic development legislation. The federal government has a role to play in helping farmers diversify production into new cash-value alternative crops and become processors of their commodities as well as producers. Such federal assistance should include federal loans and insurance for alternative crops; financing for producer-owned and -operated processing operations; research funding for the production and marketing of alternative crops; and dissemination of market information on alternative crops.
Ultimately, there are three basic policy approaches to tackling the farm crisis: (1) let the family farm system go, leaving control of our food supply in the hands of investment syndicates and conglomerates; (2) stick with some version of heavy taxpayer subsidization of commodity producers and shippers; or (3) replace expensive tax subsidization with some form of effective supply management.
It is that third alternative that best serves American taxpayers and American farmers.
By strictly limiting our production of certain commodities to the known demand, U.S. farmers will eliminate price-busting, tax-eating surpluses. They will produce to meet the actual demands of the domestic market, world cash and credit markets, and world hunger needs. In return for matching their production with real demand, a realistic and fair price floor would be established for these commodities at roughly the cost of production, thus preventing price busting by monopolistic purchasers.
By selling America's farm commodities in the marketplace, instead of to the government, we can "zero out" the humongous sums that taxpayers have been forced to pay in the form of crop subsidies to farmers, conglomerates and syndicates. In 1987, crop and storage payments cost U.S. taxpayers over $22 billion. A supply-management approach would eliminate all crop subsidy payments to farmers, saving taxpayers $18 billion in its first year and $22 billion thereafter. Under this approach, the only taxpayer outlays are to combat world hunger, to create a conservation reserve, and to establish a crop disaster program.
Simply stated, this is the single best approach that exists for pulling good farmers, overburdened taxpayers and the rural economy out of the hole.
Jim Hightower is serving his second four-year term as the elected Texas commissioner of agriculture. His comments are excerpted from an address to the ninth annual convention of the American Agriculture Movement, which met in January in Wichita, Kansas.