As combines start to roll throughout the farm belt, prices for corn, wheat, soybeans, potatoes, sugar beets, onions, and many other everyday commodities are at or near 30 year lows. And it is really worse than that. For if you adjust the prices for inflation, we are at all-time record lows. Yet, costs for seed, fertilizer, chemicals, machinery, and other services which the farmer uses continues to increase. Even real estate taxes on farms in Iowa are expected to increase by 6.5% in 1999 despite a 50% drop in farm income within the state. The squeeze on farm operations even with the limited amount of farm support income will cause 1999 to be the final year for more farmers than since the 1930 Depression years.
Eat hearty now because many of these farmers will be out-of-business before the next crop harvest occurs and many farmers won't have enough money to put the seed in the ground, or to apply the fertilizer and chemicals it takes to grow a crop.
The Freedom to Farm Act was passed
by Congress to "deregulate" the farming industry by
eventually eliminating government price supports
that have held up the farm economy during down
cycles.
Because of variable grain prices, variable weather
conditions, variable storage conditions, variable
transportation conditions, variable equipment costs
and the growth of modern technology, as well as
government politics, the average American farmer is
constantly in an economic squeeze. The government
programs were designed to take the peaks and
valleys out of the market in order to stabilize the
farm economy by minimizing the impact of the major
grain companies who dominate world markets.
The Freedom to Farm bill was sold to the farmers by the Congress, and the USDA as a way to eliminate crop controls. There were three main elements to the program.
For seven years from 1997 to 2002, the farmer would receive a payment based upon the historic base acreage of the farm without regard to the number of acres planted, production yields and/or commodity prices.
Restrictions on the planting of crops other than certain fruits, vegetables, peanuts, and the production of milk would be removed from government control.
The government would expand exports through a variety of methods, reduce regulations on farmers and institute tax reforms to benefit the farmers ability to survive.
The Farm Bureau basically believes Freedom to Farm is fair for America's farmers and ranchers. But Farm Bureau leaders have expressed frustration over government's failure to carry out promises of expanded exports, reduced regulations and tax reforms that were supposed to be part of the law. Had Congress followed through with these provisions, family farms may not be feeling the sting of the current economic climate.
Exports of corn and soybeans from the U.S. have fallen by almost 50% during the past two years. Any wonder that we will probably have continued pressure on prices. Wonder what would happen to the auto industry if they lost 30% of their sales in just two years.
With central Iowa cash corn prices hovering around $1.45 to $1.55 on September 30, 1999 and cash bean prices in the $4.30 to $4.50 range it is tough for Iowa farmers to make a profit, let alone meet family expenses.
Actually, at those prices, a typical large farmer stands to lose about $.50 per bushel of corn and about $1.50 per bushel of soybeans harvested after getting his LDP payment. And that figure does not include any compensation for his land cost. For the smaller farmer whose costs are even greater, the losses are even more significant.
The Freedom to Farm Act coupled with world grain supplies and deflated money markets abroad have put the pressure on the individual grain farm operator. If he can hold storage long enough, say two or three years, he may find a way to ease through the crisis. But most agriculture bankers will tell you that less than 20% of our farmers have the cash resources to allow them to store their crops for that period of time. It takes operating capital for seed, fertilizer, chemicals and just plain eating.
If you think President Bill Clinton has problems you need to talk to an American farmer from Texas, Idaho, the Dakota's, Iowa or any agricultural region. If the stock market plunges along with the grain market, it is going to be a long winter ahead.
During the past four weeks, I have been throughout the Midwest and Texas, Oklahoma, New Mexico, Colorado, Utah, Idaho, and Oregon driving almost 7,000 miles In talking to farmers and ranchers during my travels, the one common thread is simply this . . . We're quitting! Either we have to quit because the bank won't fund us any longer (mostly the younger farmers under 35 who have not built up any equity) or we're quitting before we lose all the equity we have built up during the past 30 or more years of farming.
The number of farmers who sold out last year was at a record and that record is going to be broken this winter and spring according to the auctioneers with whom I spoke. Land prices are headed south as these record low crop prices won't enable farmers and/or ranchers to make a profit, let alone a living.
The cost of wheat is a 1 pound loaf of bread is less than 7 cents. The cost of the corn in the large box of Kellogg Corn Flakes is less than 5 cents. Yet, the average cost of a loaf of bread is $1.75 and the large box of Kellogg Corn Flakes is $4.15.
The American consumer pays less of its Gross National Product for food than any other country in the world. But they have finally destroyed the chicken that laid the Golden Egg. But that is about to change as the Family Farmer either retires and/or is forced into bankruptcy.
One national farm organization has projected that the number of farms with over $50,000 of revenue will shrink from about 330,000 in 1998 to less than 30,000 by 2002.
This crop year started off with every indication that we were in for a bumper crop. As the year went along, we had drought in the Eastern Half of the Corn Belt, hurricanes and wind damage in the Carolina's and Virginia's, and an early frost in the upper Midwest. But that is life in the farm belt. In June 1999, all the traders in Chicago were certain that we would see a 10 billion bushel corn crop. After my recent trip, I think we will harvest only about 9 billion bushels.
What we did not expect was the loss of our export markets as the Asian economy tanked, the reluctance of the Clinton Administration to use our surplus food supplies as food relief supplies to the millions of starving people in Africa, North Korea, and the other less fortunate countries of the world.
In 1963, it was my good fortune to help draft PL 480 and get it through Congress. This Administration which is willing to write-off the debt of the so-called "poor countries" should take the surplus commodities, package them in bags labeled "Gifts from the United States" and alleviate some of the hunger in the world.
That way we could solve two problems with one bag of wheat or corn or soybeans . . . Hunger and the Commodity Surplus. Because if something drastic is not done immediately, the family farmer is gone . . . Freedom to Farm cooked him when the federal government failed to perform its part of the bargain to market our products overseas!
But then - 'Tis Only My Opinion!
Fred Richards
October 1999
This issue of 'Tis Only My Opinion was copyrighted by Adrich Corporation in October 1999.
It is intended to provoke thinking, then dialogue among its readers. Quotation with attribution is encouraged.
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