The New York Times
New York, New York
Sunday, February 14, 1988

WHEN Bob KUSSMAN drops in for lunch at Jay's Cafe, down the road from the Farm Credit Services branch he manages in Keytesville, Mo., the greetings are a good bit warmer these days, and fewer eyes avoid his.

"It's just natural,'' he explained. "There's a lot more farmers able to pay their bills."

In that respect, Mr. KUSSMAN's area of northern Missouri is the national farm economy in a nutshell. It has turned around, slowly and ponderously, while the victims of a six-year agricultural recession were still being counted. Now, "the strength of the rebound seems very clear,'' said Mark DRABENSTOTT, agricultural economist at the Federal Reserve Bank of Kansas City.

Net cash income for farmers - the money they have left for living expenses and long-term debts, after paying other expenses - set a record last year, at $58 billion. In 1983, as the farm recession approached its greatest depth, they netted only about $37 billion. And farmers have been able to reduce their total debt by nearly 28 percent since 1983, from $192.7 billion to about $140 billion.

Casualties of the recession are still rising, though more slowly, among a hard core of farmers - 10 percent, according to the Agriculture Department - who still suffer from heavy debt and low income. There are analysts who warn of weaknesses in the underpinning of the rally in farm fortunes, notably that it is heavily dependent on Government subsidies, which the Reagan Administration would like to cut next year. But these pessimists are now outnumbered by the optimists on the farm scene.

Ralph TRAIL, a land broker with the B. C. Christopher Company here, counted up the reasons for the upbeat mood: "Farmland prices have strengthened, commodity prices are up, exports are up, the grain surplus is down, foreclosures are down, and the outlook is for more of the same." The activities of people like Mr. TRAIL is another sign of the farm rebound: He recently completed the sale of partnerships in a $1.5 million land speculation.

David JENNINGS, up in Iowa's Ringgold County, has a different perspective. Though he is doing well on the cattle and hogs he raises, he is still troubled by elements in the overall picture. "Let's face it," he said, "farmers have had better incomes this year due to two things - good crops and Government payments."

Mr. JENNINGS, who helps each week at a hotline run by Prairiefire, an Iowa-based organization of farm advocates, said, "There are still plenty of those fellows losing everything." But he said the number of distress calls had dwindled to 12 or 15 a day, from about 30 a couple of years ago.

Economists like David HARRINGTON, an Agriculture Department official, and Mr. DRABENSTOTT look at both the improvement and, with words of warning, the flaws. "The farm sector as a whole has paid down a lot of debt, and things are starting to look better," said Mr. HARRINGTON, but "there are still poorly secured debts overhanging too many farms."

"I see two other problems," Mr. DRABENSTOTT said. "One is an ongoing dependence on very large Government payments. The other is a very large question mark over our exports."

Exports soared in the 1970's, and so did crop prices and land values. Farmers expanded and many went heavily into debt. In the 1980's, foreign demand weakened; as exports declined prices at home fell, and large numbers of farmers found themselves in a losing struggle to pay heavy interest costs.

Many farms, nearly all of them small- to medium-sized family farms, simply disappeared, absorbed into larger operations; between June 1981 and June 1987, the number of farms declined by more than 260,000, to 2.17 million. In just about every farming community there were sharp population declines and business failures; Nebraska and Iowa had more than 600 farm-implement dealers two years ago, for instance, against a little more than 400 today.

"We had seen a farm economy that was in a free fall for six years," said Mr. DRABENSTOTT.

Whether or not it can be given credit, a much maligned and costly farm law, the Food Security Act of 1985, preceded the easing of the crisis. The law drove prices of farm goods down deliberately, in an effort to make American products more competitive abroad. At the same time, it raised export subsidies and direct payments to farmers, for a cost to the taxpayer of $49 billion over the last two years.

What followed, partly because of poor harvests in some competing countries, was a rebound in the United States' share of farm exports. The encouraging trade deficit figures for December, issued last week, included agricultural exports that rose to $28.6 billion from $26.1 billion in 1987.

Because of other provisions in the farm bill, almost 70 million acres of cropland - an area larger than Colorado - were idled last year. That, in turn, has helped cut surpluses of farm products that have long been stored away, depressing prices. The prices of several products have begun to respond; corn prices recently crept up to about $1.90 a bushel, for example, from an average of about $1.50 in 1986.

As could be expected, not everybody has shared equally in the profits. The richest 1 percent of the farms still get about half of all farm profits, and about 9 percent of the Government subsidies. The low prices received by cash grain farmers have merely added to the profits of livestock producers, who have been enjoying one of their best years ever. But all enjoyed a decline in the costs of supplies, such as fertilizer and fuels.

In the coming year, the more things change, the more, overall, they are likely to remain the same. Government payments will probably drop, but not enough to hurt incomes greatly. With hog prices likely to fall and feed costs to rise, part of the farm profits may shift from livestock to crop growers. And as usual, the smallest farmers can be expected to do little more than break even, while the largest gain billions in profits.

Transcription by Sharon R. Becker, September of 2009