Farm Crisis Of 1980

In Hills, Iowa, a farmer kills his banker, his neighbor, his wife, and then himself. Near Ruthton, Minnesota, a farmer and his son murder two bank officials. In South Dakota’s Union County, a Farmers Home Administration (FmHA) administrator kills his wife, daughter, son, and dog before committing suicide. In the note he leaves behind he claims the pressures of his job became too much for him to bear. [FN1]

These tragic circumstances were the byproducts of a crisis that struck the American farm in the 1980s, a crisis that had tremendous human costs. Surveys revealed that cases of child abuse and neglect rose 10% in a nine-county rural area in southern Iowa during this period. Studies also showed an alarming rise in divorce rates and alcohol abuse in farm families. [FN2] Some individuals broke under the strain of an economic disaster in America’s rural heartland; many more who depended on American agriculture for their livelihood faced financial ruin.

Why did it happen?

In the early 1970s, lowered trade barriers coupled with record Soviet purchases of American grain resulted in a sharp increase in agricultural exports. Farm incomes and commodity prices soared. [FN3] The removal of restrictions on Federal Land Bank lending, coupled with increased lending by other entities for farmland purchases in the Seventies, led to rising land values. Conveniently low interest rates persuaded many farmers — and would-be farmers — to go deeply into debt on the assumption that commodity prices and land values would continue to rise. [FN4] Farm household income had been below the national average in the 1960s; in the next decade it was higher than the national average for every year except one. But it would return to the 1960s levels in the Eighties. The agricultural “boom” didn’t last long. [FN5]

This essay will explore how the American farm community, the Reagan administration, and the American public responded to the crisis. We will briefly examine the history of federal farm policy since the New Deal and determine the ways in which it contributed to the disaster of the 1980s. We will see how the political ramifications of the Reagan “market-oriented” approach to the farm problem resulted in a confused administration policy that remained largely unchanged from those of previous administrations, and how that policy affected the future of American farmers as well as consumers and taxpayers.

By the early 1980s, tight money and high interest rates had burst agriculture’s speculative bubble. The federal government estimated that farmland value dropped by nearly 60% in some parts of the Midwest between 1981 and 1985. Many farm operators found it impossible to retire their debts as fast as their asset values declined. [FN6] Record harvests led to overproduction which in turn resulted in a glut of farm commodities, forcing prices down. In addition, the decision by President Jimmy Carter to enforce a grain embargo as a means of punishing the Soviet Union for its invasion of Afghanistan cost the American farmer a crucial overseas market. Subsequently, the Soviets diversified their agricultural suppliers in order to limit the effects of a future embargo. And though prices fell, American farm products were still costlier than those of competitors on the international market; federal price supports kept prices artifically high enough so that farmers in Argentina, Australia, Canada and Europe were able to seize more of the market than ever before. [FN7] The strong dollar of the Eighties combined with the economic stagnation and financial straits of purchasing nations also hurt American agricultural exports, which declined by more than 20% between 1981 and 1983, while real commodity prices plummeted 21% during the same period. [FN8]

In the high times of the 1970s, the number of “middle level” farmers — those whose income ranged from $40,000 to $500,000 a year — had increased by an astonishing 250%. Numbering 675,000 by 1985, they were the hardest hit by the debt crisis. [FN9] The small farmers (grossing under $40,000 a year and deriving much of their income from non-farm employment) had not incurred large debts, while the large farmers (those who grossed in excess of $500,000 a year) were financially able to weather hard times. [FN10] As he watched profits decline by 36% between 1980 and 1988, the middle level farmer who had aggressively indebted himself in the Seventies faced grave financial peril during the next decade. [FN11] By early 1984, in the depths of the crisis, farm indebtedness had risen to $215 billion, double what it had been in 1978, and fifteen times the 1950 level. According to Emmanuel Melicher, Federal Reserve senior economist, more than one-third of America’s commercial farmers were in serious trouble. For the first time in history, the total of interest payments on farm loans exceeded total net farm income. [FN12] Farm foreclosures rose dramatically, and the crisis had a ripple effect, negatively impacting the manufacture and sale of farm machinery, seed and fertilizer. Rural banks went into receivership. Rural communities suffered in other ways; as more and more farmers were forced out of business, small town enterprises saw their profits plummet. In 1986, the Minnesota Agriculture Department calculated that every farm loss wiped out three non-farm jobs. [FN13] Many described the farm crisis of the Eighties as the worst since the Great Depression.

American farmers were among those most affected by the Great Depression, and agricultural recovery was one of the primary goals of the New Dealers. The average price received by farmers for their products declined 50% between 1929 and 1932. The purpose behind the Farm Relief and Inflation Act — better known as the Agricultural Adjustment Act — was to raise farm incomes through price supports and production adjustments, the theory being that by encouraging farmers to reduce the acreage under cultivation, farm commodity prices would rise. [FN14] Farmers were paid not to plant with funds acquired through a “processing tax,” which had the unfortunate result of raising consumer prices, hardly a beneficial turn of events during a severe depression when so many could not afford to buy enough to eat.

When production adjustments were deemed insufficient to restore prosperity to the American farmer, New Dealers provided government price supports for crops grown, and credit assistance so that struggling farmers could refinance their mortgages at reduced interest rates. [FN15] They failed to understand that these programs offset the acreage reduction program. Credit assistance enhanced supply by increasing resources. High price supports led to higher food prices which encouraged greater production. Farmers proved innovative in finding ways around acreage restrictions; they took their least fertile acres out of production and improved the yield of cultivated acreage with intensified capital imput. So, for instance, while the total amount of corn acreage was reduced, corn production actually increased. In addition, some farmers reduced their corn acreage, pocketed a government check, and grew uncontrolled crops like rice or soybeans on the acreage previously used for corn. In this way, and others, farmers took advantage of the failure of the government to effectively monitor or enforce acreage reduction. [FN16]

Guaranteed price supports were consistently higher than market prices, and government surpluses were greatly expanded in the Thirties. To a large degree this surplus was liquidated during World War II. In the Eisenhower years, price supports for major crops were initially reduced. The Food for Peace program — exporting price-supported commodities to developing nations — and the school-lunch milk program also reduced government surpluses. But as these surpluses were reduced, price supports had to be raised again, which in turn encouraged greater production, causing new surpluses. Farm program costs tripled during the 1950s. To make matters worse, technological improvements also brought about production increases. [FN17]

The 1973 Agricultural and Consumer Protection Act focused on maintaining farm incomes at acceptable levels by targeting direct payments and eschewing market manipulation. Domestic food costs were lowered, and American farm products became more competitive on the world market — at least for a time. But the law capped direct payments at $50,000, and this reduced the incentive to comply with acreage reduction mandates; hence, production expanded once more and the difference between market and support prices became greater. The government was in a box. Too many farmers had come to depend on direct payments; in 1970, direct payments accounted for nearly one-third of net farm income. And as production increased, government-held surpluses also grew. [FN18]

One politically popular way to reduce these surpluses was through the expansion of the food stamp program. Eligibility for that program was liberalized during the Nixon years and the program’s cost soared predictably — from $65 million in 1966 to $10 billion by 1981. [FN19] By 1977 the program was out of control, and despite earnest attempts by Congress and Jimmy Carter to restrict eligibility, 10% of the population were recipients in 1980. Ironically, the program had little impact on the farm economy; new food purchases as a result of the program accounted for less than 1% of the total farm commodity sales. Taxpayers, however, got to pay twice — once for acquiring the commodity surpluses and again for dispensing it through the food stamp program.

When the Farm Credit System was established during the New Deal, the Federal Farm Loan Act of 1916 had already established Federal Land Banks, and the Agricultural Credit Act of 1921 had authorized indirect loans to farmers for emergency relief. These “disaster loans” increased substantially in number during the Great Depression. But the expansion of farm credit programs continued long after the Great Depression was over. A 1961 amendment to the 1954 Water Facilities Act offered FmHA loans to non-farm rural residents, while the 1964 Economic Opportunity Act expanded FmHA lending to low-income rural people. Rural housing loans revamped by the Housing Act of 1968 offered interest rates as low as 1%. Needless to say, the number of farmers partaking of farm credit loans rose dramatically, from 7.2% in 1965 to more than 50% by 1980. Farm emergency program borrowing rose 700% between 1970 and 1983. By then, farm credit had long ceased to be for emergency relief or a last resort for farmers who could not get loans elsewhere. Federal farm loans were available not just for struggling small farmers but operators of all sizes. As Clifton Luttrell put it, “subsidized credit had been an important factor in changing many farming operations over to extremely expensive land-, chemical-, and credit-gobbling operations.” Easy credit encouraged the disastrous over-speculation of middle level farm operators in the Seventies. It led to a greater number of inefficient farmers remaining in agriculture than would have otherwise been the case. And, as Luttrell pointed out, “credit subsidies lower farm commodity prices and raise the cost of farm resources, especially land, thereby reducing net farm incomes,” with the consequence that federal policy with respect to farm credit actually contributed to, rather than alleviated, farm poverty. [FN20]

By 1980, American agriculture was so productive that a small number of farmers could feed the American people with only three-fifths of their output, leaving the rest available for export, or bound for federal storehouses. [FN21] Exports, however, accounted for only one-fourth of total output. Hence, the Reagan administration sought to increase exports as a means to improve farm income and reduce the burden on taxpayers of federal farm support policies. Unfortunately, since 60% of farm income depended on the domestic market, the well-being of American consumers was the ultimate determinant of farmers’ prosperity. And in the early ’80s the consumer suffered through severe recession brought about by the tight-money policies of the Federal Reserve, which were intended to bring down a crushing inflation rate that had risen to 21%. The consumers’ difficulties rippled through the economy’s largest sector, the food and fiber chain, which accounted for over 26% of GNP and employed 22 million workers. [FN22]

The Reagan philosophy was to let the marketplace operate according to its nature. A correspondent for the magazine America, writing in 1985, perfectly described the administration’s point-of-view. “The primary function of the Government should be to insure small and moderate-size farmers against natural disasters and price fluctuations that have threatened them since the beginning of time….But the Government cannot protect farmers either from themselves or from inevitable changes in technology and the marketplace.” [FN23] The latter was precisely what the government had been trying to do since the days of the New Deal. As Susan DeMarco put it, the “most devastating force at work in the farm belt is America’s disastrous agriculture policy” which she described as a “dizzying array of ad-hoc, often conflicting programs devised over decades to serve special interests.” [FN24] Stuart Hardy, manager of food and agricultural policy for the U.S. Chamber of Commerce, claimed that “price support programs and import quotas add several billion dollars annually to retail food prices.” [FN25]

By 1980, the largest portion of federal farm spending was going to large operators, not the small family farm. Seventeen percent of farmers received 60% of all agriculture subsidies. [FN26] By 1986, the farm subsidy program was costing American taxpayers over $25 billion. [FN27] The farm credit system was burdened to the breaking point through borrowing by middle-level operators; their indebtedness had increased by a factor of three in the Seventies. According to David Stockman, Reagan’s director of the Office of Management and Budget (OMB), they had been greedy and were suffering the consequences. Taxpayers, said Stockman, ought not be required to refinance the bad debt incurred by those farmers. Such hardnosed comments led Senator Tom Harkin (D-Iowa) to warn Stockman that if he stepped foot in Iowa he would be lynched. [FN28]

A good example of the failure of farm policy reform in the Reagan years was the OMB’s attempt to “privatize” the Farm Credit System (FCS). Borrowers from the FCS paid lower interest rates than they would have on loans from commercial lenders; according to the OMB this was a good deal for farmers but a rotten deal for everyone else. While the FCS and other quasi-governmental agencies soaked up much of the available credit, private borrowers found it more difficult to acquire funds. The FCS argued that it needed to maintain its “government” status or face paying more for the money it loaned to farmers, which would force it to raise interest rates — exactly what the OMB wanted. The FCS had too many political allies, and the OMB proposal was spurned by Congress.

“The worst nonsense of all…was farm subsidies,” said Stockman. “The nation’s agriculturalist had never been the same after the New Deal turned the wheat, corn, cotton, and dairy business into a way of life based on organized larceny.” The first Reagan budget attempted to slash all farm subsidy programs, proposing only $10 billion in expenditures over five years. But southern conservative Democrats — the “Boll Weevils” Reagan depended on to get other major legislation through the House of Representatives, balked at the cuts. Charles Stenholm (D-Texas) told Stockman, “We’re going to flush your free market ideology right down the commode.” While the Boll Weevils demanded continued production and marketing controls, farmbelt Republicans insisted on export subsidies. According to Stockman, the president ended up “signing a new five-year farm bill that amounted to a smorgasbord of everything — production controls, price supports, subsidy payments, export financing….We ended up spending $60 billion over five years rather than $10 billion.” [FN29]

The biggest problem for Reagan and Stockman was the fact that the middle-level farmer-entrepreneur proved to be highly skilled at politicking and publicizing, and was determined not to go quietly.

On March 17, 1986, protesters used tractors and other farm machinery to surround the Livingston County FmHA office in Chillicothe, Missouri, chanting, “Farm aid, not Contra aid!” and “Butter, not guns!” This was the start of a campaign by the National Save the Family Farm Coalition, which called for higher commodity prices, production controls, immediate debt relief, a moratorium on farm foreclosures, and emergency assistance to suffering rural families. Coalition farmers claimed the Reagan agriculture policy targeted the family farm while benefiting big agribusiness. [FN30] But organized farm protest of federal policy had gotten under way long before. The American Agriculture Movement (AAM), a lobbying group that had grown out of the “tractorcade” protests of the Seventies, played a crucial role in the new progressive farm politics of the Eighties. The North American Farm Alliance was a coalition of grass-roots groups based in Ames, Iowa. In 1986 the United Farmer and Rancher Congress was organized with funds raised by Willie Nelson’s first two Farm Aid concerts; 1,500 delegates from 38 states met in St. Louis that year. [FN31]

Many protests were staged to hinder the auctioning of foreclosed farms. Missouri Groundswell, an organization created specifically for that purpose, brought 1,500 farmers and labor union members to a Plattsburg, Missouri auction in March 1985. The protest deteriorated into violence, and a number of people were injured. Eight persons were arrested. [FN32] Many farm organizations maintained crisis hotlines to help distressed farmers with legal advice. [FN33] Farmers cooperated with civil rights groups and organized labor. In his 1984 bid for the presidency, Jesse Jackson attended a number of farmers’ rallies. That same year, a Farmer-Labor Alliance was founded in Missouri; representatives from both factions pledged to support the other’s legislative agenda — farmers would back a minimum wage increase while union members would support a moratorium on farm foreclosures. [FN34]

Activists were greatly concerned that much of the farmland being sold off in the Eighties was going to non-farmers or big agribusiness. [FN35] The Farm Credit System sought to sell much of the two million acres it held. Prairie Fire, a family farm advocacy group, complained when the FCS offered to sell at 4.9% interest to buyers who could put 40% down; only investors and large agribusiness had that kind of money. In the first three months of 1987, FCS sold 100,000 acres in Iowa alone and made $74 million; in all of 1986 its sales had totaled only $59 million. The FmHA also put much of its 1.5 million acres in holdings on the market. The 1985 Farm Bill ordered the FmHA to make all land available to family farmers for three years; only after that time could the land be offered as surplus to all comers. But, according to farm activists, the FmHA contravened the will of Congress by immediately offering farms as surplus. In the first three months of 1987, 71% of FmHA land holdings sold were so labeled. In 1986, insurance companies owned $2.4 billion worth of farmland, double the value of their 1985 holdings; they were buying the land as a good investment on the assumption that land prices had bottomed out. Meanwhile, investor-owned farm management companies were farming 62.6 million acres by 1987, up by 36% since 1979; these agribusinesses often employed bankrupt farmers as laborers. And foreign investors were busy snapping up American farmland, too. [FN36]

Still, the majority of farmland purchases were farm operators. A 1986 Agriculture Department study showed that the number of nonfarm purchasers of farmland was declining. [FN37] Farmers turned to the states to guarantee that this would be the case. In 1982, 56% of Nebraska’s voters approved Initiative 300, a state constitutional amendment limiting large corporation ownership of farmland. In Indiana, the Indiana Farmer’s Union, Women Involved in Farm Economics, the National Farmers’ Organization, and other groups pushed for that state to follow Nebraska’s lead. In Iowa, the Farm Unity Coalition urged the state legislature to retain a 1976 law forbidding corporations from owning farmland. [FN38]

Though the FmHA placed a two-year moratorium on farm foreclosures in 1983, and many private banks moved very slowly on foreclosures in spite of a record number of delinquencies, farm activists were not satisfied. [FN39] During the Great Depression, 25 states had declared a moratorium on foreclosures, and many farm groups called on the states to do likewise in the 1980s — Minnesota’s Citizens Organizations Acting Together, the North Dakota American Agriculture Movement, and the Wisconsin Farm Unity Alliance among them. [FN40] The decision in a national class-action suit, Coleman v. Black (1983) mandated that the FmHA could not foreclose until it gave the farmer an opportunity to apply for deferral of interest and loan principals. Farm activists complained that few farmers were even aware of the FmHA’s special debt set-aside program, or realized that the FmHA had an appeals process. Meanwhile, two popular feature films, Country, starring Jessica Lange and Sam Shepard, and The River, starring Sissy Spacek and Mel Gibson, effectively publicized the plight of American farm families confronted with foreclosure. [FN41]

According to Susan DeMarco, one of the problems for agriculture in the 1980s was that “too many farmers are too dependent on the production of too few commodities.” [FN42] During the decade, state governments encouraged farmers to diversify with alternative crops such as culinary and medicinal herbs, wildflowers, and aquaculture crops like crayfish and freshwater shrimp. Some states also actively sought new markets, building direct-marketing arrangements between farmers and consumers. Participating farmers averaged a 30% increased in income in 81 farmers’ markets established in Texas. Texas farmers sold millions of dollars of rice, honey, and citrus juice in the Middle East after state agriculture specialists cultivated that market. A government-to-government cooperative agreement with Mexico increased sales of Texas products such as grain sorghum and cottonseed meal, cattle and dairy goats. [FN43] But too many farmers continued to grow subsidized crops because the federal government had made it profitable to do so.

Generally, farmers opposed the Reagan administration’s twin goals of reducing price supports and lowering trade barriers. They argued that increasing exports wasn’t the answer, claiming that exports more or less held steady in the early 1980s and prices still dropped. Ken Kreego, of AAM, said, “[W]e can’t compete with a water buffalo and a grass hut.” Foreign products could almost always be counted on to undersell American products. [FN44] Since 1977 farm production expenditures had increased by 64%, while farm prices increased only 37%. “The farm coalitions thus argue that restoring profit through higher prices is the only realistic way to allow farmers to pay off their massive debt loan,” said journalist Jim Schwab. Since farmers got only 28 cents of the retail food dollar, advocates claimed that higher price supports would affect consumers very little. In fact, despite a 36% drop in farmers’ profits, consumer food prices rose 36% between 1980 and 1988. [FN45]

Reagan’s 1985 farm bill mandating lower prices for farm goods in order to increase sales abroad was viewed with distrust by many farmers; they believed it would benefit large agribusiness, multinational grain shippers, and conglomerate food processors, not the average farm operator. Instead, farmers supported the “Save the Family Farm” bill, which called for $4 billion to restructure the farm debt ($3.94 billion more than the administration wanted), as well as a freeze on existing target prices at FY 1985 levels — a $17 billion subsidy ($7 billion more than the administration wanted in FY 1986 and $12 billion more than it had earmarked for FY 1988.) [FN46] Liberal urban Democrats killed the bill, however, fearing the effect of higher food prices on their constituencies..

Not all national organizations representing farmers were opposed to the administration’s goal of reducing price supports. The American Farm Bureau stoutly defended Reagan’s market-oriented approach. Continued government management would eventually place the American farm in “public utility” status, said the Bureau. In the long run, the market-oriented approach would create a more efficient farm sector, more profitable for the farmer, and less expensive for the taxpaper. Supporters of Reagan’s approach pointed out that only half of American agriculture was produced with dominant federal involvement — wheat, feed grains, sugar, cotton, rice, dairy products, peanuts, tobacco and honey. That which was not — livestock, poultry, soybeans, fruits and vegetables — was demonstrably more profitable for growers. [FN47]

Critics said the market-oriented approach left the well-being of consumers and farmers to chance. “Either we rely on the anarchy of the marketplace…or we…adopt a rational, coherent policy of supply management with program benefits targeted to the family-scale sector of agriculture,” said Cy Carpenter, president of the National Farmers Union. [FN48] For all intents and purposes, Carpenter won the day; the Reagan administration eventually abandoned its market-oriented approach, conceding that, as one observer of the farm crisis put it, “without government assistance, farming today is a nonprofit activity.” [FN49]

Reagan’s retreat from his marketplace philosophy was politically motivated. In political terms the farm crisis hurt the president and his party. Many farmers who had been lifelong Republicans perceived Reagan as a champion of big business, even though some remembered that Jimmy Carter’s farm policy had been no better. Though a slim majority of farmers supported Reagan in 1980 and again in 1984, his approval rating in the farm community nation-wide dropped from 51% in 1984 to 39% in 1985. [FN50] In Missouri, three county-level Republican leaders switched to the Democrats in protest of Reagan’s farm policy. In Nebraska, three rural Republican legislators also switched. In Minnesota, Reagan’s 1984 state campaign coordinator became the Democratic candidate running against Republican Representative Vin Weber. [FN51] These were but a few of the defections.

In 1983 the federal government spent a record $51 billion in direct and indirect farm subsidies — an average of $22,173 for each of the nation’s 2.3 million farms. [FN52] There is a connection between these expenditures and Reagan’s success among farmers during the 1984 election year. One of the factors in the rise of federal farm subsidy expenditures was Reagan’s Payment-In-Kind (PIK) program. On January 11, 1983, Reagan described PIK as a “crop swap” in which farmers received agricultural commodities from federal surpluses in addition to cash for keeping acreage out of production. The farmer could then sell the crops he received in payment. [FN53] Critics claimed PIK would benefit wealthy farmers most and enable the Reaganites to cut spending on farm programs. “Like its Republican counterparts of the 1920s and early 1930s,” said one skeptic, “the Reagan Administration is responding to agricultural depression with policies that seem to address farmers’ problems but that actually serve the twin idols of fiscal conservatism and ‘getting government off our backs.'” [FN54]

If PIK worked as the administration envisioned, continued the critics, more land would be taken out of production and tenant farmers and farm laborers would be put out of work. And if output was lowered, prices would rise and consumers would pay more. Since the poor paid a larger percentage of their income on food, higher food costs would have a greater impact of them than other segments of the population. Farm surpluses actually reduced food prices to the benefit of the poor. [FN55] In addition, PIK would have a devastating effect on fertilizer companies and farm tractor sales since the program was designed to reduce production. “I consider PIK the greatest challenge to our survival I have ever faced,” said L. William Lowry, president of NutraFlo Chemical Company, an Iowa fertilizer producer. But most farmers accepted PIK as an emergency measure they could live with. [FN56]

Of course, as federal farm subsidies reached record highs two years later it was obvious that PIK failed to reduce the taxpayer’s burden, though the administration forecast that the program would reduce a federally-owned farm surplus that cost $12 billion a year to maintain. Farmers were in a poor position to market surplus crops anyway; selling the surplus merely added to the glut, forcing prices lower and compelling farmers to produce more just to break even.

Proponents of the 1985 Food Security Act, supported by the administration, claimed the legislation shifted agriculture toward a market orientation. The 1981 Farm Act (Congress produced a major farm bill every four years) had set high price supports, rendering American agriculture too costly to effectively compete on the global market; the 1985 act lowered loan rates to make U.S. farm products more price competitive. The law froze target prices at 1985 levels. It continued acreage reduction programs. In short, the 1985 bill as passed by Congress and signed by the president changed nothing. Federal farm policy would continue as before. [FN57]

Jay Walljasper, writing in The Nation in 1986, claimed that nearly everyone agreed “that Reagan’s farm program, which so far has cost more than the combined farm expenditures of every President from Roosevelt to Carter, is a disaster.” [FN58] Walljasper was justified in making that assessment. Although he wanted to bring a market-oriented approach to federal farm policy, public pressure and political exigencies persuaded Reagan to expand federal involvement in American agriculture. Farmbelt progressives were effective in publicizing the farmer’s plight, leading an exasperated president to comment jokingly that he was considering keeping American grain at home and exporting American farmers instead. By 1986, Reagan was boasting that federal farm assistance was higher than it had been under any previous administration, confirming Walljasper’s assertion. [FN59] At its core, Reagan’s chief problem was the responsive chord the plight of the farmer struck in the hearts of the American people. Though only 2.5% of the population lived on farms in the 1980s, farmers, as commentator Hugh Sidey put it, seemed to enjoy a “deep reservoir of good will among the general public.” Sidey wrote:

We are talking about people who want to give birth and grow old
and laugh and die, bonded and sustained by the soil, which is the
oldest way of life Americans know. The farm economic crisis has
become…a cultural crisis unique in our history. It is beyond bank
loans and government subsidies. It is in people’s hearts. [FN60]

A New York Times-CBS poll taken in 1986 showed that the percentage of people supportive of greater spending on farm programs had increased to 50% from 36% the previous year; 55% said they would pay more taxes to help farmers keep their land. [FN61] During the Reagan years they got their wish. By 1985 the full social costs of farm programs exceeded $30 billion a year. Clifton Luttrell calculated that it would have been less costly to pay the estimated $2 billion poverty deficit for all farm families combined. Unfortunately, much of the federal money went, as always, to high-income farm operators; 67% of government payments went to the 314,000 farms with sales in excess of $100,000 a year. [FN62]

Federal farm programs from the 1930s to the 1980s were oriented to aiding commercial producers. The more a farm operator grew, the more federal assistance he received. It became profitable to produce those commodities qualifying for subsidies, which invariably led to surpluses. The programs sought to guarantee farm prosperity through manipulation of the market price, but such manipulation tended to price American farm products out of the global market, so that the government — and the taxpayer — had to subsidize exports. [FN63]

Between 1981 and 1886 there was a $300 billion decline in farm asset values, a loss of one-fourth of the total valuation. Though cash receipts from marketing commodities fell in the 1980s, this was offset by rising government payments. In addition, lower inflation, lower energy rates, and declining interest rates lowered farm production expenses. Consequently, net cash farm income reached $44 billion 1985 — a record high. [FN64]

By the end of the 1980s, the federal government had moved ever closer to a “public utility” approach to farm policy. Reagan’s efforts to steer that policy into a market-oriented format was undermined by the severe farm crisis of the early Eighties. His approach was bound to cause short-term distress in a farm community already suffering from overspeculation during the previous decade, and ultimately it proved impossible to do for economic as well as political reasons. By the time the agricultural sector was beginning to recover in 1987, the administration’s will to make hard choices in terms of farm policy had diminished. [FN65] As a result, federal policy remained a shamefully wasteful and expensive burden on the American taxpayer when Ronald Reagan left office — a burden the sentimental American taxpayer was willing to accept.

FOOTNOTES

1. Steve Huntley, “Winter of Despair Hits the Farm Belt,” U.S. News & World Report v100 (January 20, 1986, 21-23; Joshua Hammer “Double Slaying in Rural Minnesota Spotlights Distress of America’s Debt-Ridden Farmers,” People Weekly, v20 (October 31, 1983), 129-131; Bob McBride, “Broken Heartland: Farm Crisis in the Midwest,” The Nation, v242 (February 8, 1986, 132-133.

2. Huntley, “Winter of Despair,” 21.

3. Net farm income doubled between 1970 and 1973, from $14.4 billion to $34.4 billion. Clifton B. Luttrell, The High Cost of Farm Welfare (Washington, DC: Cato Institute, 1989), 58.

4. The value of farm real estate rose an average of 8.1% per year between 1940 and 1982. Luttrell, The High Cost of Farm Welfare, 82.

5. Dept. of Agriculture, Economic Research Service, The U.S. Farm Sector: How Is It Weathering the 1980’s? AIB-506 (April 1987, iv, 12. According to this study, farm households earned only 80% of the national average in 1984; in 1973 they earned 50% more than the national average.

6. Ibid., 13.

7. Henry Eason, “Agriculture at the Crossroads,” Nation’s Business, v72 (August 1984), 34-36.

8. By 1984 an overvalued dollar was adding a 32% surcharge to all U.S. exports. In the 1970s, the federal government tried to offset a growing U.S. trade deficit (caused by the OPEC oil embargo) by expanding agricultural sales overseas. Subsidies to overseas purchasers via loans by the Commodity Credit Corporation and the extension of credit to foreign governments by commercial banks contributed to a surge in U.S. farm exports that went from $8 billion in 1971 to $43.8 billion in 1981. But by the ’80s, the worldwide financial community realized that debtor nations could not repay their loans unless they drastically reduced imports, and the gushing tap of credit largesse was shut off. See Heather Ball and Leland Beatty, “Blowing Away the Family Farmer: The Debt Tornado,” The Nation, v239 (November 3, 1984), 442-444.

9. Ibid., 442.

10. Farms with gross annual sales of $40,000 to $250,000 (24% of U.S. farms) produced 41% of total commodities; farms with gross annual sales of $250,000 to $500,000 (3% of U.S. farms) produced 17%; farms with gross annual sales above $500,000 (1% of U.S. farms) produced 32%. Noncommercial farms — under $40,000 in gross annual sales — produced only 10% of all farm commodities and lost money every year from 1980 to 1985; non-farm income offset these losses somewhat. These figures show that the middle-level farm operators — those most affected by the debt crisis, produced nearly 60% of total commodities. Dept. of Agriculture, The U.S. Farm Sector, iv-v.

11. Susan DeMarco, “A Fresh Crop of Ideas: State Sows the Seeds of a New Agriculture,” The Progressive, v53 (January 1989), 26-31. The real assets of farmers rose from $302 billion in 1971 to $1050 billion ten years later. As one observer described the reckless speculation of the farmer in the 1970s: “[F]unds otherwise available for productive investment were going into speculation in fixed assets, farmland among them. They were enticed there by prospects of speculative gain, enhanced by the light tax touch if gains were realized. The net effect on the economy’s productivity was clearly negative.” Harold Breimyer, “Agriculture: Return of the Thirties?,” Challenge, v25 (July-August, 1982), 35-41.

12. Ball and Beatty, “Blowing Away the Family Farmer,” 442. The federal government claimed that by 1986 total farmland debt had fallen to $92 billion, having peaked at $113 billion in 1983. Dept. of Agriculture, Economic Research Service, Issues in Agricultural Policy: New Approaches to Financing Long-Term Farm Debt. AIB-511 (March 1987), 3.

13. Paul Kabat, “The Farmer in the Cell,” The Progressive, v49 (November 1985), 50.

14. Luttrell, The High Cost of Farm Welfare, 13. The program originally covered only cotton, but was quickly expanded to cover basic cereals and meat and eventually all cash crops.

15. The price support system worked in the following manner: Farmers received government loans using future crops as collateral. If the market price rose high enough, the farmer sold to the market, repaid the loan, and kept the balance. If the market price was not sufficiently high, the government took the farmer’s harvest and forgave the loan. If the market price did not equal or exceed a “target price,” the government gave the farmer a “delinquency payment” — the difference between the target price and the market price.

16. Luttrell, The High Cost of Farm Welfare, 20-38. Farmers were paid to apply commercial fertilizer and improve their methods of weed control, erosion control, and irrigation — all in the name of “soil conservation”; ironically, this led to increased production per acre, effectively undermining acreage reduction programs.

17. Direct payments to farm producers rose an average of $263 million a year between 1950 and 1954 to an average of $714 million a year between 1955 and 1959, while total farm program expenditures soared from $654 million in 1954 to $5.8 billion in 1962. Luttrell, The High Cost of Farm Welfare, 43-50.

18. Ibid., 56-60.

19. Ibid., 66.

20. Ibid., 70-87.

21. The number of farms declined from a peak of 6.5 million in the mid-1930s to 2.2 million in 1986. Average farm size doubled, while total acreage remained close to the mid-1930s level of one billion acres. Large farms (average sales of $200,000 or more) doubled in number between 1960 and 1982.; small farms (average sales of $10,000 to $40,000 fell from 1.2 million to 500,000. The trend was to larger farm operations which produced more commodities more efficiently. Dept. of Agriculture, Economic Research Service, Issues in Agricultural Policy: Challenges in Designing U.S. Farm Policy. AIB-518 (June 1987), 2.

22. Eason, “Agriculture at the Crossroads,” 34.

23. “The Flight of the Farmer,” America, March 23, 1985, 227.

24. DeMarco, “A Fresh Crop of Ideas,” 26.

25. Quoted in Eason, “Agriculture at the Crossroads,” 38.

26. “Farm Policy,” America, v151 (September 22, 1984, 138.

27. Osha Davidson, “Farms Without Farmers: Corporate Takeover of Farming,” The Progressive, v53 (January 1989), 26-31.

28. John McLaughlin, “Farm Blues,” National Review, v37 (March 22, 1985), 24. According to the Department of Agriculture, 8% of farms with $100,000 or more in sales were insolvent by 1986, but less than 2% with sales under $40,000 were insolvent. Dept. of Agriculture, Challenges in Designing U.S. Farm Policy, 6.

29. David A. Stockman, The Triumph of Politics: How the Reagan Revolution Failed (New York: Harper & Row, 1986), 152-154.

30. James Aucoin, “Missouri Farmers on the Front Lines,” The Progressive, July 1986, 33.

31. The first Farm Aid concert, held in Champaign, Illinois in September 1985, was described as “a carefully orchestrated political event” by the president of the conservative Illinois Farm Bureau. The concert made only one-fifth of its $50 million goal. “Singing for Aid,” The Nation, October 5, 1985, 300.

32. Peter Downs, “Seeds of Discontent: Farmers Plow New Political Ground,” The Progressive, v50 (July 1986), 30-33.

33. Some activists were not concerned with the legal ramifications of their advice. In Worthington, Minn., 250 families gathered to hear one such activist assure them that they had “no moral obligation to pay an unjust debt,” and that they had the right to use a gun to protect their farms from foreclosure. Bob MxBride, “Broken Heartland: Farm Crisis in the Midwest,” The Nation, v242 (February 8, 1986), 132.

34. Downs, “Seeds of Discontent,” 32.

35. Only 58% of farmland sold in 1986 was bought by farmers. An American Bankers Association survey showed that 41,000 farms were lost that year — while the federal government was heralding a robust farm recovery. Davidson, “Farms Without Farmers,” 26.

36. By 1986 a small number of “superfarms” — the top 4% of farm operations — produced one-half of the food; the trend to fewer and bigger “managed” farms had a negative impact on rural communities dependent on the family farm. Davidson, “Farms Without Farmers,” 26.

37. Dept. of Agriculture, The U.S. Farm Sector: How Is It Weathering the 1980s?, 18. Also, the Tax Reform Act of 1986 limited the value of farm investments as a means to shelter income.

38. Jim Schwab, “Farm Protests Hit The Statehouses,” The Nation, January 19, 1985, 42-44.

39. Farms going out of business increased from 2.2% in 1982 to 3.6% in 1984 and 6.2% in 1986. Dept. of Agriculture, The U.S. Farm Sector: How Is It Weathering the 1980s?, 17. The Department of Agriculture announced that nearly 25% of FmHA loans were delinquent as of September 30, 1986, and more than three-fourths of the delinquencies were more than three years past due. Hence, the “financial condition of farm lenders is now the weakest since the Great Depression.” Dept. of Agriculture, New Approaches to Financing Long-Term Farm Debt, 3.

40.Schwab, “Farm Protests Hit The Statehouses,” 43. The FmHA anticipated legal action against more than 30% of 270,000 borrowers when it ended the moratorium in November 1985. Downs, “Seeds of Discontent,” 30.

41. On the basis of their performance in these films, both Lange and Spacek were called as “expert” witnesses to testify before congressional subcommittees looking into the plight of the farmer.

42. DeMarco, “A Fresh Crop of Ideas,” 27.

43. Ibid., 28-30.

44. Downs, “Seeds of Discontent,” 32. For example, coarse grain exports in 1981-82 were $42.4 billion, down only slightly from $43.8 billion in 1980-81. Breimyer, “Agriculture: Return of the Thirties?,” 40.

45. Another study found that of every dollar paid by the consumer at market, 31 cents went to the farmer, 46 cents to the processor, and the rest to the wholesalers and retailers. DeMarco, “A Fresh Crop of Ideas,” 27, 30.

46. McLaughlin, “Farm Blues,” 24. For the administration’s point-of-view on the 1985 Food Security Act, see Dept. of Agriculture, Economic Research Service, The U.S. Farm Sector: How Agricultural Exports Are Shaping Rural Economies in the 1980s. AIB-541, September 1988, 2-3.

47. Eason, “Agriculture at the Crossroads,” 37-38. For example, about one million acres each of peanuts and soybeans were under cultivation in 1930; by 1980, peanut growers, heavily reliant on government aid, were still cultivating about one million acres, while soybean growers had increased their total acreage to 68 million and were producing half of the world’s supply of soybeans.

48. Quoted in Eason, “Agriculture at the Crossroads,” 38.

49. Steve Broder, “Plowed Under: Farmers Home Administration vs. The Farmers,” The Progressive, v51 (May 1987), 35-40.

50. Jay Walljasper, “Farmers and the Left: Little Cells on the Prairie,” The Nation, v243 (October 25, 1986), 402.

51. Ibid., 502.

52. Eason, “Agriculture at the Crossroads,” 34.

53. Ronald Reagan, “Remarks at the Annual Meeting of the American Farm Bureau Federation in Dallas, Texas,” January 11, 1983. Public Papers of the Presidents of the United States: Ronald Reagan, 1983, 2 vols. Washington, DC: U.S. Government Printing Office, 1984; vol. 1, 28-31.

54. Kenneth Finegold and Richard M. Valelly, “Reagan ‘PIKS’ a Farm Program,” The Nation, v236 (February 5, 1983), 140.

55. In 1982, 150 million pounds of surplus cheese and 50 million pounds of surplus butter were distributed to the poor. Finegold and Valelly, “Reagan ‘PIKS’ a Farm Program,” 141.

56. Carol McCabe, “PIK Packs a Punch,” Nation’s Business, v71 (July 1983), 40-42.

57. Dept. of Agriculture, Challenges in Designing U.S. Farm Policy, 7-8.

58. Walljasper, “Little Cell on the Prairie,” 403.

59. Ronald Reagan, “The President’s News Conference,” August 12, 1986. Public Papers of the Presidents of the United States: Ronald Reagan, 1986, 2 vols. Washington, DC: U.S. Government Printing Office, 1987; vol. 2, 1081.

60. Hugh Sidey, “Cries of the Heart: Politics and the Farm Crisis,” , v128 (August 11, 1986), 15.

61. “Who Wants to Help the Farmers,” U.S. News & World Report, v100 (march 24, 1986), 82.

62. Luttrell, The High Cost of Farm Welfare, 125, 117-119. An average payment of $37,499 per farm was made to farms with sales in excess of $500,000, while the average payment to farms with sales under $40,000 was $447.

63. Dept. of Agriculture, Economic Research Service, Issues in Agricultural Policy: Redistributing Farm Program Benefits. AIB-533, July 1987, 1-2.

64. Dept. of Agriculture, Challenges in Designing U.S. Farm Policy, 5-6.

65. Farm debt had shrunk by 1987; the Department of Agriculture estimated that debt would fall nearly one-third ($60 billion) from its 1983 level by the end of 1988. Farm land prices were also on the rise. Dept. of Agriculture, Economic Research Service, Recent Financial Gains Helping Farmers Withstand Drought. AIB-543, August 1988, 6-8.

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