SENECA, ILL. -- While recession is on the lips of most workers and businesses, it hardly tops the list of farmers such as 33-year-old Philip Nelson, who runs a 1,200-acre LaSalle County grain and livestock operation in partnership with his father, Stanley.
Agriculture suffered a severe recession in the 1980s, when the rest of the economy was in relatively good shape, but now the reverse is true. Rather than recession, farmers are more concerned about higher costs -- particularly for energy -- low grain prices and lower government supports.
"Farmers have retrenched and retooled since the mid-1980s and have had some decent crop years," Nelson said. "They would be in better shape still except for the 1988 drought. Financially, the last couple of years have good for us -- because of diversification."
Neil Harl, professor of agricultural economics at Iowa State University, said, "Agriculture will be dealt only a glancing blow by a mild recession." He put the chances at six in 10 for a mild recession and four in 10 for a severe one, under which the farm sector would suffer with the rest of the economy.
The farm economy is in a much more solid financial position than in 1984 and 1985. Income has risen and debt has been pared, though it has been growing in the rest of the economy.
"A great deal of debt was wrung out of the farm economy in the last decade. Some $60 billion, or 30 percent, of debt was paid off," Harl said. "And in the last four years, net farm income has been at record or near record levels."
But while farmers may not feel a recession as quickly or as deeply as other sectors, they will not escape unscathed, particularly if the downturn is prolonged. And higher fuel costs loom large for the planting season next year.
Nelson's father runs about 200 cattle a year in a finish feedlot operation, and he has a farrow-to-finish hog operation that produces 350 litters a year. The family team grows corn, soybeans, wheat and alfalfa.
For next year's crops, high petroleum costs are a chief worry, Nelson said. "Propane and diesel prices have already gone up and chemical prices likely will be up 5 percent to 10 percent next spring," he said. "That means the break-even point on cost of production will be higher."
A somewhat similar Midwestern view was voiced by MarJean Sutter, who with husband, Don, farms 2,000 acres in Pleasantville, Iowa. "Farmers are stuck with low grain prices and higher fuel costs that can't be offset," she said. "We're not like manufacturers who can pass along higher costs to their customers."
Put through the wringer of low crop prices and high interest rates in the farm credit crunch of the early 1980s, the Sutters were forced to sell their dairy herd, other livestock and farm machinery to pay debts. But they managed to save their land and, in effect, start over in farming.
"Sure, a lot of debt has been paid off, but a lot of farmers went out of business," Sutter said. "Now, farmers don't want to borrow if they can help it, but there isn't that much credit available in any case."
A recession could be good news for a farmer in debt, operating on a significant amount of borrowed money because of lower interest rates, said David Lins, professor of agricultural finance at the University of Illinois.
Lins said a recession affects agriculture in two areas: A small part-time farmer tends to suffer if he holds a job off the farm. Part-time jobs usually are eliminated first. Second, people change diets, buying less expensive items. In this scenario, consumers buy less beef and maybe pork and more chicken and turkey, which are cheaper.
Yet in some regions, notably New England, professionals who lose jobs in metropolitan areas will move to rural communities to start businesses and stimulate employment, Lins said.
"If there is a significant downturn in the stock market and business real estate, then large institutional investors, like pension funds, will look at alternatives like farmland, which hasn't gone down in value," Lins said. "Such investment will bolster land prices and help farmers' balance sheets."
Outside forces control the agriculture economy, but they are different from the 1980s, Harl noted. The budget deficit is the major factor, and the safety net of income support gradually is dropping. This will mean, among other things, more volatility in farm prices.
"The big problem farmers face is the double whammy of higher energy costs and lower income support resulting from the 1990 farm bill," Harl said.
Farm bill changes, eliminating 15 percent of acreage eligible for government program support, "puts more responsibility on the farmer to sit down and look at alternatives to maximize profit potential," Nelson said. "The trade-off is that the level of the safety net has been lowered."
Nelson, who as president of the Land of Lincoln Soybean Association often is in demand as a speaker at farm meetings and banquets, is optimistic that agriculture has some bright opportunities in international trade. Although he is disappointed with the failure of world trade talks, Nelson warned that the United States shouldn't "get into a trade war with the European Community, which is one of our best customers. For example, they take 20 percent of our soybean exports."
As a livestock producer, he believes the Soviet Union needs value-added products and offers a tremendous market, particularly for hog farmers.
Sutter takes a much more pessimistic view: "A lot of people are touting the extension of credits to the Soviet Union as a lifesaver for grain farmers, but that isn't true if prices don't go up."
Farmers don't want to spend money on equipment and other things on hopes that grain prices will rise, Sutter said, adding that "if the farmers don't spend, that will ripple through rural communities."
Harl said the farm machinery sector has been hit hard because farmers aren't buying new equipment, when they have the prospect of higher costs and lower income, and this is likely to continue.