By Susan Sechler and Ken Cook
For all our nostalgia for the traditional family farm, we are near to bidding farewell to it as a significant institution in American life. We're on the verge of another big shake-out in U.S. agriculture, the likes of which we haven't seen for 25 years. Caught between sagging prices for their products and rising debt, tens of thousands of farm families face almost certain foreclosure; and in Midwestern states like Iowa and Nebraska, farm bankruptcies threaten dozens of banks, hundreds of farm equipment suppliers and the economic health of entire rural communities.
Such crises have occurred before; for half a century, the federal government has always adopted activist policies to resolve them. The government is about to act again, but this time we must recognize that another round of tinkering with outdated farm policies will not bring back yeoman agriculture. If we're to cope with the problems posed by modern farming, the government must recognize it as the business enterprise it has become.
For many of us who cherish the values of family, community and individual initiative represented by the family farm, and who believe that the nation is better off with an agriculture in which economic power is widely shared among decentralized producers, this prognosis is troubling and sad. But if we fail to accept it as a reality, we could lose the opportunity to influence for the better the transition underway in agriculture and rural America.
What will the current farm crisis mean to most of us? Not much, at least not in the near term. It won't cause so much as a blip in the prices we'll pay at the grocery store, or at the ritzy restaurants and fast food parlors that now take in 38 percent of every dollar we spend on food.
As for farmers, they're a world apart from most of us. Why, do you know anyone who actually earns a living solely from agriculture? Only a few hundred thousand families in America do.
Farmers in general are distinctly a minority. Only 3 percent of the population lives on farms, where one out of four Americans lived 50 years ago. Perhaps 665,000 farms can be considered "commercial" in a practical sense. The rest--about 1.7 million--sell less than $40,000 worth of farm products a year, a mere 11 percent of the country's total production, and the people who own and operate them rarely depend primarily on farming for their livelihoods.
So the impending shake-out won't look like a social crisis from where most of us sit. Ownership of land and control of farm output already are concentrated in remarkably few hands. With 5 percent of U.S. farms selling 50 percent of the products, it stretches the imagination to think of farming mainly as "a way of life" that government farm programs should try to "preserve".
As Congress prepares to debate the future of those programs in this year's farm bill, we must face the fact that the complex, 50 year- old system of price supports, subsidies and government controls is badly in need of reform.
The failures of that system are glaringly apparent.
The expense of the traditional farm programs has soared. Price supports and other payments to farmers cost the government nearly $28 billion in cash and commodities in 1983, nearly double net farm income that year. It was a bailout, pure and simple--a mighty big one compared to the $1.5 billion loan guarantee the government gave the Chrysler Corporation a few years back. And the farm outlays will never be repaid. Yet it did not insure a healthy, stable agricultural sector. As many as one out of four of the country's commercial farms remain in serious financial trouble.
The system has not prevented -- and in fact has encouraged -- the build-up of huge surpluses of grain that we cannot sell abroad and of milk and cheese we cannot sell at home. Moreover, by providing economic incentives to plant crops on fragile land, the programs have aggravated one of the most serious problems they were intended to help solve: the topsoil loss and water pollution caused by irresponsible farming practices.
For all the evidence that something is seriously amiss, the debate about agriculture's future has tended to be extremely narrow, and to revolve around two equally unrealistic extremes.
The Reagan administration's idea of reform is simple enough: gut the programs and make agriculture more "market-oriented". All of the evidence suggests, however, that the markets cannot possibly absorb current production levels for commodities now in surplus. For dairy farmers, whose price support program the Reagan administration apparently would eliminate outright, there is only a domestic market, and it is on the decline. Farmers growing wheat, corn, cotton and other crops would face drastically reduced support levels. The administration claims the export market will come to the rescue. But crop farmers already sell half of their crops on an export market that has turned very sour the past three years. Few analysts see any signs of recovery in the near future, even if we do adopt a tough, government sponsored drive to export more commodities. The administration plan really means, in the words of Agriculture Secretary John Block, that farmers will have to "take their lumps".
Liberals find themselves in a real quandary. They share most of the criticism of the programs, and emphasize the very reasonable complaint that the big farms receive most of the program benefits, which only helps them get bigger, faster. Preserving the embattled family farm remains central liberal concern. Yet, for the first time, they seem to recognize that the rescue would require government intervention as drastic in degree as the abandonment Reagan proposes. It would mean even more complex programs in which all farmers would be required to participate. Instead of relying on exports for farm earnings, prices would be raised by rigid production controls. Farms would be limited to a specified size and conservation would be a matter of regulation, not voluntary measures. If this looks like big, expensive government, it is, and if it came down to a choice, we doubt a majority of farmers would support anything resembling this approach.
In our view, the agriculture sector is not ready for the big government solution, and will not tolerate it being forced on them. On the other hand, we should not settle for just cutting costs in the 1985 farm bill, as Reagan proposes. We should devise policies that will make for a smooth transition from government-managed agriculture of the past to the competitive, business-like sector that looms ahead. The government should do everything possible to ease the personal and financial hardships of individual farmers who cannot withstand economic forces and events beyond their control.
At the same time, we have to face the fact that without drastic changes in our government policies, it is fanciful to think we can insulate farmers from those economic forces, or prevent the ownership of agricultural land from being further concentrated in fewer and fewer hands. The medium-size operators that best fit the stereotype of the family farmer are the ones most directly threatened by these trends.
The starting point for a more enlightened agricultural policy is a recognition of how radically different American agriculture is from what it was in FDR's time--and how far it probably is from the romantic notion many Americans still have of it.
Only about one American in 33 lives on a farm today, and rural incomes, which were less than 40 percent of urban incomes in the 1940s, are now nearly on a par with those in cities and towns. There are still about 14 million poor people in rural areas, but most of them do not live on farms, and those who do are virtually untouched by the farm programs.
The vast majority of "farms" are actually small, part-time operations. Of the total 2.4 million, some 1.7 million sell less than $40,000 worth of farm products, and half of that 1.7 million derive nearly all their income from off-farm jobs. There are bona fide farmers in this category, but according to a survey by the Census Bureau earlier this year, if you asked the people living on the 1.7 million smallest farms what their occupation was, nearly half would tell you it was something other than farming. Included among this group are many people who keep a farm simply for the enjoyment of it: hobby and weekend "farmers" who are doctors or automobile mechanics or factory workers in real life.
Whether they are rich or poor, this group does not benefit much from the major farm programs, for the simple reason that the benefits are directly related to the amount of corn, milk, cotton or wool produced. In recent years, farms selling less than $40,000 worth of products received an average of less than $1,200 from government commodity programs. Put another way, 70 percent of U.S. farms get 22 percent of the program benefits.
The other extreme are the 96,000 "big" farms that sell over $200,000 in farm products annually, account for one half of all sales and get a highproportion of the program benefits. Included in this category are 24,000 "superfarms" with annual gross of over $500,000, and average income over $100,000.
The government did especially well by these large farmers in 1983, when the Reagan administration's Payment In Kind (PIK) program turned over commodities worth $9.4 billion dollars to farmers who agreed to idle some of their crop acreage. PIK was their reward for cooperating in trying to reduce the U.S. grain surplus, and for the "superfarms" it was a handsome one. These extra large farms received an average of $26,805 in cash and commodities from the government that year. Fifty-one farms, half of them in California, got more than $1 million each.
Although some farmers who sell more than $200,000 a year in products are financially vulnerable, most have enough financial clout to pull through the bad years. (For example, their assets average $2.6 million.) It makes little sense for such farms to benefit from agricultural entitlement programs. At best, hefty government payments to large farms make possible their further expansion, increase the likelihood of surpluses, and raise the ante for the next time the government is called upon to intervene to "save the family farm."
This leaves the 570,000 in the middle, those with annual sales of $40,000 to $200,000, which produce 40 percent of the nation's food. To the extent that society wishes to "save" family farms, these are the ones to which government should reach out. These farmers are to agriculture what the "rust-belt" blue-collar workers are to manufacturing: an endangered class within a rapidly changing economy. Heavily concentrated in the Midwest and South, their main products are grain, soybeans, cotton, livestock and milk, commodities in which large- scale production has the economic edge no matter how skilled the smaller producers. Their options to diversify into other crops are limited. Typically, they depend on nonfarm jobs for part of their income, but still need income from their farms to make ends meet. They make up the bulk of the farmers who are now in serious financial difficulty as a result of sagging prices, high interest rates and high indebtedness. Unfortunately, current farm programs are not well-suited to helping them.
What then are we getting for the billions of dollars the taxpayers put out in support of agriculture every year, if we are not preserving the family farm?: for one thing, a massive Department of Agriculture bureaucracy that reaches into every agricultural county in America. At a time when individual enterprise and entrepreneurism is in vogue, government continues to have its hand in much of the agricultural economy.
In addition to the better-known subsidies to wheat, corn, cotton and dairy farmers, the government in fiscal 1983 paid out $89 million to bee keepers to support the price of honey and another $94 million to sheep ranchers as "incentives" to produce wool. Administrative boards regulate the marketing of 45 different products, from spearmint oil to hops. When there is a severe drought in Virginia or Maryland, weekend farmers with jobs in Washington collect checks from the government to cover their "disaster."
These programs add up to making agriculture by far the most subsidized of any industry (unless you count the ones that live off government defense contracts) raising some provocative questions about the vaunted "efficiency" of American agriculture.
What in the 1980s is the propose of these subsidies? Why do we have so many different, complicated and expensive programs?
One reason, of course, is their political momentum.
The quadrennial farm bill is an enormous Christmas tree with roots 50 years deep. It contains something for almost everybody. It spans food stamps, food aid to Third World countries, agricultural research, soil-conservation programs and, of course, the big- ticket items: the price supports, cash payments, drought relief and other direct aid to farmers.
Drawing up the measure involves horse- trading among dozens of special-interest groups, ranging from the North Carolina tobacco farmers in the home state of Senate Agricultural Committee Chairman Jesse Helms to urban members of Congress who want to hold the line against cuts in the food stamp program. Having their say along with farm organizations will be representatives of big grain companies and officials of multi-billion dollar farm input food processing companies.
That's politics, and it will be this way when the 1985 measure is debated. But it is time for the Congress to be clear about what is really at stake. The farm sector now is on the verge of an unusually drastic shakeout that could leave the profile of U.S. agriculture nearly unrecognizable by the time the next farm bill rolls around in 1989.
Farmers in many parts of the country are now in the worst financial stress since the Great Depression. According to the Department of Agriculture, perhaps 178,000 of the 670,000 commercial farms are deeply in debt, collectively amounting to $82 billion, nearly 40 percent of total farm debt. If present trends persist, there may be as many again in this category in two to three years.
Farmers are to blame, of course, but so are policies and predictions emanating from Wahsington in the 1970s. Huge new Soviet grain purchases, bad weather abroad and a devalued dollar (which made U.S. goods relatively cheap for foreigners to buy) combined to produce an export boom between 1972 and 1981. Beginning with Secretary of Agriculture Earl Butz farmers were encouraged to plant fence row to fence row. Government controls on the acreage planted were lifted, and Butz declared that the government was "getting out of agriuclutre." The American farmer, his income soaring, was "feeding the world," and eminent agriucltural economists saw no end to the export expansion.
The bust began in 1981 when high interest rates, stagnating export markets (caused in part by the runaway indebtedness of customers in the Third World), and bumper U.S. crops caused prices to drop. By then, however, farmers had borrowed heavily to expand and modernize their operations. they found themselves saddled with debt even as their equity began to be reduced by declining prices of farmland.
What should the government do about the immediate situation? We must be on the side of history and assume that farm programs will neither be eliminated nor vastly enlarged in the 1985 farm bill. We'll muddle through, but in doing so several reasonable reforms can be instituted.
First, we do need to begin lowering price supports and reduce cash transfers to farmers, both to reduce government costs and to make us more competitive in world markets. The weaning should be gradual, in order to ease the pain of economic dislocation, and done in such a way that the remaining benefits are targeted to small and medium-size commercial farmers who apply for them. Very large farmers whose sales exceed a specified amount (probably more than $200,000 a year) should be cut out althogether. We will continue to need federally supported reserves of food and grains, simply because the government has a major, long-term role to play in stabilizing food prices. Even in the market-oriented environment of the future, we'll need programs to protect consumers here and abroad when events beyond our control, such as droughts or currency fluctuations, cause food prices to soar.
Second, any bailout of indebted farmers or teetering rural banks should be designed to benefit medium size farmers who stand a reasonable chance of long-term survival. Any government refinancing schemes involving farmland should provide taxpayers a stake in the property, so that the government is at least partially repaid if the land is sold at a higher price in the future.
Finally, soil conservation would be aided by several reforms. We now have the capability to identify the land most vulnerable to erosion, and the new farm bill should impose the strongest possible "sodbuster" sanctions on farmers who plow up this land in the future. They should be denied all USDA program benefits in perpetuity. To cope with serious erosion of land already in cultivation, we also should enact a "conservation reserve" program that would pay farmers to return this fragile cropland to sustainable uses like hay, pasture and forest. Retiring a small amount of such land is the only practical way to cope with the erosion problem, and it would help reduce the production of surplus crops at the same time.
As modest as these reforms seem to us, we know they will be very difficult to achieve in the current political climate. In fact, they may well get lost in the shuffle. This next round of farm policy is headed toward a standoff between those who want to cut the agricultural budget severely without regard to its social consequences, and a wide array of groups who want to retain a central and costly role for government, some out of narrow self-interest, others in hope that tinkering with current policies can halt the trend toward toward fewer, larger farms.
But we can't turn back the clock. This is not to say that what we think of as family farms will disappear. Some will perservere by being careful with their investments, and by being content with modest incomes and less than super-size farms. Middle class Americans will eagerly continue to re-colonize the countryside, buying small plots of land they'll cultivate and support with jobs in town. Enterprising small farmers will find a niche raising fresh or specialty crops on farms on the fringes of suburbia. But family farms as most of us think of them will not produce the bulk of the country's food.
What about the 5 percent of farms that will completely control agriculture in the near future? Ironically, our nostalgia about the family farm has for too long prevented us from us from understanding contemporary agriculture for the business that it is, and from treating it accordingly. The super farms should not be accorded special treatment as a "way of life". We should expect them to perform efficiently and reliably, with far less subsidy then at present. They should be held fully accountable for the way they treat land and water resources, just like other industries are. They should be directly responsible for the integrity of the foodthat leaves their agri-factories, and for the safety and collective bargaining rights of the workers they employ.
It may not suit our longings for bygone times, and we'll probably come to regret the runaway concentration of ownership and control; but that is the agriculture and rural America on the horizon. It was on the horizon of the New Deal fifty years ago. We just never quite believed that we could someday have to turn and see it.