A Bitter Harvest

By KURT ANDERSEN

Despite bumper crops, U.S. farmers are having a dismal year

In the middle of the U.S., in the heart of Illinois, in the depths of Herb Steffen's 220 acres of ripe corn, everything seems plainly abundant. The sunny September sky is as wide and weightless as the fields' earthen smells are dark and sweet. Bugs buzz in and out of earshot and the perfectly golden stalks rustle in the breezes, but the quiet, like everything else, still seems pure and plentiful.

This week and last, in Illinois and elsewhere, the harvest intruded on that lush prairie silence. Sitting in a cab 9 ft. above ground, Steffen steered his rumbling 1970 John Deere combine up and down the quarter-mile-long rows. Each ear of corn was picked, shucked and stripped of its hard kernels, and its denuded cob spat back into the field. Steffen, whose 420-acre farm is near Cropsey (pop. 90), thinks he is harvesting his best crops ever: perhaps 25,000 bu. of corn, 9,000 of soybeans. But that is not really good news. "If it goes another couple of years this way, I may be out of business," says Steffen, 34. "That'd be the end of over a century of Steffens on this farm."

Unprecedented bounty, serious worries about survival: this is the paradox confronting Steffen and thousands of other U.S. farmers. They are, it appears, too good for their own good. Three straight years of bumper crops have created enormous surpluses and pushed prices for the major crops lower than they have been in at least a decade, often below the cost of production. The year's expected harvests of corn (8.3 billion bu.), wheat (2.8 billion bu.) and soybeans (2.3 billion bu.) will be the largest in history, and yet U.S. farm income will be the smallest in real dollars since Depression-ravaged 1933.*

Firms whose fortunes are tied to farmers are teetering, from small-town grocery stores to industrial giants such as International Harvester, which expects to lose $1.6 billion this year. Exports have for a decade absorbed more than a quarter of U.S. farm output and most of the surpluses, and thus helped to prop up prices, but the value of exports fell this year (from $43.8 billion to $40.5 billion) for the first time since 1969. Meanwhile, millions of tons of grain--35 million tons of wheat alone--sit unsold in overflowing silos and elevators across the U.S. heartland. Storage space is so tight that grain is even piling up outside, covered only by tarpaulins. This year for the first time farmers will clear less money ($19 billion) than they pay out in interest ($22 billion). Says National Farmers Union President George Stone: "That kind of arithmetic is apocalyptic in the long run."

Roughly a quarter of America's 2.4 million farmers are substantially in debt, and a fair share of them are in serious trouble. In the first ten months of the current fiscal year, there were nearly 7,000 farm failures. Even many secure and usually prosperous farmers are feeling the pinch. "You've heard farmers bitching all your life," says Chappel Sides, 53, a cotton, soybean and peanut farmer near Coffeeville, Miss. "But when an above-average farmer makes an above-average crop and loses a pile of money, you know something's wrong. We're just right on the verge of a sure-enough tragedy."

As farm failures increase, young farmers are hurt disproportionately, because they are disproportionately in debt. Unless their farms were inherited, farmers in their 20s and 30s were obliged to pay a lot to get started. The average price of farm land, adjusted for inflation, increased by 75% during the 1970s to nearly $800 an acre, more than $300,000 for a typical 400-acre farm.

Billy Fulton, 25, had been a West Texas cotton farmer since 1977, when he bought 300 acres near Floydada. This year he quit. "For months," he says, "I've been trying to figure out what I did wrong. You get angry. You can cuss Reagan, you can cuss [Secretary of Agriculture John] Block, but there's no one to blame."

He comes closest to blaming the Farmers Home Administration (FmHA), the Government lender of last resort. Last spring Fulton asked for $240,000 both to pay off his 1981 debt--his crop had been stunted by a late rain, then sold at desperately low prices--and to cover 1982 planting costs. The local FmHA offered him $55,000. "Farmers Home didn't tell us to get out of business," says his wife Sharon. "They just made it impossible for us to stay in."

Fulton sold his tractor and picker to pay his $70,000 short-term debt, and now covers most of the farm's mortgage payments by renting out his land. Even though he has gone to work as a sheriffs deputy, Fulton still thinks of himself as a farmer. "I might have made it one more year, but instead of losing just the equipment, I could have lost the land itself."

Parts of the farm economy are doing well. Pig producers are thriving: demand is strong because herd size was cut last year and feed is cheap because of the grain glut. Dairy farmers stay fat at Government expense. The USDA will buy dairy products for 13.10 per Ib. no matter how low the market price drops. Such purchases this year will amount to $2 billion, or about $10,000 for every U.S. dairy farmer. The result is heaps of cheese and butter, paid for by taxpayers, 270 million lbs. of which the Government will give away this year.

Other farmers face much more risk, but they too can avoid flat-out failure by falling into Government safety nets. Steffen, for instance, took out a $19,500 federal loan last spring, using his corn crop as collateral. Back then the collateral was appraised by Washington at $3.15 per bu.; today Steffen's local grain elevator is paying just $1.99 for corn. Steffen may default on the loan, effectively selling his corn to the U.S. Government for a dollar more than anyone else would pay for it. Tens of thousands of farmers are expected to do the same this year, without stigma, although the Government already has 7 million tons of forfeited grain stashed away. Total cost of the 1982 crop loan program: $8 billion.

"I'm not a great believer in Government programs," Steffen says, repeating the farmer's standard, slightly disingenuous disclaimer. "But we have to have them to get by in these days of low prices." Steffen, who has operated his family's farm for the last twelve of its 119 years, is an astute manager. Part of his current crop he profitably sold months ago on the commodities futures market. Although he may make no more this year than in 1981 on corn and soybeans ($7,882), he has diversified into cattle (25 head), hogs (130) and pet-dachshund breeding (40). His wife Georgia, 32, works in town three days a week. After $17,000 or so for living expenses, he expects to clear "around $5,000 between the wife, the cattle, the pigs and the dogs. Thank God for those pigs." Hogs have been selling lately for record high prices. "I've done the very best I can do," he says, mindful of the farmhouse's new wood-burning stove and, in the front yard not far from a flapping American flag, a solar collector. "I've used every single edge I can wangle, cut back to the bone."

Jerry and Molly Galloway, wheat farmers on 504 arid acres near Sunray in the Texas panhandle, are also scrimping. Unlike the Steffens, however, their farm is losing money. Last year they sold their 24,000 bu. harvest for $120,000, but expenses were $134,000. The largest single item: $31,750 for irrigation.

Molly, 40, returned to work three years ago after a 13-year hiatus to raise sons Travis and T.J.; she earns $13,000 a year as a fourth-grade teacher. After work she still attends to all the household chores. Jerry would "rather she didn't have to work" off the farm, but Molly says that she will continue "until I get a cane. I'll stay with teaching even if the agriculture economy improves." As rugged as her life is, she feels blessed. "I wouldn't want to live any place else," she says. "When I cross that first cattle guard, coming home, it is as though I've gone to another planet."

Farmers all over are surviving by cutting corners. "You have to sit down and have a talk with yourself," says Mickey George, a fruit grower in California's San Joaquin Valley. "You make a decision to eliminate part of your fertilizer program. You put off buying this piece of equipment or that piece of ground." George has postponed a new $24,000 irrigation system, and will keep using two decrepit tractors that would cost $24,000 each to replace. Says Donald Duncan, a Pennsylvania dairy farmer since 1954: "This month we cemented the inside of our silo. Normally we would have hired a silo man to come here and do that. So this is hurting him. And that's the way it goes down the line."

Indeed it does. The five biggest North American farm-machinery manufacturers have laid off 20,000 workers in the past 18 months. This year tractor sales have fallen 27%; sales of combine-harvesters, which cost up to $150,000 each, are down by more than half. U.S. fertilizer companies will sell 11% fewer.

For many small farming communities the ripple effect is wrenching. In Melbourne, Iowa (pop. 500), a 100-year-old town halfway between Chicago and Omaha, the brick fronts on Main Street were dog-eared before the current recession. But the pervasive gloom is something new. "Our vital signs are not very good in this town," says Gary Northrup, vice president of Melbourne Savings Bank. "Melbourne's best days may be behind it. Farmers have no money to spend. When they hurt, the town dies a little."

At the Phillips 66 station, which Ray Long has owned since 1957, a sign more beseeching than stern reads: PLEASE DON'T ASK FOR CREDIT. Next door, Gary Fricke says his furniture store lost money last year, and business this year is off another 50%. Mike Riemenschneider, who bought the town's Jack and Jill Supermarket in 1979, has watched sales droop 15%. Says Vernon Waterman of the farm-implement business he runs with his wife Margaret: "I'm surviving on service, but losing money every day. I'm barely in business, and it won't get any better until corn and soybean prices get better."

Melbourne Savings has most of its assets loaned out to area farmers. Says Northrup: "A few farmers around here are on the edge. Next year, if things don't improve, I might have to tell five or ten that they ought to get out." This year, Northrup pressured his borrowers to sign up for the Government's unpaid land "set-aside" program. To reduce production and raise prices, 10% of each farmer's corn acreage was to be retired during 1982. Only a quarter of U.S. farmers participated; the effect on the crop was negligible.

The Government has not paid farmers to keep fields fallow for several years, and the idea seems inherently repellent. But many farmers feel there is no ready alternative. "If I cut back and my neighbor cuts back," says Chappel Sides of Mississippi, "that won't do it. The Government has to come in and regulate supplies" by forcing farmers to produce less. Last week, by congressional mandate, Agriculture Secretary Block announced a new, paid set-aside program. If corn and wheat farmers retire 20% of their lands next year, the Government will pay them as much as $100 per unplanted acre.

Most farmers and the Administration agree, however, that expanding exports is a more seemly and durable solution. American grain exports are already almost five times those of Canada, the world's second largest shipper. Still, says Dennis Wentworth, 30, a Bloomington, Ill., farmer: "My biggest gripe is that Washington is not helping us enough with exports. We are losing out in international competition." The 1980 Soviet grain embargo did crimp that important outlet until this year, and generally weakened world confidence in U.S reliability as a supplier. But much of the problem is beyond Washington's direct control. The 1982 world grain surplus is a staggering 216 million tons, larger than the entire Soviet harvest. The European Community ,sells produce abroad at artificially low prices, and Japan applies stiff import quotas on American beef. The strong dollar and worldwide recession further slacken demand: U.S. corn exports, for instance, are down 11% in volume and 30% in value. The predicament leads some to hyperbole. Says Larry Southard, a Marshalltown, Iowa, John Deere dealer: "I'd rather give Russia our grain, free, to clear the surpluses so prices could rise and farmers would start buying again."

While farmers moan and grouse, they are invariably romantic about what they do, despite droughts and 17% interest rates and soybeans that fetch only $5.09 per bu. In every part of the country, they shake their heads and say it is rough, very rough. But "you just have to believe in what you're doing or get out," declares Steven Korshak, 36, Vermont's only full-time ginseng farmer. "We are living a life we've consciously chosen, and there's a freedom in that." T.J. Bell, 67, farms 200 acres of wheat and soybeans on the Sunflower River near Rolling Fork, Miss. His explanation could practically pass for a blues lyric. "All my life, all my days, I haven't done any other kind of work but farming. Oh, I love to be a farmer. I was hoping to get out soon, but got some debts I got to pay before I do. This year won't pay much debt." Feedlot Operator Wayne Buck, 54, who farms 900 acres of corn in central Iowa, knows his stoicism is a little crazy. "I could sell out and live pretty well on the proceeds," Buck says. "But some thing seems to keep me in farming. I don' know why I keep banging my head against the wall." He guesses why. "Maybe I have to prove I can handle hard times." --By Kurt Andersen. Reported by Lee Griggs/Chicago, with other bureaus

* Depression farm life was far tougher, however, since in 1933 nearly three times as many farmers (6.5 million) shared the aggregate income.

With reporting by Lee Griggs

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