Electronic Publications _________________________________________________________ FARM AID NEWS Volume 3, Number 2 Thursday, January 26, 1995 _________________________________________________________ Headlines: - MOTHER NATURE, FEDERAL POLICIES MAKE ECONOMIC SURVIVAL DIFFICULT FOR FAMILY FARMERS - FARMS UNABLE TO SURVIVE ON AG INCOME - FARMERS FOREGO HOUSEHOLD EXPENDITURE - FAMILY FARMERS TURN TO OFF-FARM JOBS - "FARM CRISIS" FAR FROM OVER RESOURCES _________________________________________________________ MOTHER NATURE, FEDERAL POLICIES MAKE ECONOMIC SURVIVAL DIFFICULT FOR FAMILY FARMERS "What's wrong with our government?" asked a Minnesota grain and livestock farmer last weekend during a town meeting with new Consolidated Farm Service Agency head Grant Buntrock. "Why are farmers being asked to repay 1993 deficiency payments this year when we can't even cover our household bills?" Farmers who received advanced deficiency payments in 1993 have until March 16 this year to make repayment or face interest charges on their debt. The amount farmers are being asked to repay ranges from 8 to 36 cents per bushel of their 1993 crop. Because the flood and drought that year pushed some market prices up above anticipated levels, farmers are required to repay a portion of their advanced deficiency payment. Likewise, farmers who received disaster payments for a portion of their lost crop, must repay their deficiency subsidy in full. Many family farmers, however, are in too weak a financial condition to afford repayment. Farmers have seen their income drop over the past decade as input prices have continued to rise disproportionately to farmgate prices. Most family farmers have relied on off-farm work to make ends meet. However, many farm families, approximately 32,500 each year, have been forced to quit farming largely because of financial difficulties. These trends are expected to continue in 1995 for most of the nation's family farmers who are in severe economic distress. _________________________________________________________ FARMS UNABLE TO SURVIVE ON AG INCOME The KIPLINGER AGRICULTURE LETTER notes that on average small farmers, with gross annual sales of less than $50,000, "lose money on their farms." This is largely due to the combination of rising input costs and declining real commodity prices. A recent survey by the American Bankers Association shows that the decline in commodity prices and farm income has put farmers in an increasingly weak financial condition. Nearly 60 percent of the 246 agricultural lenders surveyed reported a decline in the number of credit worthy borrowers in the past year. "There is a lot of financial vulnerability in the ag sector," said Robert Jolly, ag finance professor at Iowa State University, in a recent news report. Agribusiness will tell you family farmers are losing money because they are inefficient. Family farm groups, however, have shown that the true inefficiencies exist in the corporate farm sector where land stewardship and crop diversification inherent in family farming are often given little attention. Unfortunately, the marketplace and the federal government have placed little value on family farm production techniques and instead have chosen to subsidize agri- chemical companies, international grain traders and giant food processors. Federal income support and export programs, for example, have created an unnatural price floor in the market below farmers' cost of production. The USDA reports that the index of prices received by farmers from 1982 to 1993 rose only 7.5 percent while input costs rose over 23 percent. In effect, federal farm policies have subsidized our nation's equipment, seed, fertilizer, pesticide and herbicide dealers. Federal farm policies have failed. _________________________________________________________ FARMERS FOREGO HOUSEHOLD EXPENDITURE Family farmers have been struggling to cover basic household expenses for the past decade largely because failed federal farm policies have prevented them from earning a decent living from the marketplace. A recent report on Iowa's farm sector, "A Financial Profile of Iowa Farm Businesses, 1993," shows that the average farm family's living expense was $23,697 in 1992, while average net farm income was $22,225. Similar comparisons exist for other farm states. According to " Iowa Farm and Rural Life Poll," many of Iowa's farm families made the following financial adjustments during 1992 to save money: Used savings to meet living expenses ........................41% Postponed major household purchases ..................54 % Changed food shopping/eating habits ..................38 % Changed transportation patterns ............................34 % Reduced household utility use ...............................33 % Postponed medical care ............................................22 % Farmers continued dipping into their family's savings to cover farm and living expenses in 1993 and 1994; many were forced to use much of their total savings to make it through these financially disastrous years. _________________________________________________________ FAMILY FARMERS TURN TO OFF-FARM JOBS Nationwide, 90 percent of all farm operator households rely on off- farm sources to supplement their farm income. "For the majority of farm operator households, off-farm income is critical," says the USDA in its 1994 AGRICULTURE FACT BOOK. "Most U.S. farms are small (less than $50,000 in gross sales) and are run by households which depend mainly on off-farm sources of income." _________________________________________________________ "FARM CRISIS" FAR FROM OVER Despite claims from agribusiness leaders and some government agencies that the "farm crisis" of the 1980's has ended, family farmers continue being forced from their land at a rate of 32,500 each year or 600 farm families each week. Rising input costs and cheap farmgate prices have made it impossible for farm families to cover their commodity production costs. The crisis is not over. The USDA reports that "the decline in farm numbers continued unabated between 1987 and 1992 ... farm numbers are expected to fall to about 1.7 million by 1997 and to 1.5 million by 2002." This means over the next eight years more than 400,000 farm families are in danger of losing their farm. In fact, there are so few farmers left in the U.S. that the U.S. government is reportedly considering removing "farming" as a category on the national census. "This 'laissez-faire' attitude toward the providers of America's food supply, is unacceptable," says FARM AID President Carolyn Mugar. "The conditions creating severe financial stress for our nation's family farmers need urgent attention." _________________________________________________________ RESOURCES "Farm Numbers Continue to Drop," AGRICULTURAL OUTLOOK, January -February, 1995. $42.00 per year. ERS-NASS, 341 Victory Drive, Herndon, VA 22070. (800) 999-6779. "Iowa Farm and Rural Life Poll: 1994 Summary Report," IOWA STATE UNIVERSITY EXTENSION, August, 1994. Free. Iowa State University, 3030 East Hall, Ames, IA 50011. (515) 294-6481. For ABA survey information contact: John Blanchfield, AMERICAN BANKERS ASSOCIATION, (202) 663-5100. "Kiplinger Ag Letter: Farm and Food Facts," August, 1994. Kiplinger Washington Editors, Inc., 1729 H St. N.W., Washington, D.C. 200006- 3938. (202) 887-6400. "A Financial Profile of Iowa Farm Businesses, 1993," Alan Vontaglge, Robert Jolly, IOWA STATE UNIVERSITY EXTENSION. $4.00. Extension Distribution Center, Room 119, Printing and Publications Building, Iowa State University, Ames, IA 50011. "Agriculture Fact Book, 1994" USDA, October, 1994. $8.00. U.S. Government Printing Office, (202) 512-1800. Next edition of Farm Aid News: Natural disasters further stress family farmers' financial condition. _________________________________________________________ We welcome comments and suggestions: contact Harry Smith at FARM AID, (617) 354-2922. We encourage the reproduction of FARM AID NEWS. Produced by The Institute for Agriculture and Trade Policy (IATP) for FARM AID. Editors: Gigi DiGiacomo and Harry Smith. For information on other agriculture bulletins, contact IATP: (612) 379-5980. Fax: (612) 379-5982. E-mail: gdigiacomo@igc.apc.org. _________________________________________________________ Top