Will History Repeat Itself?
Soaring commodity prices…farm incomes on the rise…increasing land values…banks happy to cash-flow farming operations.
Most people involved in writing the new farm bill might read those phrases and think it’s a description of current situation in rural America. It’s not; it’s a description of the years leading up to the farm crisis of the 1980s.
Back in the ‘70s, things were going pretty well for America’s farmers. New markets opened, new technology improved efficiency, and interest rates were low, giving farmers and ranchers access to capital needed to plant even more.
Then the unthinkable happened.
The economy tanked. Everyday Americans had fewer dollars to spend. Banks weren’t as quick to lend money. Debts piled up. And the cost of fuel, seed, pesticides and other farm inputs skyrocketed.
It should because America finds itself at a similar juncture right now.
Three-quarters of Americans now believe the U.S. is in a recession, according to a CNN/Opinion Research Corporation poll released on March 17.
Many farmers and ranchers are struggling to secure needed operating loans at favorable rates, and the cost of doing business is skyrocketing.
By the end of 2008, the USDA’s Economic Research Service (ERS) forecasts that fuel prices will have risen 159 percent since 2002. Fertilizer costs climbed 20 percent from 2006 to 2007 and are expected to climb even higher this year. Seed is estimated to be 14.3 percent more expensive than it was just two years ago. And, pesticide expenses are projected increase of 11 percent in 2008.
Prices for a few commodities have remained at higher levels, but any farmer will tell you that these prices are fickle and can turn on a dime.
There is one major difference this time around though. Farmers have a proven farm policy to help them through the tough times—or do they?
Back in the early ‘80s, farm policy lacked the basic safety net and insurance options that many farmers today use to cushion the wild swings that are commonplace to the industry.
The farm bill pending Congress right now would strengthen this safety net and help increase certainty over the next five years, which may prove turbulent. But this bill has stalled in Congress.
When Congress returns from Easter recess, hopefully they will make passing the farm bill a top priority. If not, rural America could find itself in a time warp.
The last farm crisis took many painful years to pull through—years that were marked by farm foreclosures, free-falling land prices, and a mass exodus from rural America.
Luckily, we can still work to avoid all that with the completion of a new farm bill in April.