This summer, Dale Thorenson was an antsy farmer with a lot of time
on his hands. Earlier in the spring, while most farmers were busy
planting, Thorenson and other farmers in upper parts of North Dakota
prayed that the rain would stop so they could get in their fields
to do the same.
It didn't, and Thorenson had no wheat to harvest this summer.
But oddly enough, it might have been the best thing that could have
happened to him. With bottom-of-the-barrel wheat prices, some "lucky"
farmers who didn't experience weather problems earned less for their
wheat crop than it cost to grow. Given the flood-related government
aid expected for farmers in the area, Thorenson said, "We're probably
just as well off."
Bruce Adams, a retired North Dakota wheat farmer, said many farmers
are hurting throughout the state, and the spring rain now looks
like "a blessing in disguise."
Such is the dilemma facing many farmers nationwide. Low prices,
combined with volatile weather, have made farming an economic gamble
with increasingly poor odds. The problem appears worse for farmers
in the Great Plains and Corn Belt, where low prices in staple commodities
like corn, wheat and soybeans are the result of large crop surpluses
and growing world production that threaten to hold down prices indefinitely.
There are undeniable signs of stress on the farm, and several
thousand farmers-some estimate more-in the Ninth Federal Reserve
District will likely go out of business. But financial and other
indicators also show that the gloom-and-doom picture painted by
farmers, legislators and the media illustrates only a small portion
of the full picture. For one, this is not yet a 1980s farming deja
vu. Similarities do exist, but the number of farm foreclosures and
bankruptcies have steadily declined this decade to historic lows.
Such perception vs. reality regarding today's farm crisis begs
the question: crisis for whom?
The short-term financial position of most farmers is significantly
better than that of their counterparts a decade and a half ago.
Persistent low prices or a drop in land prices could accelerate
the insolvency of farms. This is especially true in the Ninth District,
where financial data and the Minneapolis Fed's own ag credit survey
show farmers here appear to be worse off than their national peers.
But district farmersparticularly those of major crop commoditiesalso
receive significant government aid, which in some cases might curb
a farmer's need or desire to diversify or otherwise innovate to
meet new market demands.
Many legislators have been decrying the loss of family farms and
farmland. However, the current situation reflects farming trends
that have been rolling along for better than six decades. Despite
the loss of farmers, the number of harvested acres has remained
virtually unchanged in the last decade, while food production has
more than kept pace through technology enhancements. Some farmers
have even managed to do quite well in this current crisis by turning
more attention to product marketing.
Many blame the current situation on the 1996 Freedom to Farm Actalso
popularly known as the Freedom to Fail Act. The landmark legislation
put in motion a seven-year timeline to wean farmers from government
assistance and orient them to meeting market demand. But persistently
low commodity prices since 1997 have motivated lawmakers to push
emergency aid bills that will likely triple public outlays to farmers
in just the last two years, much of which has landed in Ninth District