Block assesses US farm problems. Agriculture secretary chides banks for responding slowly to debt crisis

Presiding over a year of upheaval in American farming, Agriculture Secretary John Block is irritated with United States bankers and European competitors, hopeful about being able to draft new farm legislation, and uncertain about the political fallout from farmers' woes. At a breakfast with reporters Tuesday Mr. Block disassociated himself from President Reagan's statement that ``I think we should keep the grain and export the farmers.'' The remark was intended to be humorous and was made Saturday at the Gridiron Club's widely publicized by supposedly off the record dinner.

``I'm not interested'' in being associated with that comment, Block said.

The agriculture secretary strongly criticized bankers for not participating in a program to help farmers with their debt problems as they enter the spring planting season. Interest costs on massive debts, depressed crop prices, and falling land values are the main reasons why some experts expect US farms to fail this year at a rate of 240 a day.

Lending institutions ``have not reached out'' to help farmers, and ``the President is disappointed,'' Block said.

The Agriculture Department estimates that no more than 6,000 of the nation's 2.4 million farmers will be helped by the $650 million plan, which was updated in February. The program provides federal guarantees for farm loans on which bankers reduce interest payments by 10 percent. Another part of the program guarantees up to 90 percent of one-year operating loans for farmers who had borrowed from banks which failed.

Secretary Block blamed bankers' lack of action on the fact that ``Congress and others kept holding out hopes that there would be a sweeter deal coming for them.''

On March 6 President Reagan vetoed such a plan, which would have provided $100 million in interest subsidies, $1.85 billion in new loan guarantees and $7 billion in advances on crop loans which normally are not paid until harvest time.

The battle over emergency debt aid is just a taste of what lies ahead as Congress and the administration try to reach agreement on new farm legislation to replace the current law, which expires Sept. 30. The administration's proposal to substantially wean farming from government subsidy and control has set off heated debate in the agriculture community.

The plan is ``not dead on arrival,'' as critics have charged, Block said. ``It has been the focal point of the discussion since it was introduced.'' He predicted Congress and the administration will settle on a bill which meets the administration's two major goals.

The goals are, first, a plan which moves the government ``more out of agriculture,'' thereby making farmers competitive in world markets, he said. The second goal is ``finite cost controls . . . to address the obvious budget implications.''

The current farm program lacks such controls and is, in essense, a blank -- the amount of which depends on weather, interest rates and worldwide crop conditions, all of which are virtually impossible to forecast with precision.

For example, when the current farm program was passed in 1981 its cost was estimated at $11 billion. The Agriculture Department currently estimates the program's cost at $63.4 billion.

The question is not whether to move to a more market-oriented system but ``how fast do we get there and how much money do we spend along the way,'' Block said. While government intervention should be reduced, we ``need to keep some kind of safety net'' for farm incomes, he added.

It is ``too soon to tell'' what political impact the current distress in farm communities will have, he said. ``I don't think it [the farmers' mood] is anger as much as it is dispair,'' he said. Farmers' problems ``are generally not blamed on the President,'' he asserted.

Block also indicated that while some farmers got into trouble due to mismanagement,``on balance, I think it is circumstances . . . that thrust misery on the American agriculture industry.''

Since other nations' subsidies for their farm exports also have contributed to US agriculture's problems, the administration's proposed farm legislation would continue federal guarantees of commerical loans to finance crop sales.

``I wouldn't say we wouldn't go out and give the European Community a little taste of their own medicine,'' in terms of pushing exports, Block said. He noted that the administration's legislative proposal obligates the Agriculture Department to come up by 1986 with a plan to win back lost markets for US products.

Tobacco is one crop that needs to have its competitive position improved ``as long as it's legal,'' Block said. He added that he does not favor making tobacco illegal, although price-support levels ``need to be lowered.''

In the ``foreseeable future'' it is unlikely that tobacco-growing areas will diversify away from that crop, he said.