It's looking up in the US heartland. But recovery is uneven; some states still struggle

Very, very slowly, prosperous times are returning to America's heartland. But no one here is shouting about it. ``It's only being whispered,'' says Gov. Kay A. Orr (R) of Nebraska. ``Farmers are cautious. Some are still having tough times, and won't make it.''

A recent 2,000-mile trip through America's midsection found farmers, businessmen, and politicians far more upbeat than two years ago, when this region was in a trough of recession.

While about 10 percent of the region's farmers are still in trouble, signs of hope abound:

Livestock prices are strong, with hog farmers here in Iowa reporting excellent profits because of both domestic and foreign demand.

Oil prices of $18 to $20 a barrel, up from as low as $10, have helped not only Texas, but also oil-producing regions of Illinois, Kansas, and other farm states.

Heavy federal subsidies to grain producers have allowed farmers to maintain profits even while trimming production.

Land prices, which plunged in recent years, have firmed. Some areas, such as northeastern Iowa, report that prices for some choice parcels have begun to inch upward.

Bank failures have slowed. One federal bank examiner said the banking industry in the region hit bottom about nine months ago, with steady improvement ever since. Even so, 35 banks have already failed in Texas this year, 23 in Oklahoma.

Pollster Albert Sindlinger, who has developed a model to determine which states are being affected by a recession, said that 31 states had depressed economies last year, including most of those in the Midwest.

``They continued to be in recession through January and February of this year, but they started to come out of it early this spring,'' Mr. Sindlinger says.

In his latest survey, just out, Sindlinger slashed the number of recession states to only 12. Moving out of Sindlinger's recession category in recent months have been such farm, oil, and mining states as Colorado, Iowa, Kansas, Minnesota, Missouri, Texas, Wisconsin, and Wyoming.

Yet some states, such as Governor Orr's Nebraska, remain stuck in low gear, Sindlinger says.

Orr believes her state hit bottom ``six months ago. ... We've had no bank failures this year.'' But she concedes: ``It's a slow, laborious process'' to recovery.

Sindlinger cautions against overoptimism. He says his figures indicate that much of the Midwest and the South Central region are still stagnating, even though things have stopped getting worse. There is no brisk recovery.

Gov. Mike Hayden (R) of Kansas says one of the best indicators of a turnaround is rising farm profits. Nationwide, profits rose from $47 billion in 1985 to $52 billion in 1986. Federal officials estimate profits of $54 billion to $58 billion in 1987.

Farmers heavily dependent on corn, wheat, soybeans, and other traditional crops are still having problems. But Robert Boyd of the Iowa Department of Economic Development notes that diversified farmers are generally doing quite well. Profits have been especially handsome in Iowa for farmers with hogs, cattle, turkeys, and vegetables, Mr. Boyd says.

Governor Hayden says the positive impact of higher oil prices has also been a significant factor. For example, in Russell, Kan., home of Robert Dole, the Senate minority leader and a Republican presidential candidate, there are more wells than tractors dotting the countryside. In southern Illinois, oil pumps bob up and down in head-high cornfields around places like Mount Vernon and Graysville.

While the overall picture here is improving, Roy Ferguson, an agricultural consultant in Tulsa, Okla., warns that the region still has a long way to go.

``I'm concerned ... we may be harming ourselves by the sudden adoption of a total Dr. Feelgood philosophy,'' he says.

Mr. Ferguson explains: ``About 10 percent of US agriculture has been marginal, just skating on thin ice; and about 10 percent has one foot in bankruptcy and the other on a banana peeling. ... That has not changed.''

Ferguson says that the ones in most serious trouble are farmers who paid excessive prices for land, buildings, and machinery during the 1970s boom.

Unfortunately, these indebted farmers are in many cases ``the most successful farmers,'' who produce 35 percent of the food. Many are being kept afloat with the huge federal subsidy program, which this year totals $26 billion.

This subsidized sector has suffered the most, Ferguson notes. The livestock and poultry sectors, he says, are free markets, with ``no subsidies of any kind. And they're consistently the most profitable, and have been for 50 to 75 years.''

First of two articles. Tomorrow: The political impact of recovery.