Farmers produce more, but get less

LOOKING up from his morning chores, Dan Ruf can see his old farm. ``I was glad to leave it behind -- it would never support a family right now,'' he says. The Rufs are staying afloat with relatives' help and food stamps. They are increasingly confident they can make it here in northwest Iowa by starting a small dairy farm.

``Makes you kind of wonder,'' though, Mr. Ruf says. ``We had a farm that was plugging in about $225,000 of business within a community, and now it's . . . taken that $225,000 out.''

The agricultural depression has not only hurt farmers. In Iowa, perhaps the hardest-hit state, a third of the state's farm-machinery dealers have closed since 1979. Also gone: a tenth of its hardware stores, nearly a fifth of its auto dealerships, and more than a quarter of its men's clothing stores.

The contraction, part of the general upheaval in rural America, has hit small towns the hardest. In Hartley, population 1,700, the John Deere machinery dealer closed last year, and Howard Borchard sells fewer TV sets at Hartley Electric. But he's optimistic: ``I would think we're pretty stable from here on out.''

The farm economy is crucial to the rural United States, because, of all the natural-resource industries, it affects the most people.

In Texas alone, which up to now has avoided the dire conditions of the Midwest, more than 10,000 of the state's 185,000 farmers are expected to quit their fields this year. That is in line with nationwide forecasts of 5 to 10 percent farm failures.

The situation is especially dire in the cotton-growing regions of the Texas panhandle, where state officials estimate that 1 in 6 farmers could go out of business this year.

``I've never seen things this bad -- or this dry -- and I'm an old-timer,'' says Virgil Allison, who sells used farm equipment in Brownfield, Texas. ``I'm fixin' to retire at the end of the year, and I wouldn't be surprised if I don't make one sale between now and then.''

Although farmers from Georgia to Oregon are feeling the pinch, the main focus of concern is the nation's midsection, the Corn Belt and Great Plains, which contains nearly half of the nation's farm-dominant counties. And although only 8.5 percent of rural people work directly in agriculture, rural businesses and governments are increasingly hard hit.

``It was as if suddenly someone had flipped a switch,'' recalls Norm Starr, owner of a clothing store in Hartington, Neb. After plunging $25,000 into remodeling the store in 1979, sales dropped 20 percent that year and never recovered. The Starrs, who live above their store, have yet to find a buyer or renter.

The slump is pinching local governments, too. In a 13-county region of northeast Nebraska, which includes Hartington, the tax base eroded 22 percent in inflation-adjusted dollars between 1981 and 1985. Further erosion may be in store, since the value of farmland in the area has dropped 31 percent, according to a US Senate study.

Hartington's public school superintendent, Don Flakus, is worried. When he moved to Hartington in the mid-1970s, only two homes were up for sale. Today there are 30, he says, and as population and school enrollment have dwindled, Mr. Flakus has had to reduce staff by 20 percent. ``The next cuts that we make will be total programs,'' he says.

State governments may be able to provide some help, but they too are feeling the effects of the farm depression.

``I'm seeing it in my revenue picture that seems to get worse every day,'' says Montana Gov. Ted Schwinden, who has already cut state programs 2 percent across the board and expects a further 5 percent reduction this year. ``We can get through the sort of cuts that we're talking about. [But] if we go beyond that, then I think we begin to eliminate programs.''

Two factors are driving the farm depression of the 1980s, economists say. The immediate cause is the downward adjustment after the boom times of the 1970s, when a low-valued dollar pumped up farm exports and high inflation caused farmers with even moderate-sized operations to become millionaires, on paper. Changes in economic policy precipitated the slide in the '80s. Interest rates and the value of the dollar skyrocketed. Farmers who had borrowed heavily to expand found themselves spending more and earning less -- ``peddling backwards at a high rate of speed,'' one economist calls it. When farmland prices finally plummeted, farmers no longer had the collateral to refinance their large debts.

The decline in the number of farmers, while more precipitous than in the recent past, is not new. Improved technology has weeded out farmers for many years. Don Jones, a sports editor in Anson, Texas, recalls that when he was a boy, it took about 100 people and seven tractors to produce 1,000 bales of cotton from 2,000 acres. ``Now,'' he says, ``my dad on his own with his tractor is able to take in more than 1,000 bales off of just 1,000 acres.''

The current slide has not dragged down everybody.

``For a third of our farmers, it's a depression of unparalleled magnitude,'' says Paul Lasley, an Iowa State University Extension Service sociologist. ``For another third, it's a recession. For the other third, it's a mild recession.''

``Parallel realities,'' explains Joan Blundall, an Iowa mental-health worker. ``I can spend the morning with a farmer whose house is at 20 degrees, and he's got two cans of food on the shelf. . . . [Then] I can see a fashion show that's taking place with dresses that are 300 bucks apiece.''

The mental effects of the depression appear more broad.

``Call it tightness and a little bit of fear,'' says Keith S. Holste, pastor of the local Trinity Lutheran Church out in Hartington.``This fear makes people, even if they have it, hang on tighter'' to their money.

``There is a mood out there that says we must be sacrificial to survive, and I find a lot of wealthy people who are participating in that kind of mood,'' adds Merrill Oster, head of a farm-market news service in Cedar Falls, Iowa. During the 1970s, ``in a week's time in Hawaii, I would bump into 10 or 15 farmers that I knew from the Midwest. Incredible! [But] the farmers that [could] afford to go to Hawaii this winter [were not] going.''

Concern centers on what happens next? At the moment, economists are hopeful. Interest rates and the cost of oil and other big farm purchases are down. ``We've reestablished a solid base for growth,'' says Ross Korves, chief policy analyst at the American Farm Bureau Federation in Park Ridge, Ill.

But even if the debt crunch begins to ease, the horizon is not uniformly bright.

``I call it `the two crises of agriculture,' '' says Neil Harl, an Iowa State University agricultural economist. After the debt crisis, farmers still face the long-run problem of producing too much for too few pocketbooks, he says. Even farmers' income subsidies could be cut at this crucial period because of the Gramm-Rudman deficit law, he says. ``I think that we will eventually lose about a third'' of US farmers.

``Today, very honestly, I have no problems,'' says Monty Burke, a McKenzie, N.D., farmer and head of the state's Farm Bureau organization. But ``looking . . . down the road, I'm not so sure.''

Part 2 of a five-part series. Next: Miners and loggers feel the pinch.