DOWN ON THE FARM

August 5, 1999
		Farmers are facing some of their toughest times in a decade. Margaret Warner discusses with two industry experts whether this trend could become a long-term problem. A background report provides more information.

Aug. 5, 1999: A report on the latest farm crisis. Aug. 3, 1999: The EPA bans two cancer causing pesticides Aug. 2, 1999: Weathering the drought March 2, 1999: USDA settles suit with African-American farmers Dec. 3, 1998: Importing Farm Hands Aug. 10, 1998: Farming Crisis. July 29, 1998: Fish Farming Jan. 31, 1996: Freedom to farm Browse the NewsHour's coverage of Economy and Business     U.S. Department of Agriculture U.S. Senate National Farmers Organization	MARGARET WARNER: For a broader look at the farming picture nationwide we're joined by Daniel Sumner, Professor of Agricultural Economics at the University of California, Davis. He served as an Assistant Secretary of Agriculture during the Bush administration. We also hope to be joined by Leland Swenson, president of the National Farmers Union, an organization representing nearly 300,000 family farmers and ranchers. He's in Minneapolis, but we're having technical difficulties with the studio there. Mr. Sumner, first of all, this talk about the plight of the family farm does have a somewhat familiar ring, certainly from the 1980s. Is it worse this time? Is there something new at work here?
	Worst situation in a decade
	DANIEL SUMNER, University of California, Davis: I wouldn't say it's new. It's new to some of the people that are facing it this time. Just because it's not new, of course, doesn't make it any easier for those folks. A number of the people -- and I think your piece made this clear -- a number of the people that are having a tough time this go-around weathered the 1980s. There are two or three things that make it less severe this time. One of the important ones is the strength in the non-farm economy, particularly the Midwest. Another is that we come off some very high prices in the middle of the 1990s. That didn't help everyone, but it helped a lot of people in the farm community. MARGARET WARNER: Oh, and you said there was something else. DAVID SUMNER: Well -- MARGARET WARNER: Well, let me just ask you this. The piece certainly suggested that the farms at greatest risk right now are these family farms. One, would you agree with that, and, two, how does one define -- what's the size of family farm versus a big agra-business concern? DAVID SUMNER: Almost all farms in the U.S. are family farm, 90-some percent. So I don't even find that a useful distinction. About half the farms in the U.S. are part-time. And we had a few of the part-time farmers featured in that piece. Those are folks that make most of their living off the farm and still operate moderate-sized farming operations and in good years may make some money at it. The largest operations in farming, in fact, are really quite sensitive to profitability, just like any other investor. If they don't see profit in farming, they'll move their assets somewhere else. We saw that in the 1980s. We saw that at earlier periods when very large farmers, in fact, left farming. I would say, and again, you had someone on the piece that made this point, the farms that will probably have the strongest potential to stick it out are the ones that are moderate-sized family farms. You can't use acres to measure it because it differs whether they're growing strawberries or peaches or wheat in the Dakotas, but someone with gross sales perhaps in the million dollar range, perhaps less, perhaps more, depending on the commodity, who is solidly financed and is in a position to weather ups and downs. The other group that will weather this sort of a problem are, in fact, the smaller farms who rely on off-farm income. There may be one spouse working off the farm. It may be both spouses working off the farm. Those farms are going to weather. MARGARET WARNER: I'm told we have Mr. Swenson. Mr. Swenson, if you're there -- yes, there you. Tell me your sense from where you sit in representing these farmers how serious the situation is now. LELAND SWENSON, National Farmers Union: It's devastating. We're losing family farmers. I equate it to almost the Great Depression of the 1930s. And I say that because as we take a look at some new factors, one is we have a deregulated agriculture that came about because of the 1996 legislation, the Farm Act. Secondly, we've got trade liberalization, free trade so to speak. These are factors that we haven't seen for about 60 years that are really impacting the economic viability of family farmers and ranchers in this country. MARGARET WARNER: And when you say deregulated agriculture, you mean that this so-called Freedom to Farm Act, this bill that was passed and adopted three years ago, basically is phasing out the guaranteed income or price supports, is that right, for farmers? LELAND SWENSON: Well, I guarantee it phases out tools for which farmers could adapt to their operation and try to get the best return they could in the market. And it phased out a safety net mechanism for producers when there was volatility in the market. And we see volatility today created because of a number of factors. But we don't have the mechanisms, the tools within the structure of that legislation to enable the secretary to act in partnership with the farmers to try to survive.
	Legislation and agriculture
	MARGARET WARNER: Go ahead, Mr. Sumner. DAVID SUMNER: All of that was partly accurate and mainly not. The amount of money transferred to agriculture is at least as large now as it has been, in fact, substantially larger for the last three years than it would have been under the previous legislation. Secondly, we have something called marketing loan programs that make direct payments to farmers when farm prices fall below a certain level. What we don't do is we don't tell farmers what they have to plant. We don't tell them that they have to leave some of their farmland idle. That's not a requirement anymore. And we don't have the government acquiring stocks. What we do instead is make payments. And we've been by any measure quite willing to make relatively large payments to farmers in the face of these low prices. MARGARET WARNER: Mr. Swenson, the bill was supposed to move, I guess, farmers toward a more market-oriented approach. Are you saying that's really not possible for American farmers of a certain size or a certain production level? LELAND SWENSON: Well, the economic situation is impacting producers of all sizes. But what the farm bill leaves out is tools to work with when we see global volatility of the magnitude that we've seen unfold in the last three years. The farm bill that was passed in 1996 was not designed to deal with the Asian collapse, with the collapse of the Russian market and what impact that would have on U.S. producers. It wasn't designed to deal with an arbitrary political decision made by the president of Brazil to devalue its currency. And so what we need to adapt within the positive structures that was pointed out, planting flexibility, that was included in every farm bill proposal that was considered by Congress in 1996. But what is missing is some fundamental tools for the Secretary to deal with when we see this magnitude of volatility. MARGARET WARNER: Mr. Sumner, let me move you to even a broader look. Would you say that farming globally is changing, I mean, that this is a permanent kind of a change that American farming is going to have to get used to, greater competition, more productive farmers overseas, volatile markets in terms of for our exports? DAVID SUMNER: Farming has been worldwide, if not the most productive, most rapidly changing industry, I don't know what would be. Productivity has been growing everywhere, especially in the United States. Farmers are better at their business now than they were a decade ago or two decades ago. But let's go back to the 1970s. We were competing with Brazil and Argentina then. We're competing with them now. We were competing with the Australians then. We're competing with them now. One difference now compared to the '70s and very early '80s was that Europe used to be market, and now they're a competitor. And that's not because of free trade; in fact, that's because of the opposite of free trade. It's because of still a very large trade restrictions and export subsidies in the European Union. So I probably come down on the side of saying more trade, not less is good for U.S. agriculture. I think we really are at least as productive as anybody else out there for almost anything the U.S. produces. So it's opening these markets. Now, whenever you have markets that are open, as they are for our major farm products say into Japan or Korea, then when their economies decline, we face a dip in the market. That is a fact. And volatile prices have been around for a long time. There's one other quick point I want to make. MARGARET WARNER: Actually, let me get to Mr. Swenson briefly. We're just about out of time, Mr. Swenson. Yesterday, as you know, the Senate passed the $7 1/2 billion emergency aid package. They passed a similar thing last year. Is that going to be useful? Is that just a short-term measure? How do you see that?
	Short-term solution, again
	LELAND SWENSON: Well, it's very short-term, just as last year bridged us into 1999. The action they took will bridge us into 2000. It did nothing to remedy the problems and the challenges that farmers face. And I would agree we want more trade, and we want to know what the rules of the trade are going to be. And I want to clear one thing up. He said that Europe wasn't a market. Europe continues to be one of our better markets. And yes, it continues to be a competitor. But I also want to emphasize, when we deregulated agriculture, we allowed it to become more concentrated. And, Margaret, it's less competitive for U.S. farmers today to find market options for what they produce than what it was three, four, five years ago. MARGARET WARNER: Mr. Sumner, briefly, your thoughts on this emergency farm aid and on that whole concept. DAVID SUMNER: Well, prices are low, and Congress has decided to really add money to the Freedom of Farm. That's what was done yesterday in the Senate. That provides some added income to certain farmers. It doesn't do anything for others. The freedom-to-farm payments are being made to a handful of commodities, the grains and cotton. It doesn't help the folks in the livestock business. There are other folks that are having a tough time at it. So it does a bit. It doesn't do everything. One thing we have to recognize is farming is always going to be volatile. It's a volatile business. It's a risky business. It's a tough business. So somewhere along the line, I think we have to decide whether or not we want the government to encourage people to be in this business with payments like this. MARGARET WARNER: Okay. Thank you Mr. Sumner and Mr. Swenson. Thanks both very much. LELAND SWENSON: Thank you.