August 10, 1998The NewsHour with Jim Lehrer Transcript
Farmers across the northern plains have been hit by hard times. Depressed prices, increasing costs and years of severe weather have resulted in a decrease in the number of farms across the region. Following a report by NewsHour correspondent Fred de Sam Lazaro, Phil Ponce and two agricultural economists discuss the farm crisis.
A RealAudio version of this segment is available.
August 10, 1998:
A discussion on the farming crisis.
January 31, 1996:
A discussion on the Freedom to Farm Act.
Browse the NewsHour's coverage of the economy.
FRED DE SAM LAZARO: The farm auction seems an appropriate symbol for what's happening a lot in the northern plains of the Dakotas and Northwestern Minnesota. Precious little is selling for a decent price.
Crisis hits the Northern Plains.
SPOKESMAN: Bid $500. What do you think guys—
FRED DE SAM LAZARO: And hardly anyone is buying.
MYLO CARLSON, Farmer: We come here just to see what's going on. I guess really not interested in even purchasing anything, but I'm here. It's moral support for the neighbor, I guess.
FRED DE SAM LAZARO: The auction of Don Taus's equipment ended three generations of farming in his family. Taus's grandfather began farming this property in Pennington County, Minnesota, early this century. For years, Taus says, the price of food has not kept up with the cost of farming.
DON TAUS, Farmer: Well, the price of milk has been at that $12 to $12.50 a hundred—average year prices since 1980 or 1981, so we're at about 18 years with the same price. Here we are, escalated costs for dairying or farming, chemical costs, fertilizer costs, fuel costs, and we are living with the same prices that we lived with in the early 80's in the dairy business. And you could buy a pickup then for four or five thousand dollars. You can't touch one for $20,000 today.
LUCIAN BOLL, Farmer: It's tough. You're out there, swatting your grain, you think it's the last time I'm going to be doing this maybe.
FRED DE SAM LAZARO: Lucian Boll could well be calling an auctioneer in the next few months.
LUCIAN BOLL: I think this is it. I mean, if we don't get some prices, this is it. I've been here 24 years, and I'm—I don't overspend. I don't have a lot of new equipment. I don't have any new equipment. Equipment's getting old. Repairs are going up. I mean, we just can't, you know, cut corners and cut corners. We can't do it anymore.
Inclimate weather takes its toll.
FRED DE SAM LAZARO: Besides depressed grain prices, weather has hurt Boll severely. Unlike the searing heat and drought elsewhere, this region has suffered five straight years of wet spring weather, including the record 1997 floods that devastated the city of Grand Forks.
LUCIAN BOLL: All the rain you can see drowned out spots. Here, we got too much rain where the crop just died.
FRED DE SAM LAZARO: So this at one time was really water logged.
LUCIAN BOLL: Right.
FRED DE SAM LAZARO: Even though it looks dry now.
LUCIAN BOLL: This at one time was underwater.
FRED DE SAM LAZARO: Not only has the high soil moisture drowned crops, it's also spawned a widespread fungus called wheat scab.
LUCIAN BOLL: You can see here, there's—you feel that out—there's nothing in there. And here's a corn right here that made a kernel, but see how light it is? That's absolutely worth nothing.
FRED DE SAM LAZARO: Wheat scab has dropped the yield of fields like this by anywhere from 35 to 50 percent, according to Boll. A related fungal epidemic called vomitoxin has dropped yields from another major crop, barley. The result is a severe toll on the small communities across the region. In North Dakota farm income has dropped 98 percent in the past two years and some 2500 farms gone under. That's almost 10 percent of the total number in a predominantly farming state.
HOWARD PERSON, University of Minnesota: Losing farmers and we're losing county population, and—
FRED DE SAM LAZARO: In neighboring Minnesota, Howard Person sees the same trend. He's a university extension agent who assists farmers in trouble. Person says the decline in the number of farms has accelerated in the past five years.
HOWARD PERSON: When I started in Pennington County in 1985, we had 120 dairy farmers. Today, we have about 35 left. At that same time we had 720 active farmers on the farm program, active farmer list. Today we have just under 500.
The effects of the Freedom to Farm Act.
FRED DE SAM LAZARO: Traditionally, in times of rough weather and markets, farmers could rely on the government to help. Subsidies provided the difference between themarket price and production costs. But in 1996, Congress phased out those subsidies in a bill called the Freedom to Farm Act. Sung Won Sohn is the chief economist at Norwest Banks.
SUNG WON SOHN, Norwest Banks: The Freedom to Farm Act was designed to wean farmers away from the government. In fact, the government used to tell farmers what to do, what not to do, how much of this and that to plant. And so the farm act was designed to really get farmers to receive signals from the marketplace, instead of the government. But at the same time they decided to provide subsidies to farmers on a fixed basis over a seven-year period. It is gradually scaled down.
FRED DE SAM LAZARO: Being phased out.
SUNG WON SOHN: It is phased out by year 2002.
FRED DE SAM LAZARO: Although that premise of free and open markets was generally well received, Sohn says several factors have made the reality very different from many farmers.
SUNG WON SOHN: When the farm bill was enacted in 1996, everything went right. First of all, the subsidy payment was near the maximum, and it is being gradually scaled down to zero eventually. Also, production here in the US and overseas was very low and meant that prices were very high. Also, economic wealth was very strong in the United States and overseas. So we could sell more and more. Asian economies were booming, and they were buying more of America's food today. We have the opposite situation. We have an economic debacle in Asia, therefore, Asian demand is down. The dollar is too strong, so that they cannot buy very much from us and production around the world is very bountiful. And on top of that in this region we've got this scab.
FRED DE SAM LAZARO: Ken and Connie Mehrkens run a large farm in Pennington County, Minnesota. They say the Freedom to Farm Act removed a critical safety net for them. In many ways the Mehrkens are textbook farmers for a market economy. They've responded to market signals by planting a diversity of crops.
KEN MEHRKENS, Farmer: We raise wheat, barley, sunflowers, canola, corn, soybeans, navy beans, and pinto beans.
FRED DE SAM LAZARO: In theory, with that kind of diversity there should be more hits than misses. Chances are a problem like wheat scab, for instance, will be offset by strong demand in say sunflowers.
CONNIE MEHRKENS, Farmer: September wheat. It's closed today, and it was down 7 and a half. The December contract is down 7 and a quarter.
FRED DE SAM LAZARO: But Connie Mehrkens, who keeps abreast of market prices from her home office, has seen little that promises a profit among their several crops. Without a swift turnaround in the price their grain fetches, the Mehrkens say three generations of farming may soon end in this family, after years of huge losses.
CONNIE MEHRKENS: Between a hundred and two hundred thousand dollars—
FRED DE SAM LAZARO: Every year.
CONNIE MEHRKENS: Every year. Right now, it costs us $1/2 million to put in our crop. That's risking everything.
KEN MEHRKENS: We can probably hold off for two more years. And it's probably, you know, maybe that's being optimistic. You just can't keep on selling for less than you have in it. General Motors doesn't sell cars for less than it costs them to produce them.
FRED DE SAM LAZARO: And you've done it for five years?
KEN MEHRKENS: We've done it for five years.
CONNIE MEHRKENS: And so all the equity that we've built up and his dad built up before us is going down the drain. We're losing it.
Congress looks at the issue.
FRED DE SAM LAZARO: Democrats in Congress have proposed restoring some of those price supports. Republican leaders, however, say the new market-driven farm economy will have as many good years as bad. They've proposed emergency aid, including disaster loans and advances in the subsidies still given farmers. That assistance may be too late for many farmers in the northern plains, who are forced to seek new livelihoods. Donald Taus says it helps if farmers typically have marketable skills, and he's already lined up a new job.
DON TAUS: Actually, I'm going to work for a guy that's putting a production line together in a wood plant, and it's a new line, and he bought some used equipment, and it needs to get put together—put together as a production line, and I guess I've been putting—keeping old equipment put together and going for 40 years, so I figured I could handle it, so that's what I'm going to try to do.
FRED DE SAM LAZARO: For many farmers, however, the job opportunities lie far away from this sparsely populated region and there's widespread fear for the survival of many small communities. And one question yet unanswered is when or whether fewer farmers will lead to higher food prices at the grocery store.