From GENE LOGSDON
The general queasiness among farmers right now over low grain prices and whether we are headed into another big dip in land values reminds me of a story. Herb Walton, long gone now, was a local farmer I much admired years ago. He was truly an original thinker. After World War II, the equipment manufacturers weren’t making bigger tractors fast enough to suit him, so he bought a couple of army tanks to pull bigger machinery he had coggled together himself. He saw big surpluses coming in grain production and put out fairly large fields of cabbage for awhile, something unheard of in our county. I got to know him personally when organic and natural farming methods were first being bandied about in our neck of the woods. Unlike most of our farmers, he was right there at those first meetings, wanting to hear all about it. He told me something once— this was in the late 1950s— that I have never forgotten. He had bought another farm to add to his holdings, farmed it according to all the latest approved methods for ten years, and then sold it. “This is the truth, now, Gene,” he said. “I made money buying and selling that farm, but as for all the money I made farming it those ten years, I might just as well have left it lay there idle.”
I think maybe that’s true of farming in general. High farm prices and competition for other uses drive up land costs. Farmers borrow money recklessly to get into the good times game. Then surpluses cause prices to fall. The big borrowers become the big losers. Those who operate mostly in the black with inheritance help can then buy the land during recessionary dips, using mostly saved money, and become the big winners. Over and over again.
The Wise Men of economics say that this time around, there won’t be as many big losers as back in the 1980s because farmers are not as deeply in debt. I wonder exceedingly about that. They may not be as deeply in debt from land purchases but renting is a form of borrowing. In this case farmers unable to buy land were renting big time, driving up rental rates. Now they are in trouble.
A look at the statistics shows just how big rental farming has become. In Pennsylvania, for example, 85% of the land is owned by non-farmers. In Iowa, the latest figures I have, from 2007, indicate that 60% of the farmland is owned by people who are not farming. Some 20% of Iowa’s farm owners do not even live in the state. It is safe to say that most of the farmland in America is being farmed by renters. This is precisely what immigrants from Europe were fleeing when they risked their lives to come to America.
In some cases renters and landlords this time around are trying to work out flexible lease agreements where rental rates rise and fall along with crop prices. But landlords have seen their taxes double in the last few years, and they are not all so agreeable, especially when there are still high rollers around who are willing to pay the high rents, figuring they can hang on until crop prices are good again. So what is happening once more is that smaller operations are being squeezed out, just like always. In its recent Oct. 1 issue, Farm and Dairy, a weekly newspaper, quotes a retired farmer who rents out farmland in three states and who is unwilling to lower rents because “he’s concerned that the savings [to the renter] would only help the equipment and seed companies. When farmers are making more money, the ag companies ‘charge accordingly,’ he said. ‘I think the ag companies step right in and take it’.”
I doubt that assessment is fair although I am tempted to believe it myself sometimes. Everybody involved takes advantage of high farm prices and everybody suffers when the good times fade away. Equipment dealers right now are hurting as much or more than farmers. They have been selling pieces of equipment that cost as much as a whole farm did back in the eighties and the farmers who borrowed to buy that machinery are in just as shaky a situation as the farmers who borrowed to buy land in the eighties. So nobody’s buying. The only bright spot is the market for horse-drawn machinery. What’s that tell you?
After watching farm profits rise and fall for so many years now, I become more and more convinced that farming is not really a business in the capitalistic sense. Corn grows at its own sweet pace. It can’t hear the relentless tom-tom drumbeat of compound money interest. Humans don’t own the land. Nature does.