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Head of Industry Group Expects Prices to Bottom Out in '85 : Worst May Be Over for U.S. Farmers

January 08, 1985|BRUCE KEPPEL | Times Staff Writer

HONOLULU — The economic recovery continues to elude the nation's farmers but agricultural prices should bottom out this year, Robert B. Delano, president of the American Farm Bureau Federation, said here Monday.

"I'm not sure we've hit bottom yet, but I think we will this year and begin to improve," Delano said in an interview on the eve of the Farm Bureau's 66th annual meeting, which has drawn 8,200 members from 48 states and Puerto Rico.

"Any industry that overexpands (as agriculture did in the 1970s) has to have a shakeout," Delano said. A downturn in agriculture generally lags behind the rest of the economy and so does its recovery, he added.

Inflated land values in the 1970s led many farmers to increase their borrowing as the value of their farms grew while crop prices remained relatively high.

"This is a risky business," Delano said. "Some people took an unusually high risk--and they lost" when the market turned down. But, he emphasized, about one-third of the nation's farmers are not in debt.

The Roosevelt Center for American Policy Studies, a Washington-based study group, estimates that 25% of all commercial farms in the nation have a debt-to-equity ratio of 40%. According to a Federal Reserve estimate, a farmer whose debt level is only half that--20%--is barely breaking even if he is paying off a loan at 11% interest.

Thus, reducing interest rates is crucial to improving the situation of the nation's farmers.

The nation's agricultural lenders are meeting in Washington this week under the umbrella of a newly formed coalition, the Agricultural Banking Institute, to draft recommendations for changing the system of farm credit.

Delano said a constitutional amendment requiring a balanced federal budget would go far toward bringing down interest rates and help farmers significantly. The Farm Bureau is considering renewing its support for such a measure.

Delano, who farms 500 acres in Virginia, blamed the government price-support program for many of the ills besetting farming and ranching.

"An honest assessment of federal farm-program performance over the past 50 years shows an unbroken record of failure in this regard," he told reporters.

The Farm Bureau's 276-member House of Delegates this week will debate the 3.3-million-member organization's proposed overhaul of the 1981 Farm Act, which expires this year. That proposal aims to restore price supports to what Delano called their intended purpose as a "safety net--a floor, not a ceiling," and allow the supports to rise and fall with market prices.

Supported prices for some of the 10 basic commodities covered by the Farm Act are currently above world prices, which has curtailed farm exports at the expense of the nation's farmers.

The Farm Bureau seeks "less government involvement in the lives of farmers and ranchers," Delano said.

That assessment appears to be shared by Agriculture Secretary John R. Block, who last week blamed the program for reducing, rather than increasing, farm income by boosting domestic prices over world prices.

Block also predicted that the $12 billion spent on the farm program last year--up from about $3 billion in 1980--will be cut in half "fairly quickly."

Delano was less sure but acknowledged that a substantial reduction is likely and would increase the volume of sales, lessening the financial impact on farmers who had found it more profitable to turn their crops over to the government than to sell them on a depressed market.

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