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Farmers Reap Bumper Crop--of Subsidies

October 12, 1987|LARRY GREEN | Times Staff Writer

COLCHESTER, Ill. — Through chilly autumn days and into the frosty nights, Midwestern farmers are piloting combines across dusty fields, racing to complete the annual harvest of grain and beans--and a bumper crop of government subsidies.

This year's harvest payoff, more than ever before, will come from the federal Treasury rather than from bountiful crops. In fact, about half of what farmers earn will come not from their fields but from federal programs.

$23-Billion Cost

Direct government payments to farmers in 1987 are estimated at about $15 billion, roughly 20% greater than in 1986. The farm economy will benefit from another $8 billion in other federal expenditures, bringing the government's agricultural costs this year to at least $23 billion.

This year, Agriculture Department economists estimate farmers will earn between $41 billion and $45 billion, about one-third of that coming directly from the government and perhaps as much as a sixth the result of other government spending.

Meanwhile, Congress is wrestling with whether to invest another $6 billion to save the country's primary farm lender, the Farm Credit System, which is teetering on the brink of failure. The big banking bailout, if approved, would represent an indirect subsidy to the agricultural sector.

"I don't think there's been any time in history that you could find farmers more dependent on the government for their income than under the current situation," says agricultural economist Abner W. Womack.

"We're seeing record high levels of nominal net cash income and net farm income simply because of the large government payments," says James T. Ryan, a Department of Agriculture economist.

The harvest of subsidies is a major reason for a moderation in the battered agricultural economy where depressed economic conditions have caused widespread social and financial dislocation for most of this decade.

"If I didn't have government programs this year I wouldn't be farming next year," says Richard P. Myers, 39, who works 740 acres here in west-central Illinois, in the heart of America's Corn Belt.

Other Countries Subsidize

"Right now, without the government, we'd have a lot of farmers broke," says Myers' neighbor, Dean Chenoweth, 52, who farms about 1,100 acres near Macomb and who serves on the local farm credit board. "We're not happy about taking government payments at all. But the reality of it is . . . governments all over the world are subsidizing farmers."

Despite the improvement in the farm economy, some analysts describe their mood as "cautiously optimistic." Economists warn that though the prolonged period of financial stress may have leveled off for the moment, the shakeout, which has already forced tens of thousands of debt-burdened farmers to leave the land and lenders to absorb billions in uncollectible agricultural loans, could continue into the early 1990s.

One reason for this is that the 1985 federal farm legislation which paved the way for this year's windfall of subsidies also calls for a gradual weaning of farmers and agriculture from government aid. Instead, a free market would evolve where farm commodity prices are determined by supply and demand--a goal that has proved elusive in the past.

But if subsidies drop, and the marketplace rather than the government sets crop prices, one major economic forecast projects that net farm income in the 1990s will drop by half from this year's projected level.

"Free market agriculture (agriculture without government influence on prices) looks like $20-billion to $25-billion agriculture annually . . . and yes, it will carry more people out of production," says Womack, an economist at the University of Missouri and the authoritative Food and Agricultural Policy Research Institute. Many economists believe that level of farm income cannot support all of the hundreds of thousands of full-time commercial farmers who are among the nation's 2.17 million farmers.

"The ones who will be left will be fairly strong farmers," says Womack.

'Tired of Struggle'

"I think the shakeout is going to continue," says Gary Lucier, a Department of Agriculture economist who sees a more gradual fall in net farm income over the next five years. "The thing I do see changing is (the reason) people go out of farming--less for bankruptcy and more for being just tired of the struggle . . . of trying to make it."

Whatever the struggle ahead, this year farmers are benefiting from a cornucopia of federal programs.

"Economically speaking it's the best bargain in town," says James K. Trotter, 45, who gave up a job as a schoolteacher to farm 480 acres in Adair, in west-central Illinois.

Collectively, farm subsidies are helping to shore up finances of those burdened by debt and providing money to those without debt to expand their farming operations, often by buying the assets of their failing or retiring neighbors.

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