Amid strong farm economy, some dire signs

DES MOINES, Iowa – At a time of record agricultural profits, concerns are mounting that American farmers could be edging toward a financial crisis not seen since the 1980s farm-economy collapse.

Soaring land values, increasing debt and a reliance on government subsidies for ethanol production have prompted economists to warn that what some describe as a golden age of agriculture could come to a sudden end. At risk are the livelihoods of thousands of farmers, the health of hundreds of banks and the vitality of an agricultural industry that has been one of the nation’s few economic bright spots in recent months.


“We’re in a very risky time, and yet we don’t seem concerned about that risk nearly as much as we should be,” said Barry L. Flinchbaugh, an agricultural economist at Kansas State University.

The potential problem, economists said, is that strong demand for corn and other grains has caused prices to reach historic highs. That has led to record farmland values and steadily increasing debt as farmers borrow money to buy more land, finance the higher costs of fertilizer and seed and upgrade their equipment.

As long as the demand remains, good times for farmers should continue. But if demand falls, they could find themselves in a situation reminiscent of the early 1980s when the farm economy largely crumbled.

Among factors that could affect demand would be a change in the federal government’s policy on ethanol subsidies, now estimated at about $6 billion a year, revisions in the farm bill that would lower support payments or an increase in the dollar’s value, which would hurt exports.

Farm economists question whether the federal backing for ethanol will continue in the face of complaints that soaring corn prices are increasing food costs. Corn is used in most animal feed and is a key ingredient in myriad other products.

MSNBC