Unloosening the US farmer's financial knot

The Illinois State Fair this week is showing off the best side of US agriculture -- appropriately enough for the state that leads the country in farm exports and devotes 81 percent of its land area to farming.

But, alongside the prize steers and ranks of $100,000 tractors, farmers here are trading worries, and politicians are listening.

To help ease the farmers' plight, Illinois Gov. James R. Thompson (R) signed new legislation at the fair to reduce their tax burden. He explained that "this new formula is an important step forward in assessing farmers on the basis of income rather than on the rapidly rising market value of land."

The governor told the Monitor that such measures are necessary because "farmers are suffering from what the nation is suffering from, high interest rates on top of high inflation."

Mr. Thompson and a number of farmers interviewed at the fair added that they feel the Reagan administration is doing a good job in easing economic pressures on farming.

The governor, his state director of agriculture, Larry A. Werries, and farmers here all said the best answer to the farm economic problem is the one US Secretary of Agriculture John Block offers: boosting US farm exports to the Soviets, the Japanese, and other markets abroad.

David Hendrickson, who raises grain and hogs on 265 acres in Rochester, Ill., said one problem is that "we are the best food producers in the world, but we haven't done too well being salesmen." He expects the sales performance to improve under Secretary Block, a fellow Illinois grain and hog farmer.

Governor Thompson, agriculture director Werries, and Mr. Hendrickson all agreed there's added pressure to increase exports following the US Department of Agriculture's new crop estimates, released Aug. 12. The USDA has raised its estimates sharply since last month and now foresees a 7.7 billion-bushel corn crop, the second largest ever. Added to a record wheat harvest and a second-largest soy bean harvest ever, the figures mean that farmers must find new markets -- or face selling their grain at prices below today's already depressed levels.

Exports are getting particular attention, also, because last year's $40.5 billion earned from farm exports offset half the US bill for its imported oil.

This new worry about how to sell this year's expected bumper crops comes at a difficult time.

Net farm income dropped sharply in 1980, down to $23 billion after hitting $ 31 billion in 1979. That drop coincided with sharply rising producton costs since seed, feed, fertilizer, and labor costs all shot up because of inflation, high interest rates, and rising oil prices. The result: Total farm debt outstanding hit $176.9 billion at the start of 1981, up 12.3 percent in a year.

This new peak in farm debt comes after nine consecutive years in which farm borrowings have increased by more than 10 percent.

Many farmers could simply sit back and survive a few more hard years. A good number are doing just that, cutting their cattle herds and holding their grain off the market. This way they can avoid selling cattle or grain for less than their production costs.

More generally, however, farmers are not sitting back. They are concerned that the debt burden strangling the farm sector risks serious damage to the US economy as a whole, at a time when the economy needs extra boosters, not drags. Their answer is to do all they can to increase sales of farm products at home and abroad.

With economic pressures mounting for farmers, the most surprising fact may be that they aren't rushing to join the militant American Agriculture Movement or tractorcading Congress once again.

The explanation offered both in the farm belt and in Washington for farmers' relative calm in the face of severe problems comes in one word: Block.

The secretary of agriculture makes it very clear where he stands. Last week in St. Louis he told farmers that he has taken his views on the farmers's economic problems direct to President Reagan.

Speaking as a farmer himself as well as a member of the Reagan Cabinet, Mr. Block went on to say: "Net farm income fell about 30 percent in 1980, to the lowest level since 1977. If you adjust it for inflation, it was the lowest since the 1930s. And, frankly, it won't get much better until we can get a handle on inflation and interest rates. A 1 percent increase in interest translates into a decline in farm income of about 10 percent, and we can't take much more of that."

Ordinarily, skeptical farmers might reject a Washington bureaucraft's call for sacrifices to win the battle against inflation and high interest rates. But this time the call comes from one of their own. Block proved his farm-300-acre farm into the 3,000 acre operation he continues to run today.

His greatest claim to farm-state support today, however, rests on his success in getting President Reagan to end the Soviet grain embargo in the face of Secretary of State Alexander M. Haig Jr.'s staunch defense of it.

Block's ability to help farmers depends on what emerges in late September when the Senate and House hammer out a new four-year farm bill. But if Block and major farm groups have their way, new streamlined, market-oriented farm programs will turn the farm-in-come picture around and reward farmers for supporting the Reagan administration through difficult economic times.

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