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Farm sector is expected to rebound, over the long term

By Staff writer of The Christian Science Monitor / February 15, 1985

Oak Brook, Ill.

`Do you think that the taxpayers are going to pay farmers both very high prices for their product and pay them generous prices for setting aside acres? I think not.' The troubled farmers have traveled to suburban Chicago and plunked down $175 apiece to hear financial experts talk of farms saved and investment opportunities.

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``I hear so much doom and gloom,'' says one speaker, ``I'm almost beginning to believe it. But inside, I'm jumping up and down.'' He and other experts here are excited about the long-run opportunities in farming.

At the encouraging words, Illinois farm wife Iris Hawn looks at her husband, Donald, who just shakes his head. ``One day you're a millionaire and the next day you're broke,'' he says later. His 2,000-acre corn and soybean farm in western Illinois is in financial trouble, he says.

These are the black-and-white pictures of United States agriculture today. Looking beyond the worst farm crisis since the 1930s, many economists see a fairly bright future for the industry. But for an increasing number of farmers, just surviving the transition will be a trick.

``If things don't change, I aim to be farming,'' Mr. Hawn says. ``But it may be quite a change.'' So far, his bank has not lent him the money to plant this spring.

It now appears that a gloom is settling over agricultural America. The foreclosures are multiplying. Some banks are getting tougher. For some, solutions seem very far away.

Answers exist, thoughtful observers say, which will require careful thinking on the part of policymakers and farmers and which won't always be pleasant. Answers came, says one Iowa farmer, who eventually was forced to quit farming, ``but probably not what I wanted'' to hear.

In Washington, the current crisis has brought various proposals into focus.

One is the market-oriented plan of Agriculture Secretary John R. Block. He proposes to lower support prices and phase out over time the deficiency payments that supplement farmers' income.

With federal budget concerns the overriding factor this year in Congress, sources say, there is considerable appeal in such a solution. The cuts would trim commodity program costs, projected at $12 billion to $14 billion a year under current policies. And they would begin to pull US prices back into line with the world market. Many agriculture-related industries, still smarting from sales lost because of the 1983 payment-in-kind program, support this tack.

At the other end of the spectrum are various plans, such as the one proposed by the Nebraska Wheat Growers Association, that would raise support prices through mandatory production controls.

This thrust seems to be gaining popularity among grain farmers, particularly, who are stuck with burdensome supplies.

``I'd much rather grow a third less and get a third more,'' says Doug Wildin, of Hutchinson, Kan. ``We've got to cooperate with the other [world] producers and get off the stupidity of competition.''

Which choice will Congress make? Probably neither, many Capitol Hill observers say. Both extremes have drawbacks.

The short-term implications of the administration's proposal could devastate the sector, says Dr. John Marten, staff economist of the widely read Farm Journal.

``At that point, we're talking dominoes,'' he says. Commodity prices would fall, depressed land prices would slide another 30 percent, and a new batch of moderately indebted farmers would be dragged into serious trouble.

The long-term implications of mandatory supply controls are also negative, says Marvin Duncan, vice-president and economist at the Federal Reserve Bank of Kansas City.

Foreign competition would slice into US exports, he says. More and more American farmland would have to be idled to keep domestic prices up, and, eventually, import barriers might be needed. The cost burden would be shifted off of taxpayers and onto consumers, who last year spent a low 15.2 percent of their disposable income on food, according to the US Department of Agriculture.

``Do you think that the taxpayers are going to pay farmers both very high prices for their product and pay them generous prices for setting aside acres?'' he asks. ``I think not.''