What do we really learn from a crisis?
The 1980's farming bubble taught some hard truths. Did they stick?
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Lesson 3: Be careful. Be thrifty.
“It just comes back to being fiscally conservative,” says Donna Jeschke, who also farms in Mazon and serves on the Illinois Corn Marketing Board. “Maybe we all don’t have to have everything now. None of us is entitled to everything.”
That lesson is not new, and it can be traced back further than the ’80s farm crisis. Many older farmers have parents or grandparents who endured the Depression and tried to impart its lessons to their children.
“My father was born in 1909,” says Ms. Jeschke. “We had a lot of those Depression discussions. The two things he imparted to us were: You have to work hard and be conservative in your spending; and also, you have to be diversified. He felt it was important not to have all your financial eggs in one basket.”
In the ’70s, many farmers forgot those admonitions. Urged on by experts and public officials and encouraged by the soaring price of grain, they got rid of their livestock and concentrated on corn, soybeans, and wheat. Indeed, the secretary of Agriculture urged them to plant fence row to fence row to supply newly opened export markets.
Convinced that demand would continue to boom, farmers boosted production and bid up land prices to unprecedented heights. When demand fell and crop prices plummeted, farmland values fell like a stone. Many farmers ended up owing more than their farms were worth. Twenty years later, the farm was a house.
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Lesson 4: New generations forget.
The recession has largely spared the farm economy. Several years of high crop prices and decades of more cautious borrowing have put most farms on a solid footing. In contrast to the years preceding the ’80s farm crisis, most farmers have low debts. “I think the reason we didn’t get into the same trouble now is that we’ve got people still in business who still remember that,” says Michael Duffy, an economist at Iowa State University in Ames. “It didn’t let us get as much exposed. As a result, we haven’t got hit as hard.”
Nevertheless, farmers haven’t been immune from the economic troubles. Lower demand has meant that the prices for many crops, including corn and soybeans, have sunk far below the record levels of last year. Indeed, the corn that Midwestern farmers are harvesting this fall may have cost them more to grow than it will fetch at the local grain elevator. Livestock and dairy farmers are in much deeper trouble: They’ve been losing money since last year.
“It’s been two generations since we’ve seen anything as difficult as we’re seeing now,” says Shelly Mayer, a dairy farmer in Slinger, Wis., and executive director of the Professional Dairy Producers of Wisconsin. “Our families are struggling.”
Economists don’t expect to see a collapse either in crop prices or land values anytime soon. Still, farmers are increasingly anxious about the financial risk of commodity agriculture. Farms are less diversified than ever and more and more dependent on one or two crops. The cost of land, machinery, fertilizer, and fuel has been rising, and with it the cost of putting in a crop. Profits are higher, but so is the potential for loss.
At the same time, Neil Harl, a retired Iowa state economist with long experience in government and academia, worries that the restraint learned in the ’80s may be disappearing. The high commodity prices of recent years encouraged more aggressive lending and borrowing than he liked.
“I’ve been distressed,” he says. “I was beginning to see in the last five or six or seven years that the lessons learned in the ’80s were not as much remembered as I thought they would be.”
To some who have witnessed both the downturn of a generation ago and the one now unfolding, the most troubling lesson is the seemingly unlimited capacity of humans to forget.
“When you pass a generation or more from those crises,” says Mr. Tubbs. “It almost seems you’re doomed to experience it again.”
As America proceeds through a national economic crunch, the lessons of past struggles might head off more pain. Continue the conversation by connecting on Twitter.