Small farms have easier time avoiding large debts. A big part of their success lies in using less hired labor, study says

A 21 year-old truck, a 9 year-old tractor without an air-conditioned cab, and no laborers except himself, his wife, and their children: that's Clifford Gay's way of farming here. ``I try to pay as I go,'' says Mr. Gay, from the cab of his truck.

``We're not as big [as many farms] but we don't have as many debts,'' says his wife, Cathy. She has just walked into the yard from one of their fields, where she and her two oldest boys, Jamie and Jeff, were hoeing by hand parts of their 25-acre plot of watermelons that the tractor can't reach. Altogether, the Gays farm 165 acres. Most of it is inherited; some is rented.

Farmers in Dodge County with the same conservative approach as the Gays are in much less financial hot water today than farmers who were quicker to expand, bought the latest equipment, relied more on hired labor, and are now saddled with critical debts, according to a new three-year study.

Size of the farms is less important than how the farms are run and when they began, says the study's author, Peggy F. Barlett, an economic anthropologist at Emory University in Atlanta. She conducted in-depth interviews with 150 Dodge County farm families -- roughly half of the county's farm families. Of these she found that only 24 percent of family-run farms in operation 10 years or more and using less than 50 percent hired labor were in critical debt. Of larger-scale farms, using more than 50 percent hired labor, 45 percent were in critical debt. She defines critical debt as debts equaling or exceeding 75 percent of the value of the farm's assets.

Many farmers who started less than 10 years ago and began expanding when interest rates were high hit financial stress when crop prices fell, she says.

Bob Jolly, an agricultural economist at Iowa State University, says the Dodge County findings generally appear to hold for farmers nationwide. Newer operators of small farms are in trouble, he says, but longtime operators are doing much better.

While some analysts have predicted the current crisis in farming would force out the smaller, family-run farms, the well-established family farms are generally not as bad off as many larger farms, according to these two analysts.

The trend towards ever-bigger farms may be slowing in the United States, they say. Mr. Jolly says, however, that well-established family farms ``may be survivable, but they may be poor.''

The Gays say they are not able to save much money. Mr. Gay estimates that his farm earns ``at least $10,000'' profit a year, but most of that is plowed back into the farm. The only off-farm income is from an occasional irrigation pond he builds for other farmers.

``You just learn to cut corners,'' says Mrs. Gay. For example, when they needed irrigation equipment, she says, they bought used equipment for about $6,000, instead of $20,000 to $25,000 for new.

``I'd be crazy to tell you we don't want more [land],'' she said. But several years of low crop prices, drought, and high interest rates have made expansion more difficult, says Mr. Gay. And he says he does not like incurring big debts.

They both say they love their life. ``I wouldn't take nothing for farming,'' says Mrs. Gay. ``The main thing is being able to be independent,'' her husband adds. They usually get up before dawn and work till dark, he says.

But for others, economic strains have taken the joy out of farming.

Albert and Della Lampkin, one of the small number of black families still farming in Dodge County, are among those who find the going rough. Near retirement age, the Lampkins used to farm about 700 acres, but cut back because they were not making money.

``I don't enjoy it [farming] now. I'm worried. I don't have much coming in,'' said Mr. Lampkin recently as he stood in front of his modern brick home, near the small wooden home where he was born. He suggests a one-time federal grant to farmers based on need.

And Glyen Hickman, who farms about 2,000 acres in Dodge County, is also worried and has lost his enthusiasm for farming. ``I wish I'd cut back seven years ago,'' he says. ``The bigger you are, the more you lose.''

He began farming in 1958, but expanded just before the big crunch began in the late '70s. ``Somebody misled us along the way,'' he says of the encouragement he received from bankers and others to expand. Now he has high debts and is falling farther behind.

Small-scale family farms that have been slow to expand and have relied less on hired hands are in better shape to survive hard times, says Ms. Barlett. Larger-scale operations are stuck with more loan payments on land and equipment and often have more hired hands to pay, she says.

``Farmers should stick to the traditional, common sense they learned from their parents: Don't spend it until you have it,'' Barlett says.

That does not mean farmers should never borrow, she says. But when they do, they should have an emergency plan in case they can't make the payments. Such a plan could include an off-farm job, or switching to another, higher-paying crop, or double cropping (planting for two consecutive crops a year in the same field), she says. -- 30 --

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