Despite income plunge, most farmers plan to stay put

In farming, the nation's No. 1 industry in workers, there are, for the most part, no company managers to decide whether and when to lay off the employees. Most farmers must decide for themselves if it is worthwhile to stay in business.

Experts in agricultural economics now predict that the average farmer's 1980 net income will be down sharply, by 25 to 35 percent. Yet so far most farmers, aware that lean and good years in their business tend to be cyclical, appear to be holding firm with their first choice in employment.

In some regions of the Midwestern farm belt there have been an unusually high number of land sales. But indications to date are that the 1.5 percent annual decline in the number of farms nationally remains steady.

Most farmers, economically hard pressed by hikes in production costs expected to reach 11 percent by the end of the year, have chosen instead to cut back dramatically on all but the most necessary purchases. In some areas farmers have economized on fuel by making fewer trips across the field.

"Some marginal farmers will bite the dust, but in general farmers are a hopeful lot," insists John K. Hosemann, senior economist with the American Farm Bureau federation. "Many are playing it very tight on equipment and buy only the essentials."

Some farmers are going out of business," observers Terry L. Francl, an agricultural economist and vice-president of Chicago's Continental Illinois National Bank Trust Company. "But they'll usually stay in until they use some of the equity they've built up or until they're absolutely convinced that the farm isn't ever going to be profitable as an ongoing entity."

Washington's credit crunch, now eased, came at a particularly hard time for many farmers who needed cash for heavy spring planting expenses. Some borrowed as much against their land as they could. Total farm debt has doubled just in the last five years, and there has been a sharp drop in loan repayments.

During much of the 1970s the world market for United States agricultural products was strong, with prices accordingly high. The industry has been diverse enough so that income losses in one areas have generally been offset by gains in another. This year, although the average livestock farmer (particularly the hog producer) has been hit the hardest by the income drop, the losses have ranged across most of the farm product spectrum. Only in a few areas such as dairy products and cotton has farmer income gone up.

The reason for the wide-ranging income drop this year, according to the US Department of Agriculture's chief economist, Howard W. Hjort, is a rare combination of events that led to record supplies in both livestock and grain at the same time. In large part encouraged by strong market prices for pork, poultry, and beef in early 1979, livestock farmers stepped up production in hopes of cashing in on more of a good thing. The increased supplies, coupled with a relatively mild winter, which kept losses down, pushed prices down.

The past year has also been an exceptional one for production of every major crop from wheat to sorghum. That fact, combined with the spring surge in interest rates and the continued effect of inflation on production costs, has weighed heavily on prices, according to Mr. Hjort.

Many grain farmers continue to point to the Carter administration's continued embargo on grain sales to the Soviet Union as the root of their income problems. But Mr. Hjort insists that the embargo as a factor is "more psychological than real," since exports and domestic use of American agricultural products is up. Though the embargo remains as popular with most farmers as "a skunk at a garden party," as the Des Moines Register puts it, the Carter administration as yet shows no inclination to lift it.

The experts say that farmer income the rest of this year and next will depend in large part on weather and the degree to which farmers decide to cut back market supplies of their products. If a number of farmers, for instance, decide to stash a portion of their crops in the farmer-owned grain reserve until prices improve, the immediate effect on farm prices could be large.

"The reserve is a powerful tool and terribly important," Mr. Hjort insists. "The $64 question is how much use farmers will make of it."

Many livestock producers have already decided to cut production next year, hoping to achieve a better balance of supply and demand.

Some argue, however, that only much more help from Washington can save the day. Many farm groups and state agriculture departments have been pressing the Carter administration and Congress to step up loan rates on farm commodities and to make early announcement on an acreage set-aside program for next year. Though the changes are not programmed into plans for a balanced budget, the fact that this is an election year could make the difference in getting that extra help.