Farm Finance

Report Outline
Spring Credit Crunch
Effects of Farm Bill
Reshaping Agriculture
Special Focus

Spring Credit Crunch

Planting Time Yields Stress, Foreclosures

Oklahoma wheat farmer Ron Voth mocks the bankers, bureaucrats and politicians presiding over the worst farm credit crunch since the Depression: “The people in high-backed swivel chairs call it a necessary time of adjustment for over-investment.” Voth, president of the Oklahoma Wheat Growers Association, calls it a disaster. As spring planting advances northward across the nation's agricultural heartland, he and many other farmers expect a bitter harvest of failure and foreclosures.

Agricultural economists predict that 5 to 10 percent of the Midwestern farmers won't get the credit necessary to seed a new crop. The Farmers Home Administration (FmHA), lender to those rejected elsewhere, sent out 65,000 delinquency notices in February, marking the end of a two-year, court-imposed moratorium on efforts to seize property from farmers in arrears. Also in jeopardy are 125,000 other farmers indebted to commercial banks, production credit associations and land banks, according to the American Farm Bureau Federation. “Six months ago I was convinced we were bottoming out on this [credit crisis],” said Steve Tomac, a farmer and executive director of the North Dakota Wheat Growers Association. “After talking with lenders, I'm convinced we've got two or three years of hard times yet.”

The financial stress felt by farmers has begun to take a toll on farm lenders. Total farm debt at the end of 1985 topped $198 billion, roughly equal to the entire foreign debt of Mexico and Brazil combined. Farmers' ability to cope with that debt has been hampered by mountains of price-depressing surplus crops, falling exports and shrinking farm land values. Bad debts climbed sharply last year, threatening the stability of many lenders.