Transcript The Farm Crisis in 1999: Old Wine in New Bottles

From Boom to Bust to Boom to ??
Paul Lasley
Iowa State University
Causes of the farm crises
Flawed government policy
 World expansion of grain
 Overly optimistic projections
 Favorable global weather
 Food self sufficient
 Increased global competition

Need to make the distinction between
“Farm Crisis” and “Long-term Chronic
Problem”

This is a restructuring process
 Broader than farming
 Painful—Difficult
 Transitions are hard
Community Impacts of
Economic Hardship in Farming

Economic
What does it mean for the financial
well-being of the community?

Social
What does it mean for the social fabric
of the community?
1. Cut back on living expenses
a. Eat out less, reduce entertainment
expenses, reduce discretionary spending
b. Postpone buying things (belt-tightening)
c. Cut back on other types of discretionary
spending such as pledge or tithes
2. Earn more money, attempt to generate
more income
a.
b.
c.
d.
e.
Work more hours, over-time hours
Take on more land, get bigger
Take a second job
Spouse and children have jobs
Engage in illegal activities (rob bank, peddle or
manufacture drugs, raise marijuana, bootleg, etc.)
f. Gamble—”just one big hit,” slots, races, cards,
lottery, etc.
3. Dip into savings
a. Use emergency reserves
b. Use funds set aside for children’s
college fund
c. Retirement funds or inheritance
4. Borrow and use credit
a. Second mortgages
b. Use of credit cards
c. Borrow against cash values of life
insurance
5. Withdraw from social activities
a. Can’t afford to participate
 fees, dues, or admission
 can’t afford clothes that look nice
b. Shame prevents one from participating
Social or Community Impacts
Fewer farms translates to fewer farm families
 consolidation of rural organizations and
institutions, e.g., schools and churches
 revenue declines among businesses that
serve the needs of farm families
 Multiple job holding
 more part-time farming
 less time for community activities

Number of Iowa Farms
250
Thousands
211
208
206
190
200
154
150
124
115
97
100
91
50
0
1920
1930
1940
1954
1964
1974
1982
1992
Agricultural Census Data
Percent Farm Population, 1940–1990
50
40
30
Percent
36
30
25
20
24
20
18
14
13
10
10
9
5
2
0
1940
1950
1960
U.S.
1970
Iowa
1980
1990
Perceptions of Stress
Over last 5 years
Personal level of stress
Concern about stress
On a day-to-day basis
Among neighbors
Within own family
% Increase
57
45
44
81
53
Adjustments in Family Living
Shopping at discount stores
Switched to generic drugs
Buying more used merchandise
Avoiding name brands
Cut back social activities
% Yes
71
61
52
51
51
Adjustments in Family Living
(continued)
Postponed household purchase
Cut back charitable contributions
Family member taken off-farm job
Used savings to meet expenses
% Yes
47
45
37
36
Adjustments in Family Living
(continued)
Delayed retirement
Working more over-time
Started home-based business
Expanded farm
Using more credit
Postponed medical care
% Yes
33
28
12
21
23
21
Is the current problem a
commodity price problem
or a farm income problem?
Making the Distinction Between
Personal Problems and Social Problems
When one farmer has financial problems, we
can conclude that this is a personal problem.
When an entire group or class of individuals
have financial problems, we should conclude
that this is a social problem.
Witness the loss of 5 million farms since
1920 (6.8 million in 1920 to 1.9 million in
1997). Rather than recognize the failure of
5 million farms as a social problem, policies
were based upon the belief that this was a
personal problem and sought ways to
improve individual farm management skills.
Rather than recognize and address the deficiencies
in the structure, conduct, and performance of the
farm economy, agricultural economists adopted an
orientation that focused on individuals rather than
group behavior (psychological approach).
The prescription for the farm ills during the
past 70 years was to emphasize individual
adoption of new technology with little or no
regard to implications for farmers as a group.
Those who failed to accept this prescription
were labeled as social deviants
Laggards
 Luddites
 Romantics
 Radicals
 Consumerism
 Tree-huggers
 Environmental wackos

Rather than emphasize what farmers as a
group might do to raise prices and improve
their collective situations, historic (traditional)
policies pushed individualistic approaches.
And even worse, any attempt to address
farm problems through group or
collective action were labeled socialistic.
It is rather ironic that group action that resulted
in clearing land of trees, draining swamps,
erecting barns, organizing rural schools, and
other group action were generally not defined
as socialism, but when farmers sought to
organize themselves to achieve a better price,
they were generally labeled as socialistic.
Production Costs
Attempts to Decrease
Sustainable Farming
IPM, ICM, BMP
Commodity Prices
Attempts to Increase
Futures, Hedges, Options
Cooperative Action
During low prices—farm crisis:
It is not possible to squeeze the cost of
production enough to generate a profit
With the glut of commodities, it is not
possible for an individual or group to
significantly raise commodity prices
through traditional strategies…
Historically, farm policy has dealt with commodity
prices rather than farm income. Based upon some
assumptions about the relationships between
commodity prices and farm income.
Given the ineffectiveness of the commodity
price focus over the past 70 years, maybe it is
time to shift focus to farm income.
Maybe focus should be on developing a new
food system rather than trying to preserve an
obsolete and antiquated commodity system.
Characteristics of the Old Commodity System
Production of homogenous bulk commodities
 Standardized production systems
 Focus on volume, scale, size, and efficiency
 Large scale production, transportation and
processing
 Impersonal and indifferent to individual needs
and niches
 Food viewed as fuel

Sharp distinction between producers and
consumers
 Product was produced and then sold through
some market structure that may or may not be
regulated and fair to all parties
 Buyers and sellers are adversaries—each
looking out for their best interests
 Focus was on individual whether it be a person,
farm, or firm

Emerging Characteristics of a Food System
Designer commodities, crops grown for specific
end uses
 Explosion of new crops and products resulting
from biotechnology
 Emphasis on batches, small niches
 Focus on food safety and quality
 Food shopping and eating as a social experience

Linkages between producers and consumers
 Crops grown under contract to meet
expectations of buyer
 Product is specified, terms negotiated, produce
is grown, and then delivered
 Buyers and sellers are partners
 Focus on group, network, coalition

Why are transitions hard?

Social and economic change are not neutral
processes
 They produce gains for some and losses for
others
 How to cope with losses
Loss
Decline in financial security
 Loss of status
 Stigma/Labeling
 Separation/Identity
 Feelings of unfairness
 Guilt—self-blame
 Feeling of inadequacy

What can social workers, mental health
counselors, and other “caring” individuals do
to “soften” the sense of loss, hurt and grief?
Presence is critical—not alone
 Offering hope—there will be another day
 Keeping losses in perspective
 Balance is important

What Services Are Needed?
Short Run
1. Income assistance
a. Job placement
b.Transfer payments
c. Insurance—especially medical care
2. Family budgeting/financial management
3. Develop responsive networks
a. Need to be able to identify those in greatest
need (targeting)
b. Remove or reduce stigma associated with
asking for help
c. Need to guard against callousness
d. Need to become “proactive,” shouldn’t just
wait on clients to “appear”
e. Need to develop expertise in directing
clients to resources
f. Referral networks are key
Longer Run
1. Return to community development focus
2. Social capital (building caring
communities)
3. Strengthening the art of neighboring
4. Place focus on people, not production
5. Emphasize the values of cooperation and
community rather than competition and
individual
6. Need to broaden understanding of how
global conditions impact local situations—
policy perspective