The Next Farm Crisis
When you hear the words "farm crisis," what comes to mind?
Today, most of us are so far removed from the farm that we probably wouldn't even know where to begin. Does a farm crisis involve the livestock, the farmers, the food... Us?
The truth is, it's all of the above. Though we may buy our food at a grocery store or even order it online, it all has to come from somewhere. And, as a country that relies on the domestic food supply, booming international export industry, and 21 million American jobs supported by U.S. Agriculture, a farm crisis would have catastrophic repercussions on the entire nation.
Not too long ago, in the 1980s, we did experience a farm crisis. Much like today, farmland prices were flying high and things were going well in rural America. But the market was unsustainable and eventually, the bubble burst. Hard.
In just five short years—from 1981 to 1986—an estimated one-quarter of the assessed valuation of America's farmland disappeared.
And if you think a depression like this doesn't hit rural America as hard as Wall St., think again. Widespread losses led to foreclosure, depression, and worse. Families were ripped apart, forced to move from their homes, unable to make payments and unaware of where to go or what to do.
Over the last three years, production agriculture has been one of the economy's few bright spots while most of the country has been hemorrhaging value which has lead to—among other things—a surge in land prices. And so, we find ourselves in a similar position.
Today, we do have one thing going for us. Hindsight is 20-20. In the past 30 years, Congress has taken steps to ensure America's farmers are never in that position again, recognizing that, as the population continues to grow and the farming community continues to shrink, there's just too much at stake.
But now, with elections approaching and the Administration looking to save face, it has proposed cutting $33 billion from the same farm policies that were put in place to prevent such a crisis.
And it's not as if this is a last resort. Farmers and ranchers have already lost $15 billion in funding in the name of deficit reduction. With another $33 billion chopped, farm programs like crop insurance will be rendered ineffective.
And with strong farm policies like crop insurance, goes the banks' confidence in lending to farmers, and this, puts agriculture at a standstill. Much of rural America runs on credit—not just for land but also for $600,000 combines, seed, fertilizer, and fuel. Without a backstop, one bad storm or a strong wind could put a producer right out of business.
Someone once said, "You can only be scared of the future, if you don't understand your past." Washington needs to take a long hard look at the history books before it considers making the same mistake twice.