AgDM newsletter article, March 2000

The farm situation: Surviving tough times

Paul LasleyBy Paul Lasley, extension sociologist, 515-294-0937, plasley@iastate.edu

Second in a series of three articles by Lasley, director of the Iowa Farm and Rural Life Poll. This series of articles draws on information received through the poll, conducted since 1982, which asks farmers' views on a variety of rural and agricultural issues. The Iowa Farm and Rural Life Poll is funded by ISU Extension and the Agriculture and Home Economics Experiment Station.

A gain, farming is experiencing significant levels of financial stress. Similar to the situation that existed in the early 1980s, there is not agreement on the seriousness or magnitude of present conditions. While the symptoms of financial distress in today's farm economy mirror many of those observed in the 1980s, the root causes are different.

Table 1. Family living changes in the past 12 months

 
Yes

No

 
percent

percent

Have reduced living expenses by:

   

a. shopping at discount stores/centers

71

29

b. switched to generic drugs

61

39

c. buying more used or second-hand goods such as clothing, furniture, and machinery

52
48

d. avoid name brand products

51

49

Cut back on social activities and entertainment expenses

51

49

Postponed major household purchases)

47

53

Cut back on charitable contributions

45

55

Postponed a major farm purchases)

45

55

You or another family member has taken an off-farm job

37

63

Used savings to meet living expenses

36

64

Changed food shopping or eating habits to save money

35

65

Have experienced a declining standard of living due to financial situation

34

66

Have delayed retirement plans

33

67

Reduced household utility use

32

67

Changed transportation patterns to save money

30

70

Have explored ways to increase income such as:

   

a. working more over-time, if applicable

28

72

b. started a home based business

12

88

c. expanded farm operation

21

79

Purchased more items on credit than we used to

23

77

Have borrowed money from lender to meet living expenses

22

78

Postponed medical care to save money

21

79

Sold possessions or cashed in insurance

16

84

Have borrowed money from family members

10

90

Let life insurance lapse

8

92

Have sold land or other assets to reduce debt load

7

93

Have not been able to pay property taxes

6

94

Forfeited a land contract or mortgage

1

99

 

Table 2. Farm plans for the next 5 years (1999-2004)

       
 
Yes, definitely

Yes, probably

Not sure

No, probably not

No, definitely

Not applicable

Pay closer attention to marketing decisions

28

49

9

6

3

5

Buy crop insurance

31

32

11

9

10

7

Reduce short-term debt

18

38

11

5

3

25

Reduce long-term debt

18

36

10

6

4

26

Adopt computerized record keeping

7

18

19

22

23

11

Buy a new car or pickup

5

24

22

24

23

2

Expand current livestock operation

2

11

14

26

31

16

Buy additional land

3

11

20

30

33

3

Make a major farm equipment purchase, e.g., tractor or combine

2

11

14

27

40

6

Build additional grain storage

1

9

16

29

39

6

Build a new home or extensively remodel existing home

2

8

13

30

44

3

Projections are that world surpluses will continue to depress market prices, barring any unforeseen crop failures in major grain producing regions. Obviously, a major crop failure could alter the situation, but under most projections, the current problems that grip farming are expected to linger.

Adjustments farmers have made

Data from the Iowa Farm and Rural Life Poll gives us an indication of the adjustments farmers have made and their plans for the next five years. Table 1 shows that the majority of farmers have made significant adjustments in the past 12 months. These data were collected in early 1999 before the farm economy had worsened and commodity prices had plummeted. This survey of 2,513 randomly selected lowa farmers shows that many have made substantial adjustments in their spending patterns.

Reducing family living expenses by shopping at discounts stores, switching to generic drugs, and buying more used or second-hand goods such as clothing, machinery, or furniture were frequently cited responses. Approximately one-half reported they had cut back on social activities and entertainment expenses, as well as postponed household purchases, cut back on charitable contributions, and postponed a major farm purchase.

Almost four in ten reported that a family member had taken an off-farm job in the past 12 months, and about the same proportion reported they have used savings to meet living expenses. One-third reported they have experienced a declining standard of living in the past 12 months.

Plans for the next five years

When asked about their plans for the next five years, it is evident that producers are in a maintenance mode and most are not planning major expenditures. While the majority indicated plans to pay close attention to marketing and reducing debt loads, there are ominous signs in these data for local merchants.

Plans will affect local merchants--Only about one-third felt it likely they would buy a new car or pickup in the next 5 years, compared to 13 percent that indicated they would make a major farm equipment purchase, or the 10 percent that plan to build or remodel their home. These data suggest that local merchants will be adversely influenced as farmers adjust their spending patterns to survive the tough times in farming. It is important to remember that within the farm community there are wide discrepancies among producers and some local merchants report strong sales.

 

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