Dl6-Uncaster Farming Saturday, May 11,1985
WASHINGTON - The Farm
Credit Council today revealed
figures compiled by a group of
university economists which in
dicate that under an optimistic
scenario, as much as 7 percent, or
$52.5 billion, of the agricultural
assets in the country may have to
be sold by U.S. farmers because of
financial stress.
Even by liquidating this amount
of farm assets, a Council
representative said, over 2 percent
of the nation’s total farm debt, or
almost $4.4 billion, may have to be
written off.
According to the Council, in the
next three years the number of
farms on the market will be three
to five times the norm.
As a measure to prevent a
swamping of the farmland market,
the Council suggested creation of
an Agricultural Conservation
Corporation (ACC). Such a
limited-life, federally chartered
corporation would be able to
purchase farm assets of distressed
farmers and their lenders.
These statements were con
tained in testimony the Council
presented at a hearing on the 1985
Farm Bill before the Senate
Agriculture Committee.
Speaking for the Council were
Melvin Todd Jr., a farmer from
Union, Neb., and a member of the
board of directors of The Farm
Credit Council, along with Gene
Swackhamer, president of the
Baltimore District Farm Credit
Council and chief executive officer
of the Farm Credit Banks of
Baltimore.
Todd said that according to the
recent projection of the
deteriorating farm economy, if
conditions worsen so that farm
income declines, asset values fall
to 65 percent of their current value
and interest rates hover at 10
percent, then as much as 17 per
cent of all farm assets might have
to be sold in order to make
payment on the current farm debt.
Todd told the Senators that the
Council, a federated trade
association representing the
nationwide network of Farm
Credit banks and associations, was
prompted to commission a studyof
certain economic conditions af
fecting agriculture as a result of
similar results of a recent USDA
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U.S. farmers may lose 7% of assets, council says
study and a survey completed in
January by Farm Journal
magazine.
Todd said, “The Farm Journal
survey found that close to 30
percent of the farm operators have
debt-to-asset ratios greater than 40
percent. But of particular note, is
that these financially stressed
individuals owed close to two
thirds of the agricultural debt and
held about one-quarter of all farm
assets.”
Todd said that because of the
importance of the information
released in both reports, The Farm
Credit Council helped support a
further analysis of the information
by the Food and Agricultural
Policy Research Institute, com
posed of economists from the
University of Missouri and lowa
State University.
“We asked the institute
economists to project what might
happen to the financial condition of
farmers between 1985 and 1986
under various rates of return and
For
with various levels of asset
values,” Todd said.
He said the economists were
asked what would be the impact on
the economy as a whole if as much
as 4 percent of the agricultural
debt were written off.
The economists responded that a
4 percent loss on all farm debt
would result in an estimated loss of
$7.3 billion in personal income,
$21.7 billion in lost output and a loss
of more than 500,000 jobs nation
wide.
Under the proposal, ACC capital
would be owned by users of the
corporation, including farmers,
commercial banks, Farm Credit
institutions, USDA, insurance
companies, contract sellers and
others.
The corporation would be a
willing buyer of farmland during
the first five years of its life. Land
would have to be sold in an orderly
way prior to the end of the cor
poration’s 10-year life.
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Agricultural Conservation Cor
poration proposal, Todd said, “The
first and foremost beneficiaries of
the plan would be farmers.”
The farmer who sells assets to
ACC would have first right to lease
the property back, he would be
protected against the sale of his
property by the ACC for three
years, and he also would have first
refusal if the property were put up
for sale. The ACC can provide an
alternative to liquidation m many
instances, Todd said.
“Most of all,” Todd said,
“farmers would avoid paying,
thro""'’interest rate-’ their
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lenders’ costs of holding land in
inventory.”
Assuming that farm assets
would stay at their present level
for the life of ACC, the plan would
cost an estimated $1.5 billion over
10 years. However, the Council
proposal includes a recapture
feature which would allow the
government to recoup its costs
should land values recover. If
conditions improved so that farm
assets, principally land, rose by 12
percent in the next 10 years, the
program costs would about equal
the returns.
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