AlB-Lancastar Farming, Saturday, December 13,1986
Farm Credit
(Continued from Page A3O)
David Kohl, professor ag
economics, Virginia Polytech,
outlined some of the statistics that
have contributed to the farm
economic problems. In 1960 we had
$2lO billion worth of assets in
United States agriculture. By the
inflationary period of the 19705, we
went to over a trillion dollars worth
of assets. In 1981 total agricultural
assets reached a peak. At that time
real interest rates began to cause
assets to suck capital into cash
flow. During this period of time,
PDA To Distribute
Rice To Needy
HARRISBURG - The state
Department of Agriculture has
offered Pennsylvania counties a
special allocation of 65 truckloads
of milled rice for distribution to the
needy this month.
The rice is in addition to cheese,
butter and other federal com
modities also available to the
counties in December under the
department’s Temporary
Emergency Food Assistance
Program.
In all, 13.5 million pounds of food
valued at nearly $l3 million has
been offered to the counties for
their December distributions.
The department was able to
acquire enough rice for a special
holiday offering by requesting
commodities that other states
declined to accept from the U.S.
Department of Agriculture.
bin
bustin’
beans!
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Lancaster County 57.2 bu. per acre
* JMS 3482 Penn State, One Year
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* JMS 3983 Penn State, Lancaster Co.
One Year Avg. 55.1 bu. per acre
* JMS 4383 Penn State, Lancaster County
One Year, 56.1 bu. per acre
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Northampton County Seed Co., Inc.
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(215)837-6322
David Bird
RD #2 Box 122
Catawissa Pa 17820
717 365 7403
Sheldon Harsbar^er
MiHlmtown Pa 17059
717 436 2523
Hautmann'i Farm
Box 173 RD *1
Schnecksville Pa 18078
215 767 5281
Rt 6 Box 896
Lebanon Pa 17042
717-933 5370
RDttl Box6BD
Clinton Pa 15026
412 378 8175
4§o Delaware Ave
Palmerton Pa 18071
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agriculture was an attractive
investment. The export policy of
the country was to feed the world.
And we expanded the agricultural
mechanism to accomplish this.
“We also expanded domestic
programs,” he said. “And we
eased the availability of credit. We
were two or three generations
away from the depression.” Kohl
said. That’s enough time to forget
the lessons learned in the
depression of the 19305. We also
changed tax policies during this
time to encourage investment in
agriculture. We made investment
tax credits. We accelerated
depression and figured in capital
gains. By 1981 the assets picture
had peaked and now everything
that happened in the 1970 s is
happening in reverse.
From 1981 to 1983, we’ve had a
slight decline in agricultural
assets. And by 1985 we were down
to a trillion dollars. In 1986 we will
have about |865 assets and by 1992
experts are predicting we will have
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Dealers
in Farmers
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RD #1
Sussex NJ 07461
914 726 3688
F W Eckel and Sons
RD #2 Box 384
Clark Summit Pa 18411
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Mertztown Pa 19539
215 682 7065
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1553 Pen Argyl Road
PenArgyl Pa 18072
215 588 7144
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Port Royal Pa 17006
717 527 4772
returned back to the 1975 level of
$6OO to |7OO billion worth of farm
assets in the United States. So we
see we have a blip in farm assets
during the 19705. On the other side
the U.S. farm debt went from $25
billion outstanding in 1960 to an
increasing debt load in relation to
assets. By 1981 when the farm
assets reached their peak, farm
debt continued to grow at a 25
percent annual rate. A lot of farm
operating losses were refinanced
using their land collateral as a
method of getting cash flow.
Now farm debt is back down into
$2lO billion range. But farm assets
are coming down faster than farm
debt. So we are still eroding the
farm picture on the balance sheet
of American fanners. In 1960 farm
assets in ratio to farm debt was 12
percent. So a farm worth $lOO,OOO
was carrying about $12,000 worth
of debt. During the 1970 s this ratio
went up to 16 percent. In 1982 it was
18 percent, 1983,20 percent, 1985 to
1986 it is now 24 percent. And based
on the experts projections, by 1992
the average farm will have a 30 to
35 percent farm debt to asset ratio.
At present in the northeast part
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of the United States, the farmers
over a 40 percent debt to asset level
is one in five farmers. This is a
level where stress begins. In the
southern part of the country. And
on the west coast, it’s a little bit
more. But in the central bread
basket, the current debt to asset
ratio right now is 38 percent. And
about two out of five farms are in
the stress situation. “We really
have too much and too few dollars
coming in to pay it off,” Kohl said.
“Net farm income compared from
1975 to 1985, we find that farmers
have only half of the dollars
coming in that were coming in the
19705. Farms were leveraged in the
19705. And now you only have half
the income to support that ex
pansion,” Kohl said.
Kohl listed changes he expects to
see in agriculture. 1. Cash flow
and profitability. Interest rates are
declining but not as fast in
agriculture as in other sectors.
Farm operating costs are coming
down for feed and fertilizer. The
key is to get costs down faster than
your income.
2. Exports. Kohl predicted that
the export markets will not come
It's I^mCSiWififL
back because of the population
growth that has turned downward.
The income growth of the world
has increased but not in the areas
that need our food. And the
production growth of farm com
modities has been increasing in
competing countries. “The
probability of export markets
increasing are not very good,” he
said.
3. On domestic markets, we have
not done a very good job at an
ticipating consumption trends. We
have changed our eating habits.
We have gone from a sit-down
meal, to fast-food, to grazing at the
salad bar just like cattle. But our
farming industry has not an
ticipated these trends.
4. Technological advances. “This
is the scarey one,” Kohl said. “We
can produce more and more from
less and less units of farm
operation. And I expect that to
continue. Things are going to be
changing. We may be faced with
half the dairy farms in the future.
Structural change will happen.
And it will happen over the world
and also in the agribusiness sec
tor.”