They can breed a cow with half again as much beef as those raised by their grandfathers and grow 160 bushels of corn an acre instead of 80. Their revenues are many times what their parents dreamed of, and their land is worth five times what they paid for it. But America's farmers aren't making any money, and they can't afford to bring their children into the business. The reason is not that they are lousy farmers.
The Holiday Inn in Minot, N. Dak., has, for reasons only its owners fully understand, a Hawaiian theme. The desk clerk answers the phone "Aloha." The facilities include an Oahu Banquet Room, a Kona Kafe, and an Islander Bar that serves pina coladas and frozen strawberry daiquiris in the middle of winter. On this particular day, February 1, 1983, when the skies are gray and the temperature is hovering at 6 degrees F, the Holiday Inn marquee out front reads "Aloha PCA."
The sign is welcoming farmers and lenders who are members of the Minot Production Credit Association, the local branch of a credit organization established by the federal government in the 1930s to lend money to farmers and ranchers. The system's future is bound up with that of the farmers, and the farmers, everyone knows, are in trouble. The Minot PCA has invited its borrowers, the agricultural producers of the 16 surrounding counties, to a two-day seminar at the Holiday Inn to talk about how they are going to survive.
In the Hawaiian Ballroom, the farmers, who have driven in from places like Berthold (pop. 398; 20 miles away) and Williston (pop. 11,280; 135 miles away), are drinking coffee from Styrofoam cups and talking in musical accents that sound vaguely Scandinavian or Canadian about the mildness of the winter, the lack of snow on the road, the high school basketball game. Most of them are not talking about what has brought them together, which is that three out of four are not making a profit.
"I think we're going to drop some land," says one tiny, fuzzy-haired woman to another woman in the row in front of her. Her husband turns from the conversation he has been having with another fellow, and the woman says nothing more.
Here in the heart of America's Wheat Belt people don't go on about their troubles. Instead of complaining about the winter, natives joke that the 20-below-zero temperatures keep the riffraff away. "You don't find many people sleeping under bridges here," says one farmer.
He might have added that you don't find many bridges, either. The city of Minot is surrounded by vast, windswept, mostly treeless plains where farmers grow wheat, barley, rye, flax, and oats. The land is fertile enough, and unlike much of the country's farmland, in little danger of being encroached upon by urban sprawl. (The population of the entire state is slightly less than that of San Francisco.) But these northern plains are more susceptible than most areas to hail, summer frost, drought, or early snow, and the average net income per farm in North Dakota is among the nation's lowest. Still, the farmers stay to plant the land their parents planted.
These are not the so-called "hobby farmers," the city people who have retired from urban life to plant a 40-acre garden and raise a couple of horses and cows. They are not the political activists of the American Agriculture Movement who chant about an international conspiracy against U.S. farmers. This is a crowd of 75 or so mainstream producers of wheat and barley and sunflower seeds and cattle and a few hogs, a segment of the top 10% of farmers who produce about 65% of the food for the United States.
These people are second- or third- or fourth-generation farmers for the most part, with assets of $30,000 to $4 million. They have farmed through drought, early frosts, world wars, and a patchwork of government price supports, set-aside subsidies, wavering export policies, and misguided tax breaks. They still have their farms, and they have fed, clothed, and educated their families. But after 20 to 40 years of farming, when they would like to bring their sons or daughters into the operation, they find they are not making any money. And they are sitting, husbands and wives, like Marlys Haugeberg and her husband Carl in the Hawaiian Ballroom at the Minot Holiday Inn to learn what, if anything, they can do about it. "It's a terrible mess the government has gotten us into," says Marlys.
What she means, explains Carl Haugeberg, who is sitting beside her puffing on one of six pipes he has laid out on the table in front of him, is not just the government embargoes against shipping grain to the Soviet Union, although they were a terrible blow, but a public policy of cheap food. U.S. consumers spend about 16% of their disposable income on food, but residents of Europe and the Far East spend significantly more. Historically, U.S. farmers have been tied by public policy to narrow profit margins, and in response they became production oriented.
For years, the price of U.S. land, the weather in the Farm Belt, the openness of the U.S. market, the land grant schools, and even the transportation system provided a relatively comfortable environment for the U.S. farmer. Even if aftertax profits of 6% to 8% were the best farmers could expect, many made a good living. Some even got rich.
Carl Haugeberg started farming in the good old days. He took out his first operating loan on his name. He owned no land of his own and had no capital, but in the 1950s farmers and lenders believed in a rosy future for agriculture, and the local bank lent the young man the money he needed to rent 640 acres and farm it. It was a heavy debt load for a 20 year old to undertake, but Carl Haugeberg knew he wanted to farm, and he chose an option that doesn't exist for his three sons. In exchange for labor at his brother-in-law's place he used that farm's equipment. The arrangement enabled him to keep down his overhead.
He raised a little livestock, and with hard work, strong production skills, and thrift, he was able to make enough money to support Marlys, whom he married shortly after striking out on his own, and the three sons who soon followed. He also set aside enough money to buy his own land. There were good years and bad years, cycles of dry spells and low prices, but profits were strong enough in the good years to tide them and their neighbors through the bad.
In the 1970s the nature of the agriculture business seemed to change. A tractor that cost $5,000 in 1960 went for $100,000 in the improved and bigger versions that were being sold in 1980. Fertilizer that went for $86 per ton in 1960 went for $179 in 1981. Land prices kept rising until North Dakota farms that had sold for $100 an acre in the early '60s went for the $500 an acre some farmers paid in 1980, a higher price than the land could ever pay back. A farmer had to produce more just to stay even.
Eight years ago the Haugebergs owned 830 acres, but it didn't seem to be enough. Then-Secretary of Agriculture Earl Butz went on the national circuit in the mid-1970s to encourage farmers to plant fence post to fence post so the country would have something to export. Although the Haugebergs had held back on expansion because they hadn't wanted the extra risk and the increased investment in equipment that expansion would require, they decided in 1975 that they couldn't afford to hold back any longer and arranged to rent more land to cultivate, an additional 1,700 acres by 1982.
For the first few years it looked as if they had made the right decision. Greater volume did increase their income and spread their risk over a wider geographical area. They joined the ranks of the producers who were making 20% profits per year after taxes.
Then interest rates shot up in 1979, a two-year drought decreased yields, President Carter laid down his 1980 embargo on shipping grain to the USSR, and Mexico crashed in 1982, deflating the market for vegetable oil. Profits of 20% quickly turned into losses. And farmers found themselves with million-dollar debt loads and no income to pay off any of it. Some went broke, and others remortgaged the assets they had worked for all their life, just to hang on. Although the Haugebergs found their income drastically reduced, they were better off than some of their neighbors who had expanded more rapidly and borrowed to buy land.
Still, the Haugeberg's position was far from good, and what they are hearing this morning at the Holiday Inn is not particularly reassuring.
They are greeted with a rousing "Good morning" from a tall, Ivy League-ish consultant in a blue shirt and tie who goes on to recite a humorous poem called "Sad Reflections of a Cow on Artificial Insemination." After a couple more funny stories he tells them to write in the "Planning Notebook" on the table in front of each chair: "How can I run a profitable business in an unpredictable, complex, rapidly changing environment?" The answer, he says, is "systems," management systems or planning and control. Farmers are still using "horse-and-buggy controls," he explains, and as a result, 40,000 farmers a year are giving up their farms. He introduces himself as Bill Van Dusen, president of the Management Center for Agribusiness in Denver. He says he has been in the agricultural consulting business, saving farms, for 16 years. Van Dusen calls up his associate, Roy Ferguson, president of RCF Ltd., a management consulting firm in Tulsa. He is a shorter man, with rectangular black-framed glasses, who isn't smiling.
After laying out his experience as an international consultant in fields that range from equipment manufacturing to food processing to livestock and poultry breeding, Ferguson starts talking about the state of U.S. agriculture. The state, as he sees it for the folks in North Dakota, isn't good. He says it is farmers like the ones sitting in front of him who are in trouble: the highly leveraged, aggressive producers; the star borrowers of two or three years ago; the leaders of the 1970s; the pillars of the community who borrowed to buy land to take advantage of efficiencies of scale offered by larger tractors and volume buying, and in some cases selling.
"I seldom see an inefficient producer, yet the problems are not low prices and high interest rates," says Ferguson. He takes off his glasses and points the stem at his listeners. In 1982, for the first time in U.S. history, he intones, farmers cleared less ($19 billion) than they paid out in interest ($21 billion.) Only 3.5% to 4% of all farmers were delinquent on their loans as of January 1983. But since those in trouble are the larger producers, farmers representing 25% to 35% of the total U.S. productive capacity can't see if it will pay to stay in business. Total farm equity is shrinking, from $520 billion in 1980 to $459 billion at the close of 1982, to a projected $410 billion by the end of 1983. And the farmers in Minot can see it happening on their farms. Land that they owned free and clear when they were in their thirties is now leveraged 80%, and they are now in their late forties. After decades of hard work, they are sliding backwards.
From 1978 through 1982, agricultural expenses rose 61% faster than sales, and debt rose 178% faster than sales. From 1970 to 1981, interest expenditures increased 600%. Interest payments ate up 16% of total expenses for 1982.
Much of this, Ferguson points out, is the result of a giant land pyramid that has been building for a decade, "and when you get to the point of any pyramid," he says, "it hurts."
Then he gets to the crux of the message he and Van Dusen are preaching to the agricultural community across the country -- to cattlemen in Boise, to dairymen in the state of Washington, to crop farmers in Indiana, Illinois, and Kentucky: "People are looking for political and technical answers for business and financial issues. We are not going to farm our way out of trouble. We are not going to regulate our way out of trouble. We are not going to dream our way out of trouble. Life used to be simpler. I know it sounds silly, but it was."
The assets of Ferguson's typical client have risen 200% to 500% in the last five years -- and agriculture has fundamentally changed. But Mom and Pop and the land-grant colleges haven't changed with it.
The issue, as many farmers are beginning to realize, is that they have not been trained to look at their farms and ranches as businesses. They can produce cattle with half again as much meat as those their grandfathers raised and grow 125 to 160 bushels of corn per acre instead of 60 to 80. But they can't afford to bring their children into the business, and their neighbors are losing their land. Their revenues are two to five times what they were five years ago, and their land is valued at least five times higher than what they paid for it, but still they are not making any money. And the reason is not that they are lousy farmers.
The tools that U.S. farmers must use to make money, say Ferguson and Van Dusen are comparable to the tools used by the rest of U.S. business. Budgeting with 95% to 98% accuracy, strategic planning, hedging, profit-and-loss financing instead of asset financing, and sophisticated weather forecasts are the implements of the new farmer.
At lunch, the Haugebergs say that they think what Van Dusen and Ferguson are saying is interesting but not really applicable to their situation. They don't believe that even the most sophisticated university meteorologist has the ability to predict North Dakota heat waves, cold snaps, and hail. And they are not sure it is possible for producers of durum wheat, sunflower seeds, flax, like themselves, to draw up a budget that is 95% to 98% accurate, because, after all, those commodities can't be hedged. But they do agree that it is time to think of their farm as a business.
"Two years ago you didn't need to," says Carl Haugeberg as he sits down to the PCA lunch of pickled salads, Jell-O, and a sandwich. "The profits were there. We did think of farming as a way of life. But things have changed.
"I've wasted 20 years not being hungry," he says looking at his plate. He talks about a North Dakota energy company that was very successful in its early days but lost steam after the founders made their first millions. "They got what we call a farmer mentality," says Haugeberg. "They weren't hungry." Now, he says he realizes that farmers have to be hungry to survive.
Still, he has reservations about what these two consultants are saying. They are bright, and their ideas will work for some farms but maybe not for North Dakota's. Besides, the Haugebergs are not yet facing the debt crisis of some of their midwestern neighbors. They didn't have the assets to borrow themselves into a hopeless state of hock, and Carl Haugeberg is cautious by nature. They may not be making much money, and the smaller size of their operation may prevent them from taking advantage of some economies of scale, but their lender is not yet pressuring them to sell off their assets. Like many farmers, Carl and Marlys Haugeberg have a sense that something in their operation isn't clicking, and interest costs are much higher than they would like. But they don't owe the Minot PCA anywhere near the amount of money that Keith and Dorothy Kuhn owed their lender in the fall of 1981.
Dorothy Kuhn never intended to marry a farmer. She had grown up on a dairy farm near Sioux City, Iowa, and had seen that the financial rewards were not always commensurate with effort and that the job was never done. Seven days a week, 52 weeks a year, her father got up at 2 a.m. to start the milking. He would milk until 7 or 8 in the morning, go back to bed for a while, then begin getting ready for milking again around 3 in the afternoon. Her father made a decent living, but they weren't rich. Dorothy wanted something different. Her brother helped her father with the dairy, and Dorothy went on to school, at Wayne State College in Wayne, Nebr. After graduating she taught business in two or three cities in Iowa. Until she met Keith, the brother of a friend, she thought she would be happiest in the city.
Keith Kuhn is a third-generation farmer. His father had bought the 629-acre Iowa homestead where he raised corn, alfalfa, oats, cattle, and purebred hogs. After studying animal science at Iowa State University in Ames and a tour of duty in Vietnam, Keith came home to take over the family farm. He liked getting up in the morning not knowing what kind of challenge he would face that day, whether it was planting, or strategy sessions with his hired men, or rounding up straying cattle in his pickup truck. And he figured he would probably make a "bunch of money" farming.
After Keith's father died of leukemia a few years later, Keith shared the ownership of the land with his mother, who had a half share, and his two sisters. His mother continued to do the books, as she had for Keith's father, but the responsibility of seeing that the place would be there to hand down to the next generation of Kuhns was clearly Keith's.
Kuhn read the 1970s the same way most strong and aggressive producers did, and he started adding acres as land became available. He bought 240 acres for $307.50 an acre shortly before he got serious about Dorothy. They decided to get married in 1973, and Dorothy kissed the city life good-bye. She knew she was marrying a business as well as a young man, and her business background would prove useful for doing the farm's books. For the first year she worked on them with Keith's mother, learning the system Keith's parents had used, a system they would soon find inadequate for the less-forgiving environment of the '70s.
For the rest of the decade the Kuhns expanded right along with all the other future-oriented producers. Keith Kuhn added land, at steadily increasing prices, until Kuhn Farms Inc. covered 1,489 acres. He bought more efficient tractors and, just before his father died, an eight-row planter. About 98% of Keith's education at Iowa State had been geared toward production, he says, and he learned his lessons well. He produced 110 bushels of corn per acre, and in good years 145, instead of the 90 bushels per acre his father had raised. He nearly tripled the number of hogs marketed annually, from 1,500 to the 4,000 he sold in 1982. He more than doubled the number of feeder cattle. Kuhn Farms was featured in several national agricultural magazines. Keith and Dorothy built a large ranch house down the road from Keith's mother's place, up on a hill, away from the animals and the farm traffic.
As the price of land rose, so did the Kuhns' ability to borrow, although the small country bank where Keith's father' had done most of his business told the son that his borrowing needs were getting larger than the bank could handle. The Kuhns took their business to the Sioux City PCA and found the vault doors open. Keith was asked to sit on the board of directors. The farm's revenues rose 329% from 1975 to 1980, to $4.3 million, but the Kuhn's began to see that they weren't making much more money. And in the bad years they were losing a lot.
Debt reached a peak of $2.9 million the year their youngest child was a year old. And four-fifths of the Kuhns' outstanding obligations were short-term. Keith's mother had lived through the Depression, and she told her son she thought he was flying pretty high. But Keith didn't think the problems were that serious. "Everybody was doing it," he says.
The star producers of the county had mortgaged their land to get the capital to take advantage of new improved cultivators, tractors, and a market that was encouraging them to plant from fence post to fence post. Then, when they were extended as far as the value of their assets would allow them to borrow, interest rates nearly doubled, the bottom dropped out of the land market, a two-year drought reduced their crop yields, and hog prices hit a five-year low.
"There were a lot of tears around here," says Keith.
The local banks and credit associations began to realize that nearly half of their largest borrowers were in trouble and that the land, their primary collateral, was dropping in value and taking months or even longer to be sold. Fewer and fewer farmers anywhere were making money, and sociologists were starting to question the future of the family farm. Nearly every dollar the local banks and the PCA had lent was tied to the family farm somehow. So when the farmers were the most strapped for cash, the lenders forced the borrowers to cut back. They told farmers to sell their land, their cattle (even if it wasn't market weight), their hog breeding stock, and their fancy tractors, and they told them to do it in a hurry.
The Kuhns didn't particularly care for the idea of selling land that had been in the family for generations. They didn't see how they would ever make it if they were forced to sell their stock of breeding hogs. For a time, Keith says, he wasn't sure it was worth getting up in the morning to check hogs he was losing money on and to plant seeds for a crop priced at less than it cost him to grow. He didn't know exactly what the problem was or how to fix it, but he did know that if a Kuhn was going to fritter away the family farm, he would rather it be a later generation.
Keith Kuhn doesn't remember the ad in Beef magazine that convinced him he ought to fly out to Denver to hear a couple of consultants he didn't know speak about the farm of the future, but he went. He didn't like a lot of things he heard, such as that land ownership was too expensive at current interest rates for most family farms to afford. And although Van Dusen seemed friendly enough, Ferguson made him feel as if he were "2 cents waiting for change." Still, if these men weren't exactly optimistic about the row most farmers were hoeing, they at least saw alternatives for the few producers who were willing to take stock of their operations and choose a more profitable course for the future. They knew their ratios and what lenders wanted, and Keith knew Kuhn Farms had to make changes. He flew home, talked things over with Dorothy for about 24 hours, and called Ferguson. He told them that what Kuhn Farms required was an "operations review," a detailed analysis of their current financial position and where their practices were taking them.
Dorothy says she "about had a heart failure" when she heard what kind of information the two consultants were going to need. The Kuhns had always considered Dorothy's record keeping a strong point of their operation, and compared with most farm businesses, it was. But Ferguson and Van Dusen were asking for a greater level of precision and detail than Keith and Dorothy imagined possible -- balance sheets and cash-flow statements and profit-and-loss statements for the previous five years, down to the last dollar. They wanted pro forma data for the next three years. They wanted to know what the crop projections were, how much would be spent on seed, how much on fertilizer, how many pounds of corn the cattle ate and when, whether the corn would be ready when the cattle needed to eat it, or whether they might have to buy feed from the local elevator. They wanted to know how much the salaries of the hired men were going to increase.
Dorothy spent day and night, week after week in the office. "My family suffered," she says. "My house suffered." Her children asked why she was in the office so much. One daughter, then six, asked her mother if she was "ever going to get that cash flow straightened out."
As Ferguson worked his way through the numbers Dorothy and Keith provided, he began to see that the Kuhns' situation was more serious than anyone had thought. Although the agricultural part of their operation was a model of efficiency, the financial trends were disturbing, if not frightening. The Kuhns discovered they had been technically insolvent for the previous two years. (They are not alone. Some 75% to 80% of the farmers Ferguson sees are technically insolvent.) Although revenues had increased 329% from 1975 to 1980, expenses rose 316%. Interest expenses were nearly 20 times greater, increasing from $24,000 in 1975 to $450,000 in 1980. If the Kuhns were to continue on the path they were on, interest costs for 1980 would reach a staggering $623,000, or more than 20% of total production expenses. For each $1.46 of new debt they had incurred in the previous six years, they were producing only $1 of sales. The good news was that unlike some of their less fortunate neighbors, they still had a positive net worth.
The numbers were gut-wrenching, but for the Kuhns the toughest part of what Ferguson and Van Dusen had to report was how they were going to turn Kuhn Farms around. The consultants tried to be gentle. They said that although the Kuhns' success in developing their family corporation to its current size was "genuinely impressive" and that their imagination and hard work had taken them a long way, because of the operation's size, the vagaries of the weather, and the volatility of agricultural commodity prices, the Kuhns had to reduce their risk, with detailed financial planning, systematic controls, and forward marketing. That was all well and good, and for a fee Ferguson and Van Dusen were willing to teach them the techniques they would need. But the first step in the process was the worst for both Kuhns. To reduce the intolerable burden of their short-term debt, the Kuhns would have to sell land. "I cried," says Dorothy.
"I took a real dim view of it," says Keith. "We didn't purchase the land to speculate. We expected it to be in the family long after we were. It's a very bitter pill, until you realize the land is killing you."
Ferguson also recommended that they restructure their cattle-feeding program to feed cattle for investors instead of owning the beasts themselves. This, too, was not easy to accept.
"It's a little like running a full-time babysitting service," says Keith. "People thought we were too proud to do it. In the Midwest you do your own thing. You pay your own bills. You feed your own cattle. You do your own electrical work, your own plumbing. And you own the cattle you feed."
Ferguson was saying that it was time to get into the service business, and that was a long way from where the Kuhns were. But farming the way their grandfathers had farmed was no longer possible.
Still, said Ferguson and Van Dusen, if the Kuhns were willing to make those admittedly drastic changes, the consultants were "cautiously optimistic" about the future. Dorothy and Keith would have to stick to their budget with the 98% accuracy that Ferguson preached was possible, forward-contract enough of their crop and livestock sales to guarantee two-thirds of their incoming revenues, and allow outside investors to assume a significant part of their financial risk. If they did so, not only would their operation become profitable, but they would be able to forecast and control their revenues, expenses, and income to a degree that much of the agricultural world was saying was impossible.
The Kuhns didn't want to sell their land, and they were not completely convinced that they could project their income with anything approaching 98% accuracy, given the volatility of prices and the effect of the weather on crops. But nobody else was offering any better answers. They could sell the 250 acres the PCA wanted them to sell and hope that commodity prices would go up and interest rates down, and they would be able to farm themselves out of trouble. But they realized that was only a temporary solution. The Kuhns had built their house on top of a hill, they had three children to feed, clothe, and send to college, children who played with toy John Deere tractors, combines, and front-end loaders. They had tied up their lives in farming, and they wanted to make money. Following Ferguson's and Van Dusen's suggestions seemed to be their only hope of doing both.
Even when Keith and Dorothy agreed to make the changes that the consultants thought necessary, their road was neither smooth nor straight. Although expenses and income for the year had been projected in excruciating detail in the operations review, the PCA balked at lending the Kuhns the money they needed for operating expenses. There were no buyers for the land, and short-term debt didn't allow the Kuhns the luxury of waiting for one to show up. They persuaded relatives to back Keith's mother in a limited partnership that would buy the land Keith and Dorothy had acquired and then lease it back to Kuhn Farms to work. Even when they had put together a prospectus for their investor cattle-feeding venture -- including costs down to the last pint of feed corn; pictures of the family homestead; and recommendations from local veterinarians, an Iowa State University livestock specialist, and the territory manager of their feed company -- they had to make many calls and write letters to track down potential investors who would buy the 2,000 head of cattle that was the minimum Keith and Dorothy could feed profitably. They got their first 600 cattle from a neighbor who fed 6,000 of his own but had more than he could handle. They made deals with investors in Montana and Chicago who needed tax breaks. Keith still makes the rounds of the farm every morning for strategy sessions with his men. But he has had to give up time on the traetor to spend it on the phone with investors. Dorothy has probably devoted more time to lenders in a year than Keith's mother did in a lifetime.
Farming is changing in Woodbury County, Iowa, and as usual, Keith and Dorothy Kuhn are at the leading edge of that change. "We're still not sure if it was the way to go," says Dorothy of their land sale to the family and the investor feeder cattle operation. And they won't know for a number of years. There have been times when they have wondered whether all the pain they have had to go through has been worth it. But even with no-till planting, investor cattle-feeding, and cultivation of rented land, Keith can come home for lunch, talk over the investor program with Dorothy while his youngest, Kevin Michael, climbs on his knee, and look out across fields that are still in the Kuhn family, even if he doesn't own them in the way he would like.
Keith has never particularly cared for doing books, and perhaps he never will, but he and Dorothy have committed themselves to fine-tuning the financial side of their operation because that is what the environment demands. It may be months or even years before their strapped lender regains the confidence it once had in their operation, but the Kuhns say they understand their financial situation better than they ever have. In 1982, their budget was 95% accurate, 3% under what Ferguson tells them they should be able to accomplish but better than most of their neighbors. They have sales goals, profit goals, and clearly defined strategies for achieving them, as well as a more accurate system for measuring what they have and haven't accomplished than they and most of the Minot audience imagined possible.
"It is not a miraculous manna that falls from heaven" says Ferguson to the Minot farmers. He is talking about budgeting with 95% to 98% accuracy. The light catches the diamond in his ring as he gestures. "I know a lot of you will say that's impossible, because of the weather, crop prices, diseases. But it will end forever crisis management." It is near the close of a long day and an exhausting night. The farmers have asked how they can hedge if the crops they grow aren't traded on the commodities exchange, what they can do if they are stuck with land they bought in the '70s, and how they will ever be able to pay their bills. These are questions to which the answers are long and complicated, sometimes requiring more knowledge about the particular farmer's situation than in most cases the farmers have themselves. But Ferguson and Van Dusen will stand there as long as the questions are asked, bccause it is here, in places like the Minot Holiday Inn, not the in halls of Congress, that the real revolution in U.S. agriculture is taking place.
Farmers in North Dakota have it tough. The Haugebergs can't hedge durum wheat, sunflower seeds, or flax. The droughts, hail, and early frosts may demand more of an investment in equipment and insurance than current operations will support. Farmers who did not have livestock were particularly hard hit by the grain embargo, because the failure of 10% of exports to make its way to the Soviet Union through France or South America cut grain prices 40%. The government has never successfully intervened in the market for major commodities, says Ferguson, and the embargoes made life extraordinarily difficult for crop farmers. The livestock sector is the most free of federal regulation and marketplace intervention, and Ferguson says, "I don't think it's coincidental that it's been the most profitable and efficient."
But still, Ferguson says, although 15% of the problems of U.S. farmers can be attributed to the government and maybe another 15% to the lenders who provided poor advice, lent money, or held back from lending when they shouldn't have, 70% of the responsibility for the problems farmers have today lies squarely on their own broad shoulders.
"It's inexcusable that corn is $1.95, Ferguson says of the price corn fetched per bushel last fall. "I feel for the farmers. But a year ago they could have sold their corn for $2.60. The fact that corn is $1.95 is terrible. But the fact that a big producer is going to take it is inexcusable.
"Some years you have to sell at a loss, but at least it should be a controlled loss, not some wild slide downward. I had a client in the South who rode the soybean market $400,000 down. It got to the point where he said, 'Roy, I can't sell.' And he could have made a profit."
The hour is late, and Ferguson doesn't give the farmers his lecture about this year's 80% chance of a hard winter. "There's going to be snow on the ground in March. There have got to be so many therms in the ground for a seed to germinate. You can't put seeds in before the soil is ready, or they'll rot. So you plan on early germinating seeds. That means you're giving up 3% to 4% of your yield, but that's better than losing 100% of your crop to frost. If it's going to be a hot, dry summer and, if you're not irrigated you've got to reduce the seed population and reduce the fertilizer, because if you don't get water the fertilizer will burn the crop up. But that's better than slapping the seed in the ground like they did in 1980. They got 35% of their crop, with the expenses of a 100% crop."
There are trends in energy, in natural gas prices, and in petroleum fertilizer, Ferguson tells them. They can get interest rate forecasts. He has an inch-thick file on the weather.
"The key," he says, "is eliminating surprises."
The farmers are sitting without saying much. When there are no more questions from the floor, most of the farmers wander out to sit by the pool, in the Islander bar, or in their rooms or to drive home in the light snow that is just beginning to fall. But Ferguson, his fingers blue from the magic marker he has been using to scribble figures on the board, his shirt collar wilted, is bent over one of the Formica tables, talking with the last farmer left in the room about how that farmer might survive.