There is not much to see on the main street of Hills, Iowa, on a winter's day. A sign welcomes you to "Where Town and Country Meet," but there is precious little town left. A few neat houses, three of the first eight with faded For Sale signs. Two taverns, Max's Lounge and Hills Tap, and an Amoco gas station, a small convenience store, a galvanized-metal grain dealer, a tanning salon, and the bank. "Save the Farmer," a pickup's dusty bumper sticker reads, "Export Reagan."
Mostly a visitor notices the smell, the rich scent of hogs hanging in the air like a ripe cloud. It is the smell of an industry in trouble, the worst farm recession, some say, since the Great Depression. Nationally, about 25% of America's 650,000 farmers are in danger of default, with debt-to-asset ratios of more than 70%.
In Johnson County, by contrast, less than 10% of the family farming operations are in danger of going belly-up next year. Farmers here were spared the worst of the 1983 drought, and, thanks to the university at the county seat up in Iowa City just seven miles away, there are part-time jobs a farmer can find, emptying trash barrels, perhaps, or driving a bus.
But "no one is talking about any profit farm farming, that's for sure," one area farmer admits. "Our cost of production is way more than we can take in.Even without any debt, we're just hanging on."
"Heck," his neighbor agrees, "it's getting so you can barely call yourself a farmer anymore if you aren't looking hard at Chapter 7 or Chapter 11."
It is one of the most widespread industry shakeouts in American history. "A whole generation of farmers is being pushed out of business," explains Stan Johnson, director of the Center for Agriculture & Rural Development at Iowa State University. "Anyone who started farming or was expandingt between 1977 and 1983 is in severe financial trouble. It doesn't matter if he is a good manager or not."
The 1970s had been a heady time for agriculture, an era comparable to the booms that followed each world war. Costs were rising with inflation, but profits were rising even faster. International drought, overseas crop failures, and the hunger of the Third World pushed the prices for American farm products to historic heights. Feed the world, America's farmers were told. Modernize. Mechanize. Expand.
The watchword was leverage: with the average price of an acre of Iowa ground shooting up 345% between 1972 and 1981, the real interest rate on money borrowed to buy land fell as low as -1.6%. Rather than lending to a farmer based on the production value, bankers were lending on sale value, considering land as a growth asset more than an income producer. What was a little debt if it could bring you so much equity? Hang the cash flow -- go for the capital gain.
After the Reagan inauguration, however, the farm boom went bust, just as each boom had gone bust in the past. Costs kept rising, especially the cost of credit, as the Federal Reserve Board tightened the money supply. But everything else collapsed. Exports fell by a third, as heavy international harvests, followed by a worldwide recession and then a strengthening dollar, eroded newly won overseas markets. Harvests were heavy at home, too, cutting prices even further. The price of corn fell more than 30%, while the cost of production was rising 45%. Farmers' return on equity fell from a high of 13.5% during the boom to a low of -15.7%.
Inevitably, the bubble in land prices -- which William R. Bernau, superintendent of banking in Iowa, compares to "the old tulip bulb deal that Holland had in the seventeenth century" -- collapsed as well. The average acre of Iowa ground had sold for $2,539 in 1981. By 1985 it would fetch only $1,275. Instead of the -1.6% during the boom, real interest rates soared to highs of 6% to 8%. Farmers who had thought themselves rich -- and then borrowed against the asset value of their land -- suddenly saw their borrowing power disappear and the value of their assets drop almost 50%.
"People may wonder why I made the decision to expand," oine farmer explains, "but I'd just had a son, and given the information I was given it seemed the right thing to do. The land-grant colleges were telling us we'd have $10,000 land by the 1990s, so use your leverage. What a joke. Now my boy tells me he wouldn't be caught dead farming -- he doesn't want to end up 'a loser' like his dad."
Melissa Farley, an Iowa City psychotherapist who counsels rural families under stress, sees a predictable cycle in Johnson County farmers. Denial gives way to anger, then to depression and self-doubt. "When I talk to farm women, they all say they understand how Burr felt," Farley says. "There is a progressive sense of being pushed up against the wall. They've been independent all their lives, then they lose control of everything. The bank controls every bit of cash that comes through their hands. There is a terrible lack of dignity. People are scared. They last out. There are more temper out-bursts, more substance abuse, and more domestic violence -- a lot of women getting hit these days."
In the past, families in Johnson County have always come together in crisis, with barn raisings and potluck suppers to bind the community close. But the current hard times are driving people apart. No one wants to face failure in front of his neighbors; the guilt and self-criticism is already too searing. There is help available -- a suicide hot-line and crisis-intervention centers -- but few farmers can admit to their own despair. Farm activist groups like Prairiefire Rural Action organize regular "survival meetings," two or three hours at night in a church basement. It's a chance to share the hardship and explore the economics and politics of the crisis, but more farmers are too ashamed to come. When Jo Anne Neuzil, a Johnson County farm wife who had become a self-trained bankruptcy adviser, wanted to move her practice from the living room of her home to an office in town, the farmers who were working with her balked. They couldn't come to see her in town, they explained. Someone might spot them there, or recognize their pickup. Then people would talk.
