The MacNeil/Lehrer Report; Harvest Woes

[Tease]

FARM WOMAN: It's not easy for us to admit, I think, as farmers that we hurt. I had a neighbor come over one afternoon, a friend of mine, and she said, "Anne, if my husband broke his leg or if he became ill, the neighbors would all come and we'd all bake a cake and brownies and hot dishes, and the corn would get picked and the wheat would get combined, but," she said, "who's going to bring the cake when we lose our farm?"

[Titles]

ROBERT MacNEIL: Good evening. It was a glorious fall day across much of the nation today, pleasant for most of us and, in normal times, terrific for the farmers. But the times are anything but normal and so the fair weather is only a mixed blessing. It will help what was already shaping up as another record grain harvest, the third in a row, and that, paradoxically, is almost bad news because the nation already has too much wheat and corn. Huge surpluses are depressing crop prices and cutting heavily into farm income, pushing many farmers close to financial ruin. Many farmers have borrowed heavily; as crop prices drop they cannot earn enough to meet their loans, and they face the threat of foreclosure. So many are in that predicament that some farmers have started to fight back. A coalition of farm lobbying groups declared last Saturday National Farm Crisis Day. In 11 states farmers marched to protest low prices, claiming that the federal government was forcing them out of business.Tonight, with a documentary report from one farm community, the Secretary of Agriculture and a farmer, the harvest time woes of American agriculture. Jim?

JIM LEHRER: Robin, the farmer and the rest of us who buy and eat his product seem continually out of synch: good times for the farmer -- Scarcity and high prices at his market, mean bad times for the consumer -- scarcity and high prices at our supermarket, and vice versa. It's a vice versa right now. Most food products are in plentiful supply at the grocery store, and the prices are reasonable -- so reasonable, say some farmers, that it's costing them more to produce something -- a bushel of wheat, corn or whatever -- than they can sell it for. Corn and wheat are cited as the worst cases. A year ago, wheat sold for $4.28 a bushel; now it's down to $3.17, a 26% decline. On corn: it sold for $2.95 a bushel this time last year; now it's also down the same percentage to $2.17 a bushel. Farmers claim there is not only no profit in those kind of prices, there is a loss. Among the farmers making such claims are those in southwest Minnesota, as we see in this report.

MacNEIL [voice-over]: In Minnesota farmers reported $3 billion in losses last year, and some 2,000 went out of business. In this state, however, farmers are starting to fight back. We sent independent producer/cameraman Philip Garvin to Westbrook, Minnesota, a farming community 170 miles southwest of Minneapolis, where a single incident has galvanized the hard-pressed farmers. It happened at the farm of Widen and Loretta Hanson. The Hanson family stopped farming last spring. Their creditor, the Farm Home Loan Administration, refused to extend their loan. So an auction sale of the Hansons' farm equipment was scheduled for August 25th, but the auction didn't come off as planned.

LORETTA HANSON: Well, we saw all these cars coming from the west, and we looked and there were cars coming from the east. They were just bumper to bumper. And it took me awhile to realize what they all had alike; they all had red handkerchiefs on.

MacNEIL [voice-over]: The bearers of red handkerchiefs were their friends and neighbors and members of the American Agriculture Movement who had come not to buy but to protest. Their strategy revived a Depression-era tactic known as the penny auction. The idea is for farmers to discourage the real bidders from bidding at all, and for the protestors to bid only a penny, a dime or a dollar for the equipment. When these bidders buy a tractor for, say, a dollar, they lease it back to the original owner for 99 years for the same amount. In the Thirties the tactic did discourage foreclosures because the creditors reaped so little benefit from the sales.

WIDEN HANSON: One of the things that happened just before the sale started was one guy said he drove over 20 miles here to come to the sale to buy a piece of machinery, and he was going to bid no matter what, and another guy said to him, he says, "Well, I come 100 miles to this sale to stop it."

Mrs. HANSON: First there was three people around that guy trying to convince him not to bid; pretty soon there was 10 and pretty soon there was 15, and then the guy backed down. He wasn't going to bid.

MacNEIL [voice-over]: As it happened, the protestors succeeded in getting the auctioneer to stop the sale.

AUCTIONERR: And I have made the decision to postpone this sale. [cheers]

MacNEIL [voice-over]: Though the farmers cheered, Westbrook farmers like the Claytons felt only momentary relief. Marvin and Audrey Clayton face possible foreclosure themselves.

MARVIN CLAYTON: Right now it doesn't look good. If prices don't increase, I'll maybe go out this fall or next spring, or maybe I could go one more year. If something foesn't happen in another year, for sure I'll be out.

REPORTER: Out of business.

Mr. CLAYTON: Out of business. And then I don't know what I'm going to do. I'm not old, I don't think, but I'm not young, either. I'm 43, and farming is really the only civilian job I've ever had.

[at family supper] Would you girls ask blessing, please?

CLAYTON DAUGHTERS: Come, Lord Jesus, be our guest, let these gifts. . . . Amen.

Mr. CLAYTON: Amen.

[to reporter] I don't think many people would want to come out here and switch places with us right now. It's not -- it's not ideal; it's not a healthy place to live now. I mean, it's an ideal place to raise kids if you can make enough to clothe them and send them to school and provide for them the way they should be, but you just don't. You just don't have the money.

MacNEIL [voice-over]: The money the Claytons do have from this farm has come in recent years from the FMHA. Their loan officer is Bob Shearer.

BOB SHEARER: The FHA is here. It's a branch of the U.S. Department of Agriculture to assist people to farm or get started farming who cannot get credit elsewhere.

Mr. CLAYTON: That's the last line of credit that we have is FHA, and it seems to me that they're doing their best to sell out to the lower percentage of the farmers that have loans with them.

PEPORTER: What do you mean by lower percentage?

Mr. CLAYTON: Well, the people that haven't kept their payments up to date and paid on time, and I'm delinquent $1,500 right now.

REPORTER: And how much do you owe total?

Mr. CLAYTON: I own $70,000 without interest, and this year they want a payment of $49,000 plus interest on $70,000.

REPORTER: What can you give them?

Mr. CLAYTON: Maybe half.

Mr. SHEARER: If we can see a plan where he could work himself out of it, chances are we would continue. And if not, maybe it would be best -- to his best interest and ours if he would discontinue farming.

Mr. CLAYTON: I think they would like to close me down. As a matter of fact, this spring they sent me out a letter saying that they thought maybe I should sell out. Sometimes you think, well, maybe I should just pack up what few clothes I have and just drive away. And just leave.Take the family and just leave.

Mrs. CLAYTON: Because they're going to get it all anyway. You know, really, when it comes right down to it. When they sell you out you won't have nothing anyway, so what's the difference, you know?

MacNEIL [voice-over]: Westbrook farmers talk about Delbert Jensen as one neighbor who will drop everything to come over and help when you call. He came over to the penny auction with both his sons, Rick and Bruce -- all wearing red handkerchiefs. But now, after some 40 years of farming, this family is in trouble, too. Although they harvest crops together, Delbert, Rick and Bruce each have their own farms. That worked well for a few years, but with low prices and high interest rates, the sons' farms are losing money fast, and their dad has guaranteed so many of their loans that now he's in trouble as well.

1st JENSEN SON: And the way it sounds, like, if I want to keep on going, Dad is going to have to kick in more money again. And I just don't feel like that's right. Well, it isn't right, 'cause he shouldn't have to do that. Him and Ma paid for their land, you know, and why should they waste it all on, like, on me when there isn't no good prices or anything like that? It just -- it isn't no future into it anymore.

2nd JENSEN SON: Doesn't make any difference anymore how hard you work. It just -- if it just isn't there, there's nothing you can do about it. You can work day and night and you can't get ahead.

DELBERT JENSEN: I would say to produce a bushel of corn it would cost from $2.50 to $2.80 a bushel. Well, if you went to town today, you'd probably get about a $1.85 for that bushel of corn, saying it was 15% moisture.

REPORTER: And so you're losing money on each bushel?

Mr. JENSEN: Oh, for sure you are, yes.

REPORTER: So how much -- so why don't you just quit?

Mr. JENSEN: Well, we kind of thinkin' about it. Quit and go fishing.

Mr. CLAYTON: Maybe, would it help if you'd go out and hang somebody. If it would get enough attention that you maybe could, you know, just -- you feel like wrecking something, destroying something. You think, well, maybe if I'd go out and plow up all my corn and all my grain -- but then you think, well, somebody needs that for food. Somebody needs to eat.

Mrs. HANSON: They're going to have to group together and say, "Hey, we're not giving our crop away anymore. We've got to have a price. Either that or we'll sit and burn it."

MacNEIL [voice-over]: For the traditionally independent farmers of Westbrook, the idea of grouping together in protest is almost revolutionary, but the penny auction has brought many of them together. Even the town's banker admits that the penny auction can be effective.

WESTBROOK BANKER: I think lending institutions will probably take a longer look at foreclosing on a line if they anticipate encountering a so-called penny auction.

FARMER: Hi, Mike. Is it all right if I hang this sign up on this meeting Wednesday night up at Tracey?

MIKE: Yeah.

MacNEIL [voice-over]: Taking the next step in local organization, area farmers decided to hold a meeting at a nearby VFW hall. They invited some speakers from Minneapolis and the American Agriculture Movement.

LARRY LONG, singer/songwriter; Thank you.

Grandma was born and raised on a farm in Iowa/

When I was young she would pray for those who worked the soil/

Days of drought, sleet and hail Grandma would often tell/

Me about that penny sale that saved the family farm/

And when the auctioneer was done/

The country folk, they had won/

Without spilling any blood they saved a family farm.

You can sing if you want.

Give a prayer tonight for the farmer/

Give a word of thanks for their labor/

Give a prayer tonight for the farmer.

1st SPEAKER [at organizing meeting]: All we've got are one another; only people have got people. And it's not easy for us to admit, I think, as farmers that we hurt. I had a neighbor come over one afternoon, a friend of mine, and she said, "Anne, if my husband broke his leg or if he became ill, the neighbors would all come, you know, we'd all bake a cake and brownies and hot dishes, and the corn would get picked and the wheat would get combined, but," she said, "who's going to bring the cake when we lose our farm?"

2nd SPEAKER: And we can go out and take that hardline stand and say no farmers are going to lose their farm, no farmers are going to lose their equipment, and we're going to make sure that that happens because we're going to go out there like we did to the Hansons, make sure nobody bids at the auction. We're going to go out like they've done in Canada and stop banks from repossessing equipment. And, you know, we're right in doing it because it's not farmers' fault. It's not their fault -- it's not your fault that the prices have been bad and, you know, as a group we've got to say it's not been our fault. We've got to work together and we've got to stop it.

3th SPEAKER: I think history demonstrates and reveals to us very clearly that the legislative institutions -- the congresses -- they follow the people. They don't lead them. Two of the things that the upper midwestern farm unity group is pushing -- and all the different farm states that are participating -- two pieces of legislation. One is a moratorium on all farm foreclosures; the other is a minimum price bill.

4th SPEAKER: One thing that wasn't brought up here tonight was the farmer hanky -- the red bandanna -- has become the national symbol of farm foreclosures, farm prices, the seriousness of the farmer. Make it a point when you go in to visit your banker or your FHA man -- tie your red hanky around your neck, and they're going to know you're involved in this group, and it's going to -- it's going to make a difference when you talk to them.

5th SPEAKER: After everything that we've heard here tonight, how many of you actually will go out and do something? Who will stand up and be counted? Will you stand up?

PARTICIPANT: I will.

2nd PARTICIPANT: You bet. [most stand; applause]

LEHRER: The farmers' problems as seen from the perspective of Westbrook, Minnesota; now as seen from the perspective of the man in Washington whose job it is to tend to those problems, the Secretary of Agriculture, John Block, a farmer himself before entering government, a hog farmer in Illinois. Mr. Secretary, is the man correct when he says what's happening is not the farmer's fault?

Sec. JOHN BLOCK: It's not the farmer's fault, that's true. It's a combination of circumstances. We went through a period of time of high inflation. The end result is high interest rates. The end result has been world economies that have been weak, and finally we've had two years of huge crops, on balance, around the world. And what really face today is a production plant in agriculture that is bigger than we have paying customers for the products that we're producing. And that's where we find ourselves. It's a very difficult situation, and that's where we are.

LEHRER: All right. Let's take where we are, and a couple of things have been mentioned -- were mentioned on the tape, in fact -- is what they would like the federal government to do. Number one is a one-year deferral on loan payments; there was also the additional suggestion of a moratorium on foreclosures. You do not support that, correct?

Sec. BLOCK: No, I'm a -- you know, I have farm interests. My son's on the farm. The thing he calls me up and talks to me about, he says, "What are you going to do about corn prices?" But, really, the federal government can do some things, but there are some things we can't do, and we just don't have a magic wand. The circumstances I talked about. Now, the suggestion that we have a moratorium on foreclosures, I think a more responsible approach is what we have done, is look at each case on a case-by-case basis, and try and keep the producers in business that have a reasonable shot at succeeding in the long run. And it really isn't right and fair to the vast majority of producers that pay their loans and everything to have a blanket moratorium. That just is not fair to them, and I don't think it's fair to the producer behind on his payments.

LEHRER: One of the farmers suggested in the film that it was the policy of the Department of Agriculture through the FHA to actually eliminate some of the farmers at the bottom of the scale in terms of those who were the most behind in their payments. Is that true?

Sec. BLOCK: The policy is to be fair and use an evenhanded judgment. And we are not going to have that many casualties percentage-wise. So far this year we have, of our borrowers in Farmers Home -- Farmers Home is the borrowing institution of last resort, too, remember, and only 12% of the borrowers get their money -- their 12% of the money from the Farmers Home. We are only going to end up losing about 2.75% of those -- of that 12%.

LEHRER: Now, how many farms is that?

Sec. BLOCK: It's going to be about 7,000 farms out of --

LEHRER: What do you think of the penny auction technique that they're using in Minnesota and elsewhere?

Sec. BLOCK: I think it's a system of protest, it's an effort made by farmers, and, I believe in the producers talking to me, talking to government, taking what action they can. It's within the law. I don't think it'll always provide a service to the producer. In some cases a producer would like to sell out and get a good -- you know, the most he can so he can start a new life. So I just think it depends on the circumstance, and we're just going to have to live with the times.

LEHRER: You don't basically, then, object to the penny auction as a technique?

Sec. BLOCK: Well, I just -- I wouldn't necessarily endorse it because I think it has some serious shortcomings, but you've got to let people, you know, address the problems the best they can in the ways they can.

LEHRER: All right, the second part of the problem, or I guess, the major part of the problem, which is how you get prices up. While we're waiting for the world economy to get squared away, what are you prepared to do -- is the federal government prepared to do to try to get those prices up, particularly corn and wheat?

Sec. BLOCK: There are only two ways you can do it. You can reduce the supply, and we have what I think will be very effective voluntary acreage reduction programs with some paid diversion to get farmers to take some land out of production. That's on the supply side. On the demand side, we're looking and working to find markets wherever we can in the world, and the Department of Agriculture serves as a catalyst. We try to help. Of course, it's going to be up to the private industry to do what they can. And these are the two ways you can do it. Someone suggested that you just guarantee a price or lock in a certain price at the cost of production. If you do something like that, the other countries in the world will come in and steal our markets. You have to live with the world market price. That's all.

LEHRER: Thank you. Robin?

MacNEIL: Now for the views of a farmer who is himself facing foreclosure on loans from the FMHA. He is Jake Latham, who grows corn and wheat on his 400-acre farm outside Rochester, New York. Mr. Latham, you heard the Secretary say the federal government hasn't got any magic wand. Do you as a farmer think there is a wand they could wave and do something practical?

JAKE LATHAM: Well, I don't think the wand is magic in itself. I think there are some clear policies that the Congress of the United States has enacted, most recently to the tune of $600 million that was allocated for people like myself and those people out there that participate in that penny auction.

MacNEIL: That's the emergency fund, as it were, that the Secretary could authorize -- put into the loan pool to make more loan money available?

Mr. LATHAM: Well, apparently the Congress of the United States has felt, and they continue to feel, that there is a crisis situation out there. There is chaos in the entire agribusiness community. We represent 65% of the gross national product in agriculture. He's talking surplus when in fact other industries classify it as inventory. Fifty-two percent of the world population goes to bed every night hungry. How can we say we have a surplus?

MacNEIL: Back to the things that the federal government could do. On the question of a moratorium on foreclosures. He says it wouldn't be fair to have a blanket moratorium.

Mr. LATHAM: Well, I think that initially it probably wouldn't be fair. I think that the most expedient means to get ourself out of the problem that we're being faced right now in the agriculture community is to place a national moratorium. He has the authority to do that. And then you go to those people in the Justice Department, let them take it by a case-by-case basis. I think that in most instances, because myself I've been in this fight for approximately five years now, because my credit in the area has been destroyed by being an FMHA farmer -- you know, it's kind of hard to go in and show a projection that where in years past you had the capability of working 1,200 acres of ground, now you're down to 400, and this is all done selectively by the people in FMHA.

MacNEIL: Now, he says that there are only going to be, of the 12% of farmers who have their loans from the FMHA, only 2.7% and only 7,000 farms are going to fail this year. What do you think in your area?

Mr. LATHAM: Those are just numbers, right? There's a clear policy in FMHA. Initially in the film clip you showed there were -- they suggested to the man in the spring there that he sell out. Now, you don't classify it as a foreclosure. How many people, we'll say, since 1977-78, into the '80s, before some of this high interest rate that he spoke of, were sent a letter similar to this, and because they were so frustrated because the economic situation on the farm has deteriorated rapidly in the last 10 years, they had no alternative. They just had lost all their ability to fight, and they gave up.

MacNEIL: So you say that the FMHA either by foreclosing or by suggesting that people pay up or sell out is, in fact, pushing some people out of business?

Mr. LATHAM: Well, it's like in the military service. They can give you an order to do something, and you don't have to necessarily carry it out, but they can make you wish you had.

MacNEIL: In general what is your observation on the way the Reagan administration has handled the agriculture side of things so far?

Mr. LATHAM: Well, it's quite obvious with the $600 million that was allocated that's being held up by Mr. Block, I think there's some single-interest groups in the nation that are anxious to see this happen, and it's the tail's wagging the dog. I think that --

MacNEIL: Which tail is wagging the dog?

Mr. LATHAM: Well, the tail is that the United States Department of Agriculture is wagging the Congress around. The Congress has said that money's available; it's to be used in situations like this, and they're not going to use it.

MacNEIL: Well, let's go back. Jim?

LEHRER: Why not, Mr. Secretary?

Sec. BLOCK: There is no shortage of funds at all in Farmers Home Administration for operating loans. These emergency loans -- release of that would add more money, but we're not short of money. That's the point. We have adequate funds for operating. We have increased the operating funds each year since this administration has been there in the Department of Agriculture.

LEHRER: So every farmer who qualifies for an FMHA loan, there's money for him right now, right? No problem?

Sec. BLOCK: Absolutely. All those that qualify.

LEHRER: Mr. Latham, there's no emergency. They don't need the money.

Mr. LATHAM: Well, the whole thing is on the answer "qualification," you know. He's talking about an increase every year since the Reagan administration. It's been an inflationary increase that has not kept pace with what it's cost us to produce that corp. Now, as far as the qualification is concerned, it's an arbitrary procedure you go through with FMHA; the fact is they are a lender of last resort. You go in there, if they are the lender of last resort, they're trying to keep you in agriculture, but because you are in this situation, they now have the right to disqualify you from the loan. What they're doing is they're using FMHA regulation that was enacted by the Congress of the United States, and they're turning it to use it to their own benefit. They're not solving the problems in agriculture right now. What they're trying to do is they're trying to keep a lid on a situation that's creating chaos in the agriculture industry in America. You can look very closely at the International Harvester Corporation. They're in deep trouble financially, and it is a result of the fact that the federal government has failed to live up to the commitment that they have by the Constitution of the United States to maintain a marketplace.

LEHRER: Mr. Secretary?

Sec. BLOCK: Well, there's no one that has --

LEHRER: Tell Mr. Latham why you think he's wrong.

Sec. BLOCK: Well, Jake, I -- there's no one has any more sympathy than I have, but the federal government is doing the best we can. We must be responsible in our lending activities, and there must be some rules. We're trying to handle it and manage it the best we can. We're looking for markets for the products. We're trying to cut back production with a voluntary acreage reduction program. We're struggling with a very difficult situation, and when you look at the whole thing, there's a lot of industry in the same boat, and we've got problems throughout the economy, and I think we're going to make some progress. We've been through ups and downs before in agriculture. This industry is a tough industry. It has survived before, and it's going to survive this time. That doesn't mean there won't be a few casualties, and I regret that very much

Mr. LATHAM: Well, then we've come full cycle. In 1933 a very similar situation was occurring in America where the economy agricultural dollars was declining very rapidly, and the administration at that time said in essence what you've told us here tonight -- that we're going to work ourselves out of it. And how many years was it from 1933 until what apparently the United States Department of Agriculture feels that the problem was solved? I mean, we went through a depression; we went into a war. We are at the same situation right now that where the $19 billion that's being generated in agricultural communities today will not pay the interest debt that we have to FMHA, banks, production credit, and individual lenders in this country. Now, how can you sit there and tell me that you, being sympathetic to people in agriculture, when there has been no programs made available --

LEHRER: Excuse me --

Mr. LATHAM: -- to people like myself and other people in the same situation?

Sec. BLOCK: Well, there is a program available, and we have made increased loans -- operating loans for Farmers Home Administration. We have increased our outlays for commodities by two-and-a-half times over last year. There is a great deal being done, but there is no guarantee of success for anyone in agriculture, just as there is no guarantee in other businesses for everyone to succeed. And that's just the facts of the day.

Mr. LATHAM: You're reaching into equity and people who qualify for loans, that's what you're saying, right?

LEHRER: We have to go. Robin?

MacNEIL: Sorry, but that's the end of our time, Mr. Latham. Thank you, Mr. Secretary, for joining us, and thank you, Mr. Latham. Good night, Jim.

LEHRER: Good night, Robin.

MacNEIL: That's all for tonight. We will be back tomorrow night. I'm Robert MacNeil. Good night.