Farming from the Heart: Relearning Old Lessons About Farm Debt

by Chet Kendell of Michigan State University

As I am writing this I see a news bulletin announcing that Toyota is posting its first ever operating loss in 70 years… yes, that’s right, since 1938, before WWII. These are tough times globally, here at home and on the farm too. Some economic analysts have even suggested that the present state of the economy brings to mind memories of the Farm Crisis of the ‘80s or even the Great Depression. While I wouldn’t go quite that far, and certainly hope things get better soon, there resides in a corner of my mind the notion that our economy could get worse before it gets better.

At the same time, we are presently seeing data coming out of the United States Census of Agriculture that is showing that we are in the midst of another major back to the land movement. Good people are returning to farming as their primary occupation and the data is showing that, contrary to some opinions, it is the number of farms of modest acreage, those under 180 acres, which are growing. In fact, you’ll notice that small farms are the only U.S. farm sector seeing any real increase in the numbers of farms and of course farmers.^[1]

One would think we should try and do a better job of keeping these farmers on the farm and farming than we did a generation ago, back in the 1970’s, when we saw a similar move back to the land. Many of those good people, and they were very good people, didn’t last as full time farmers. Like a revolving door, most of them by the time the Farm Crisis of the 1980’s was over were back to work in town with the farm relegated to an avocation.

While we lost many of those farmers from the 1970’s, some are still with us. Much of the tragic heartache associated with loss of the farm or farming as a viable livelihood can be avoided, it is not really necessary to repeat all the mistakes of the past. Fortunately for us, we have neighbors as well as our parents and grandparents who, in their day, weathered their own farm and economic crises. They persisted, survived and some even thrived; if we will, we can learn a great deal about how to get through the present crisis from them.

As an older student, who probably should be more concerned with retiring than going back to school, and as a farmer who depends on farming for his livelihood, I like to think I have more practical experience and perhaps insight; maybe, maybe not. You’ll have to judge. As a student, I found it important to step outside the rhetoric of the university and talk with other farmers, farmers who have made farming their livelihood and have stayed with it for at least ten years and the longer the better. It’s an old concept…learning more from the farmer experts, who are literally proving their trade each day, than university experts who are too often removed from the practice of it.

The university does some things exceptionally well, others not-so-well but others are perpetual problems and a result of the way they do business. Just like Canada Thistle or teat warts in dairy cattle, some problems at the university are there to stay with suppression rather than eradication the only real alternative. A common problem I see often is the tendency for the university to redefine our problems into the context of what they know; therein is their job security as an expert. Take the problem of farm viability to a crop and soils scientist and we need to utilize better plant varieties and rotation patterns; to an Agri-business expert and we need better business skills, and so on. The answer we are given is always the same yet different depending on the respondent’s area of expertise. Another problem is larger and more ingrained. The university places immense emphasis on the production of new knowledge and professing it, that’s why they call them professors. The obvious has happened; with the professional esteem attached to the production of new knowledge, as well as the salary increases, the bonuses and endowments; knowledge claims have become inflated, exaggerated and unfortunately in some cases even fabricated, just like the financial rewards to which they are connected. The problem is that we as farmers are too often they who are professed upon.

John Ikerd, a lifelong observer of agriculture in the United States and an Agricultural Economist made the following statement:

“During the farm financial crisis of the 1980s, I was forced to confront the reality that the way of farming that I had been promoting led neither to success nor to happiness. Progressive farmers had borrowed heavily at record high interest rates to expand the size of their operations during the export driven economic boom years of the 1970s. So, many were caught with large debts that they couldn’t pay when world commodity prices and the domestic economy fell into economic recession during the 1980s. Stories of farm failures and foreclosures sprinkled the national network news programs and an occasional suicide by a bankrupt farmer captured both local and national headlines. Farming for the economic bottom line had led to widespread financial and personal failure.

While setting across the table from more than a few struggling farm families during those times, I began to realize that what I had been trying to teach farmers over the years had contributed much more to their problems than it could ever contribute to the solutions for those problems. The farmers who had most closely followed the recommendations of their agricultural universities and government agencies were in the greatest financial difficulties. Farmers who had worked hardest for financial success were failing. There had to be a better way to farm than the way I learned in college and the way I had been promoting for the past fifteen years.” ^[2]

Kathryn Marie Dudley, a Yale University Anthropologist has conducted research into debt financing and its effects on a rural farming community in Minnesota. She draws her conclusions from interviews with farmers and other community members involved in the farm crisis of the 1980’s. Her findings are published in the book Debt and Dispossession: Farm Loss in America’s Heartland. A book I recommend as mandatory reading for any farmer or would be farmer. Dudley, points out that she and others who have researched the topic have discovered, “there is a recognizable difference between cautious and ambitious farm management styles—and a strong tendency for more ambitious managers to be at greater risk of failure.” She states that this is usually a function of how they define success and then how they pursue it. She considers similar findings in the work of Sonya Salomon ^[3] as well as Peggy Barlett ^[4] and identifies:

“Cautious” managers are those who define success in terms of family continuity. They value keeping the farm in the family and therefore attempt to minimize financial risk by avoiding debt, even if this means setting a modest standard of living. “Ambitious” managers, in contrast, are those who define success as maximizing financial profit. They value personal achievement for themselves and upward mobility for their children, and therefore do not hesitate to expand their operations through debt financing, even if this means putting the farm itself at risk.” She concludes that: “the ethnographic research is unequivocal on one point: whereas the entrepreneurial style was strongly encouraged during the 1970s, in retrospect it is the cautious farmer who has endured.” ^[5]

My voice coincides with that of Dudley’s and Ikerd’s that family, agricultural and community values are more effective in sustaining the farm than ambitious economics. The standard advocated by our universities is the aggressive, competitive agricultural businessman who utilizes extensive debt financing to positively manage and grow the farm. The problem is that this model doesn’t work well, at least not as well as some would lead us to believe. As farmers we try to be the positive determinant of ordered outcomes on the farm, however, with the vagaries of nature, the volatility of the markets and arbitrary agricultural policy it just isn’t so. The inherent risk in farming is greater than we may realize. On a daily basis we make a great number of complex decisions with a high level of uncertainty and there are limits to what we can rationally do. What is difficult in conventional agriculture becomes nearly impossible in the highly diverse, integrated cropping systems required of sustainable agriculture. Too often, when the harvest is in, we are left to speculate just what happened, both good and bad.

At the present, I am afraid that too many farmers are finding out that tying a fixed mortgage payment to an irregular income is causing repayment problems and fears of farm dispossession reside deep in their heart. Usually a town job is picked up to support the farm, but it’s difficult to farm as well as we know we should with our time divided as well as our interests. Systemic approaches to agriculture, which require abundant time and intellect on farm, must of necessity, be abandoned. As a result, the data shows that the farm soon decreases in profitability ^[6] and the town job comes to dominate the livelihoods and the lives of the farmers.

As I have discussed this topic with a variety of farmers from various states, those who have been around the longest have always come back to a simple common theme: The capacity to recover and continue is most essential if you plan to have farming as a viable livelihood. Being cautious with debt allows us to recover and continue in difficult times and to prosper in better times. For those starting out in farming, if you start out small, you’ll make smaller mistakes while you learn, then as you get better let the farm finance its own growth. No reason you need to pay the banker’s salary too. Remember, if the farm doesn’t carry a mortgage there really is very few reasons to lose it.

This presents a problem for the ambitious farmer who considers farm success as personal achievement and financial profit; for them the farm is certain to be a frustration. The farm is a poor ladder for the social climber. We all want to better ourselves but at what income level can we be happy and content, or is there no end to our ambition and in the pursuit of it do we push the farm past its limits? At some point contentment with a modest agrarian lifestyle is essential to the viability of the farm. Bill Henning, a Cornell Extension Specialist reminds us that a great many people live on much less than we do. If we look at our lives closely it’s really not the cost of living which has gone up so much, as the cost of living the way we want to.^[7] The difficult decision, the very difficult decision is reconciling the standard of living we currently have against the standard of living we think we deserve, which, according to Economist Paul Heyne, is a moral decision and not an economic one at all.^[8] Once we come to grips with the moral decision, and find an acceptable rather than socially competitive standard of living, it becomes much easier to move forward with a cautious farm management style, farming with modesty and using debt providently to improve the viability of our farms and our livelihood as farmers.

As we look to the future, there is no denying that we are faced with some challenging times ahead of us, but we have seen tough times before and probably will again. The key is not to repeat the same mistakes each generation. Find other farmers and family members who’ve seen similar times and weathered them. I suspect that, if asked, they will confirm what I have stated here. My suggestion is if Grandpa and Grandma have left the farm decision table, bring them back. They have a broader practical base on which to make good farming decisions, including farm business and debt decisions. If you have neighbors who have made their livelihood out of farming seek out their ideas and recommendations as well. Sit down with them, pay attention and value deeply their suggestions and ideas.

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1. Census of Agriculture, Data by Primary Occupation: 1992 Table 48; 2002 Table 60. 1992-2002, National Agriculture Statistics Service.
2. Ikerd, J., Farming with Values that Last: Family, Community, Land, and Faith, in John E. Ikerd recent papers. 2004, The University of Missouri: Columbia.
3. Salamon, S., Ethnic Determinants of Farm Community Character, in Farmwork and Field-work, M. Chibnik, Editor. 1987, Cornell University Press: Ithaca. p. 167-188.
4. Barlett, P.F., The Crisis in Family Farming: Who will Survive, in Farmwork and Field-work, M. Chibnik, Editor. 1987, Cornell University Press: Ithaca. p. 29-57.
5. Dudley, K.M., Debt and Dispossession: Farm Loss in America’s Heartland. 1 ed. 2000, Chicago and London: The University of Chicago Press. 195.
6. Census of Agriculture, Data by Primary Occupation; Income per acre harvested. 2002, National Agriculture Statistics Service.
7. Henning, B., Simple Observations on Small Scale Farming. Farming Magazine, 2003. 3(3): p. 31,32.
8. Heyne, P.: University of Washington.