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PASTOR GENERAL'S REPORT, MARCH 1, 1985
PAGE 9
this spring because they have exhausted their credit and will be
unable to borrow money to plant crops.
As more and more farmers are driven from the land, small towns
and cities are dying. Equipment dealers, grain elevators and�
and .P2E stores along Main Street� closing. Banks that have
extended repayments and renegotiated loans to hard-pressed
farmers now are threatened themselves. The Federal Deposit In
surance Corporation's latest problem-bank list included 231 farm
banks, more than double their number a year earlier. Since that
June 30 report was issued, more than half of all bank failures
have involved farm banks.
Almost 30 percent of the federal Farmers Home Administration's
25.2 billion dollars in outstanding loans are delinquent. The
problem is most severe in the heart of the nation's breadbasket-
Kansas, Iowa, Illinois, Nebraska, Indiana and Ohio.
The crisis had its beginning in the 1970s, when the Soviet Union
began buying massive amounts of U.S. grain and predictions of
worldwide famine made agriculture a fast-growth industry. Estab
lished farmers rushed to expand operations, while about 70,000
young Americans took up the occupations of their parents. Many
borrowed heavily to buy land and equipment. Farm debt jumped
from 73.3 billion dollars in 1974 to 182 billion in 1981.
The heavy borrowing was backed by rapidly escalating land prices.
Between 1974 and 1981, the average price of farmland in the U.S.
rose from $302 an acre to $795. Prime Midwestern land shot up to
$4,000 an acre. The boom peaked in 1981, and land values have
careened downhill ever since. Economists blame the global reces
sion, a stronger U.S. dollar, years of high interest rates and
politically inspired embargoes on food exports that made overseas
customers doubt the reliability of American suppliers and pro
vided an opening for competitors.
Net farm income fell from 31 billion dollars in 1981 to an esti
mated 24 billion, at most-:- this year.... Emanuel Melichar, an
economist with the Federal Reserve System, estimates that 83
percent of the farm debt is owed by only 29 percent of farmers.
More than two thirds of them have debts equal to 40 percent of the
value of their farms--the point at which they owe more in
interest than they earn from their crops.
A February 11 report received over our Reuters wire added the following:
Neil Harl, a professor of economics at Iowa State University,
•••[ said that] banks are already overextended•••• They have
loaned more than they can now recover since the collateral
involved, the land itself, has sharply fallen in value. An acre
of prime Iowa farmland which sold for $2,147 in 1981, he said,
sells today for $1,357--when a buyer can be found••••
Today the total U.S. farm debt is estimated to be $210 billion,
more than the entire combined debt of the governments of Brazil,
Mexico and Argentina, and second only to the U.S. government's