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AMES, Iowa - Iowa farmers are coping with economic hard times by
watching how they spend money for everyday needs and cutting back on
some activities.
A large majority of farmers who responded to the 1999 Iowa Farm and
Rural Life Poll have taken at least one step to reduce living expenses,
reported Paul Lasley, Iowa State University Extension sociologist who
directed the poll. Seventy-one percent say they are reducing expenses by
shopping at discount stores, and 61 percent are cutting medical costs by
switching to generic drugs.
Of the 2,583 participants in the 1999 poll, about half (52 percent) say
they are saving money by buying more used or second hand merchandise
such as clothing, furniture and machinery. And 51 percent said they save
money by avoiding name brand products when they have a choice. Some
financial adjustments that farm families have made are prudent
decisions, but they can have important negative impacts on local
businesses and may have negative long-term consequences for family
life-styles, Lasley said. "Shifting purchases to discount stores or
delaying purchases may result in financial stress among family-owned
independent main street businesses," he noted.
More than one third of the poll respondents said they have changed food
shopping or eating habits to save money, and 32 percent said they have
reduced household utility use. Thirty-four percent say their standard of
living is declining due to their financial situation, and 33 percent
say they have delayed retirement plans. Other ways of saving money
include changing transportation patterns, mentioned by 30 percent, and
postponing medical care, mentioned by 21 percent.
In addition to changing their everyday spending habits, farm families
are looking at other ways to save money. Fifty-one percent said they are
cutting back on what they spend on social activities and entertainment,
and 47 percent said they have postponed major household purchases.
Forty-five percent have cut back on charitable contributions, and 45
percent have postponed purchases of major items needed in the farm
business.
Twenty-three percent of the poll respondents say they are purchasing
more items on credit than they used to, and 22 percent say it has been
necessary to borrow money from lenders for living expenses. Another 10
percent have borrowed from family members. A few, 16 percent, have
raised money by selling possessions or cashing in insurance, and 7
percent have sold land or other assets to reduce debt.
Taken as a whole, these data show the widespread and pervasive changes
that farm families are doing to make ends meet," Lasley said. He added
that the findings document the seriousness of lifestyle changes farm
families are making and the tough choices they may face if farm prices
do not improve. "For example, rural churches and other groups that rely
upon charitable contributions will undoubtedly be adversely affected as
farm families reduce their giving," Lasley said. "This only serves to
reduce the capacity of these organizations to help others during these
difficult times," he noted.
In addition to reducing expenses, a significant number of farm
operators have sought to increase income. Thirty-seven percent said at
least one family member has taken an off-farm job in the past 12 months,
and 28 percent said they are working more overtime at off-farm jobs.
Twelve percent have started home-based businesses, and 21 percent are
trying to cope with income needs by expanding their farm operations.
The Iowa Farm and Rural Life Poll is funded by ISU Extension and the
Agriculture and Home Economics Experiment Station. The purpose of the
poll, conducted since 1982, is to ask farmers' views on a variety of
rural and agricultural issues. Mail questionnaires were sent to a
random sample of 4,947 Iowa farm operators in mid-February, with a 52
percent response rate.
Contact:
Paul Lasley, Extension Sociology,
(515) 294-0937, plasley@iastate.edu
Del Marks, Extension Communication Systems, (515) 294-9807,
dkmarks@iastate.edu


Running a Farm Business is Becoming More Risky

AMES, Iowa -- Nearly nine out of 10 Iowa farm operators say the
business of running a farm has become more risky during the past five
years. Eighty-nine percent of the 2,583 farmers who responded to the
1999 Iowa Farm and Rural Life Poll said risk levels have increased
during the past five years, and 87 percent also said that they expect
farming to continue to become more risky during the next five years,
reported Paul Lasley, Iowa State University Extension sociologist who
directed the poll.
While farmers agreed that farming in general is becoming more risky,
they were slightly less concerned about their own farming operations.
One farmer in four (25 percent) said the level of risk in their own farm
operation had remained the same during the past five years, and 8
percent said their personal risk had actually declined. Sixty-seven
percent said their personal risk had increased, however.
Lasley said a major finding of the 1999 poll is that the extent and
magnitude of economic risk and uncertainty on the farm is creating
significant stress among farm families. "Current financial harship,
along with perceptions that risk and uncertainty in farming are likely
to increase, have resulted in numerous adjustments and changes on Iowa
farms," Lasley said. Fifty-seven percent of respondents to the 1999
poll said their personal stress had increased during the past five
years, while 30 percent said it had not changed, and 13 percent said it
had declined. Those figures compared with 60 percent who said stress
levels had increased when a similar question was asked in 1994, and 44
percent who said stress levels had increased in the five years before
1989.
While farming is becoming more stressful, only 45 percent said they are
becoming more concerned about their personal level of stress, and 43
percent said their concern has not changed. Forty-four percent said
their stress has increased on a day-to-day basis, while 42 percent said
it has not changed, and 14 percent said it has declined.
Those figures compared with 29 percent who said day-to-day stress had
increased in 1989, and 29 percent who said it had decreased. "As we
look to the prospects of a large crop this fall, with continued low
prices and considerable economic stress, those in farming will be faced
with mounting personal stress," Lasley said. "It is important that farm
families recognize the stress they are under and seek ways to reduce
stress levels," he said.
In response to two new questions asked this year, Lasley said 81
percent of Iowa farmers reported that community stress levels have
increased duirng the past five years, and 53 percent reported stress
levels have increased in their families.
The Iowa Farm and Rural Life Poll is funded by ISU Extension and the
Agriculture and Home Economics Experiment Station. The purpose of the
poll, conducted since 1982, is to ask farmers' views on a variety of
rural and agricultural issues. A random sample of 4,947 Iowa farm
operators were sent mail questionnaires in mid-February, with a 52
percent response rate.
Contacts:
Paul Lasley, Extension Sociology,
(515) 294-0937, plasley@iastate.edu
Del Marks, Extension Communication Systems, (515) 294-9807,.
dkmarks@iastate.edu


Money available for bright ideas in sustainable agriculture research

COLUMBIA, Mo. -- Pasture-fed poultry. Controlling mites in beehives
without chemicals. Growing ginseng in conjunction with black walnuts.
Intensive goat grazing.
If you have some ideas for sustainable agriculture, you might be able to
test them out with the help of the Missouri Department of Agriculture
and University of Missouri Outreach and Extension. The agencies are
offering 23 sustainable agriculture demonstration awards through the
Sustainable Agriculture Extension Program of MU and Lincoln University.
The grants of up to $3,000 help farmers reduce their dependence on
purchased inputs and help to protect and conserve natural resources,
said Joan Benjamin, co- coordinator of the MU Extension Sustainable
Agriculture Program.
"To be considered, a project or demonstration must be sustainable,
meaning economically viable, environmentally sound and socially
responsible," she said. "Most projects aim to reduce pesticide and
fertilizer use."
While some of the grants are geared to niche farming, many have broader
applications for Missouri agriculture. For example, several projects
evaluated what kinds of grass are most suitable for forage in different
parts of the state. Another demonstrated the best ways to return
Conservation Reserve Program land to no-till production, and others
tested alternative, naturally occurring fertilizers on corn, tall fescue
and cotton.
Since its inception in 1995, the program has awarded 115 grants to
Missouri farmers. Projects are selected by a committee made up of
farmers and representatives of the state department of agriculture and
the university. MU researchers and Extension specialists aid the
recipients in conducting the demonstrations. Projects must be completed
within three years.
The deadline for application is Nov. 30, 1999. For an application,
contact your local Extension office or the Missouri Department of
Agriculture at (573) 751-5505. For more information, call Joan Benjamin
at (573) 445-2194.
Forrest Rose
Information Specialist
(573) 882-6843
RoseF@missouri.edu


PLAIN ECONOMIC SENSE
Emergency Farm Aid and Payment Limit Impacts on Iowa
By Mark A. Edelman
Economist
Ia University

   Congress approved and sent to the President $8.7 billion in
emergency aid to the nation's farmers, including $5.5 billion in market
loss payments. The emergency aid package was attached to the regular
agricultural appropriations bill that totaled $69 billion for Fiscal
Year 2000. Of this total $29 billion is for farm programs and $35
billion is for School Lunch, Food Stamps, and other food assistance
programs.


Media reports suggest that Iowa's farmers will receive an additional
$610 million over and above what already was allocated for farm
programs. ISU's Center for Agriculture and Rural Development has
estimated the 1999 direct payments for Iowa farmers will total $1.5
billion and that federal farm assistance will likely account for about
62 percent of Iowa's estimated $2.4 billion net farm income for 1999.
Dividing Iowa's direct payments by Iowa's 90,792 farms--using the $1,000
in ag sales Census definition of a farm--means the average payment per
farm will be about $16,500. An average Iowa county will receive about
$15 million in total federal farm assistance. Averages don't tell the
whole story. Because farm program payments are primarily distributed on
the basis of production volume, larger farms receive larger payments. A
previous column examined farm size and indicted that 3.6 percent of
Iowa's farms account for 57 percent of production. Visits with local FSA
officials confirm that only a few farmers in their counties bump up
against farm program payment limits, but then it only takes 33 of the
largest farms in an average Iowa county to account for half the county's
production, including livestock.


The 1996 Farm Bill imposed a $40,000 payment limit on Agricultural
Marketing Transition Act (AMTA) payments and a separate $75,000 payment limit on Loan Deficiency Payments (LDP) and Marketing Loan Gains--for a combined limit of $115,000 per farm entity. In 1999, the AMTA payment rate is 33 cents per bushel for corn. Assuming a program yield of 120 bushels per acre, a farm could have had a historical acreage base of up to 1,010 corn acres before the farmer would have received the $40,000 maximum AMTA payment.


Media reports indicate 1999 Emergency Assistance legislation may double
the AMTA payment rate as well as the AMTA payment limit. This means a
farmer with a 1,010 historical corn acreage base could receive $80,000
under the new maximum AMTA payment limit. In addition, the limit on LDP and marketing loan gain payments is to be doubled to $150,000. Thus, the combined AMTA and LDP limit would increase up to $230,000 per entity, according to the media reports. LDP payments are based on the farmer's actual yields and harvested crops rather than the historical program base and program yields.

 

If a farmer takes an LDP payment of $.40 cents per bushel and has a
harvested yield of 140 bushels per acre, this farmer could farm up to
1,339 acres of corn before the old $75,000 payment limit became binding.
Doubling this payment limitation means an Iowa farmer could farm up to
2,678 acres of corn and receive $150,000 in federal LDP assistance
before the new limit became binding.


Many larger operations have several family members and spouses working
together on part of their farming operations. USDA allows such
individuals who meet special criteria to accept payments from up to
three entities. Thus, federal farm program payment limits can be
exceeded under special circumstances. A father and son or husband and
wife in a large operation could potentially receive up to $460,000 if
they meet the special criteria The bottom line is that half of Iowa's
farms are non-commercial farms and rely primarily on off farm sources of
income. They will be receiving less than the $16,500 average farm
payment. Most of Iowa's commercial grain farms will receive two to three
times the average payment. Larger grain farms will potentially receive
about nine times the average payment.


While targeting federal assistance to medium and small farms and those
that are financially vulnerable is often discussed during the outbreak
of a farm crisis, the bulk of the emergency payments is not distributed
according to those criteria. Up to this point, Congress and farm
interests have not been willing to target the bulk of the farm program
payments in ways that exclude or penalize larger farmers, or that
arbitrarily reward medium, small or financially vulnerable farmers.


Some ways farmers are adapting to low farm prices

You can call it seeing the glass half full instead of half empty. Many
farmers affected by the poor farm economy are aggressively looking at
ways to remain competitive in production agriculture, says a University
of Minnesota Extension Service educator.
"There are no magic answers, but I see many farmers being proactive,"
says Erlin Weness, a farm management educator at Worthington. Here's an
outline of what Weness says some are doing:
--Getting jobs off the farm. This may be one of the best options to help
ride the current price squeeze out.
--Getting an education in another field; learning another trade.
--Expanding acres or expanding livestock-many times through contracts to
lessen risk.
--Culling out unprofitable enterprises.
--Examining and cutting costs in every aspect of the business and
household.
--Investing in value-added enterprises in an effort to capture profits
further up the food chain.
--Networking and joint ventures in livestock and machinery.
--Establishing off-farm business ventures such as construction, trucking
and retail sales.
--Contracting farm work done after selling machinery, or providing these
production services to others.
--And, Weness says other farmers are opting for retirement and Social
Security. The important thing, he says, is to plan ahead so you have
some options.
# # # eweness@extension.umn.edu


The Traditional Domestic Policy Options for the Farm Crisis
By Mark A. Edelman
Extension Public Policy Economist
Iowa State University Extension to Communities

Increasingly, many farmers and nonfarmers are asking tough questions
about farm aid: Do all farmers really need the assistance? What are the
options? How do they work? Who really benefits? What are the long-term
consequences? In this column, many traditional domestic policy options
for dealing with a farm crisis are discussed.
Option 1. Increase Transition Payments. The 1996 Agricultural Marketing
Transition Act (AMTA) set up seven-year transition payments for program
commodities. Before the 1996 Act, program crop payments were tied to
planting decisions. After the 1996 Act, the program crop base was
frozen and the payment rates were to annually decline over the
seven-year period. Each farm could vary the crop mix each year, and
AMTA payments would not be changed.


One option for increasing farm assistance has been to increase the AMTA
transition payments. For example, last year's Boone County AMTA
transition payment for corn was 36 cents per bushel. Congress passed
emergency aid that added an additional 19 cents. This year one farm aid
proposal is to double or add 36 cents to the original AMTA transition
payment. Adding supplemental payments for one year as proposed does not change the original payments planned for following years. Finally,
larger farmers tend to receive larger payments--up to a payment limit of
$40,000--because they tend to have a larger historical farm program
base.


Option 2. Increase Loan Rates. Currently two programs use loan rates.
Farmers can take out a nine-month commodity marketing loan on harvested grain based on the loan rate. When market prices are below the loan rate, the farmer can pay back the loan at the local county's posted
price any time before the loan comes due. A local county posted price
varies daily and is typically set about 5 cents below the local market
price so there is no incentive for farmers to forfeit any grain to the
government. Thus, the farmer receives the difference between the loan
rate and the posted county price as a marketing loan gain that doesn't
need to be repaid.


For example, suppose the corn loan rate in Boone County is $1.78 per
bushel. A farmer can take out a commodity marketing loan at this rate.
If the Boone County posted price is $1.53, the farmer pays back the loan
at $1.53 per bushel and the commodity marketing loan gain would amount
to 25 cents per bushel. The farmer also would be free to sell locally at
$1.58 per bushel.
Loan Deficiency Program (LDP) payments also use the loan rates and
local county posted price. However, the farmer simply receives a grant
and does not take out a loan under this program. The farmer selects a
day on which to receive an LDP payment for his harvested grain when the
market price is below the loan rate. The difference between the loan
rate and the local county posted price is the payment rate. LDP
payments and marketing loan gains are subject to a $75,000 payment
limit.


Increasing the loan rate would increase program payments to farmers who
were able to harvest a crop--up to the $75,000 payment limit. In fact,
farmers with a larger than normal crop benefit disproportionately, while
farmers who experienced a short crop--due to drought or hail--do not
benefit nearly as much because they have less crops to put under loan or
upon which to receive an LDP payment. Increasing the loan rate also
implies a more permanent multi-year change in payment rates. In turn,
this may create a longer-term incentive for farmers to expand
production, perhaps when the market is giving the opposite price
signals.


Option 3. Re-establish Grain Reserves. The 1996 Farm Bill eliminated
the Farmer-Owned Reserve (FOR) and government payments for storage.
Instead, farmers now sell their surpluses on the market while the
government picks up the price difference up to the loan rate as
previously explained. Without the FOR, market prices are forced down to
market clearing levels. This makes U.S. farmers more competitive in
world markets. At the same time, government payments to U.S. farmers
increase as the surplus grain forces the county posted prices down even
further.


Some groups have proposed allowing farmers to extend their nine-month
commodity loans to up to three years and to re-institute government
storage payments that used to be 26.5 cents per bushel per year for
corn. Compared to current policy, a three-year farmer-owned grain
reserve program would take surpluses off the market during the current
year, but increase the U.S. carryover stocks during the next three
years. During the current year, with less grain on the market, market
prices would not decline to the same degree. However, LDP and marketing loan payments to farmers would also be lower for the current year. Why?  Because the county posted prices would not be as low with a reserve program compared to current policy. In the longer term, market prices with a farmer-owned reserve would likely be lower than they would
otherwise be without a reserve. Why? Grain going into the reserve
during the current year must come out back onto the market within three
years.


Option 4. Expand the Conservation Reserve. Currently, about 31 million
acres are in the Conservation Reserve Program (CRP). Under this
program, farmers receive payments for taking eligible land out of
production for ten years. The 1996 Farm Bill eliminated annual acreage
reduction programs and paid diversion programs. The CRP program is the
only remaining program in which the government has management influence
over supply.


Some groups have suggested increasing the 36.2 million acre limit
authorized for the CRP in the 1996 Farm Bill. Others have proposed a 3
to 5-year CRP program to take more acreage out of production. This
approach would tend to reduce domestic production, reduce surpluses,
and raise market prices. However if too much land is put into the CRP,
higher market prices may encourage international competitors to expand
their production and reduce the U.S. share of world trade. While larger
farmers with eligible acres may disproportionately benefit from the CRP
because they can potentially place more acres into the program,
eligible acres are not uniformly distributed and CRP rental payments are
subject to a $50,000 payment limit.


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