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Farm Bust of the 1980s

  Auctioneer Hank Kobza after his last harvest  
The boom of the 70s became the bust of the 80s because surplus production rose, land prices rose, too many farmers were carrying too much debt, problems in the economy forced interest rates to historic highs, and a new administration tried to cut back on government support. As a result, marginal farmers were forced off their land. Many did not go quietly as farm protest movements heated up during the 80s. The number of farmers shrank, and the average farm got bigger.

The factors that produced the bust were powerful and varied –

  • Many farmers took Earl Butz seriously when he told them to "get big or get out." They increased production so much that there were record harvests between 1974 and '79. Much of that increase in production was financed with borrowed money. In 1962, total farm debt was $60 billion; by 1983, farm debt had skyrocketed to $216 billion.
  • Inflation was running rampant through the general U.S. economy in the 70s. In 1979, the Federal Reserve Board tried to slow the rate of inflation by increasing interest rates. That increased the cost of doing business for all businesses, including farming.
  • Land is the first requirement for growing a crop, and land prices reached new highs in the production rush of the 70s. Urban speculators also moved in to the land market bidding prices up even higher. Then in the 80s, land prices fell back down to earth. Farmers who had borrowed money with high land prices as their collateral often couldn't find new loans, even for operating expenses.
  • Export markets were bolstered during the 70s to absorb all that increased grain production. Exports in 1960 totaled $6 billion and quintupled to over $32 billion in 1979. That year, a quarter of all crops in the U.S. were grown for export. But exports stopped growing during the 80s, in part because of the perceived effect of the 1980 Russian grain embargo.
  • Ronald Reagan defeated Jimmy Carter in the 1980 election in part because of Carter's unpopular Russian grain embargo. Reagan was really no friend to the farmer admitting that he didn't understand the concept of "parity prices." When the administration began working on the 1981 farm bill, Reagan attempted to set an overall limit on the amount of farm spending in the bill. Different farm organizations ended up fighting each other to get their piece of the pie. The administration also required that most farmers had to reduce their production acres by 10 percent to qualify for support payments. Farmers did what they had in the past – take their worst acres out of production and increase production on the rest. Surpluses continued to be produced and government payments rose even higher.

A slowdown in the early-80s became a crisis of the mid-80s. At least a third of Nebraska farmers, for example, were in danger of loosing their farms. Delinquency on property taxes increased nearly 400 percent between 1980 and '85. Banks in Nebraska were failing at rates that were the highest in the nation. As farmers couldn't pay back their loans, there were more bank failures than at any time since the Great Depression. When the banks tried to foreclose on the farms, sheriffs in the plains were met by protestors or individual farmers with guns. At least one farmer, Arthur Kirk of Cairo, Nebraska, was killed in a shootout with law enforcement officials trying to repossess his land in 1984.

Hank Kobza InterviewTodd Sneller InterviewHank Kobza, (left) of David City, Nebraska, was forced to leave farming when his bank failed and he couldn't find alternate funding. "The cupboards were pretty bare, I'll tell you, at that time," Hank says now. "I think I aged a lot during those 80s. They were not fun." Hank was profiled in a documentary called "After the Last Harvest," produced by the Nebraska Educational Television network in the 80s. In this special video segment, we see how Hank and his family coped then – he became a full-time auctioneer forced to sell out his neighbors when they got in trouble – and how he's doing in 2009.

Todd Sneller (right) says that the farm crisis of the 80s forced fundamental changes in farming. "The 70s and 80s really were things that were life-changing challenges for many who lived on the farm and many who live in rural communities."

Elaine Stuhr InterviewJim Ermer InterviewElaine Stuhr (left) notes that interest rates reached 19 and 20 percent, land prices reached $2,500 an acre in central Nebraska, and corn prices dropped from $3.50 a bushel to $1.50. "That just put the squeeze on many families and they simply couldn't make it," she says. "I think probably the biggest [change] was farm women went to work in town... This was the turning point where women would work to buy groceries. It was a difficult time."

But hard times for many can produce good times for a few. Jim Ermer (right) had just started his farm equipment business in York, Nebraska, and he could find bargains on repossessed equipment. "They happened to be the best years I ever had in the implement business," he now says with a little chagrin. "I went through many states around here. I went to Kansas, some Texas, Missouri, Iowa. And I would buy implements that were repossessed... We were able to recondition these machines and sell them for oh so much less than new."

Troy Otte InterviewDon Lee InterviewThe crisis affected many personally. For instance, Troy Otte (left) was considering getting into the farming business in the middle of the 80s after growing up on a farm and getting his degree in agriculture. "We didn't come back to the farm without reservation," he says. "The early 80s were kind of a slow abandon. The mid 80s, they had some drought periods and some lower commodity prices. And it was kind of its own little recession in that time frame… But I enjoy it. You have to enjoy it to do it because you kind of live it every day."

Don Lee (right) says he became a university professor – rather than a researcher for a seed company – because of the farm crisis of the 80s. "We talked about Monsanto," he says. "The biotechnology industry was going through some starts and stops, and I think it reflected the profitability in the farming sector... If I had a choice, I was going to get a job at a university, at a public university. I liked to teach, and I just felt it was a more reliable career rather than working for industry."

The farm crisis of the 80s affected everyone who lived through it in rural America in very personal ways.

Written by Bill Ganzel, the Ganzel Group. First published in 2009. A partial bibliography of sources is here.


 

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