CAMBRIA Over an
oak dining room table in a 100-year-old farm house, Art, Doug and Heather Tessman
weigh their futures like poker players pondering their next hand of cards.
This year, with one of the best fall harvests on record, you might imagine that
every cut of the deck would bring these farmers prosperity. Their fields are full
of ripening corn and the soybeans are nearly splitting their pods. In the barn,
the cattle and hogs are well-fed.
But the spectacular growing season has played a cruel trick on the Tessmans and
thousands of farm families nationwide. When all the cards are on the table, it may
end up costing them more to raise their grain and livestock than they'll get paid
for it at the markets.
On 500 acres of corn, for example, the Tessmans would lose $88,000 at the $1.60
per bushel price recently quoted on the Chicago Board of Trade. Their break-even
point is about $2.56 per bushel.
With the hogs, the Tessmans stand to lose roughly $25 for every animal they sell.
Last year they raised 3,000 market hogs.
While waiting for prices to turn in their favor, many farmers will put their grain
in storage.
Some will seek off-farm employment, government loans and sympathetic bankers
to keep from becoming farm auction statistics.
"Borrow, borrow, borrow," Heather Tessman quipped, a light-hearted remark barely
masking her deep concern for the future.
Harvest of despair
In a year of plenty, the U.S. Department
of Agriculture estimates that net farm incomes will slide an average of 15 percent
and at $42.5 billion will be below the $45 billion average for the 1990s.
In southwestern Minnesota, where grain prices can make the difference between prosperity
and poverty, 1998 net farm incomes could plummet more than 200 percent, according
to a University of Minnesota study.
What that means is a farmer whose net income was $40,600 in 1997, not only won't
turn a profit this year, but could come up short $42,650, said Kent Olson, University
of Minnesota farm economist.
Much of the problem comes down to this, Olson said: As farmers prepare for fall
harvest, millions of bushels of grain are still in storage from last year. That,
and a growing global economic malaise has depressed prices to some of the lowest
points in decades.
U.S. exporters are locked in intense price competition with Canadian and South
American grain dealers for a shrinking share of the world market.
Historically, one out of every five rows of U.S. corn has been shipped overseas.
But that number has wavered in recent years, and U.S. agricultural exports are now
down one-third from their highs in the 1970s.
Just last month the Department of Agriculture cut its fiscal 1999 U.S. farm exports
forecast to $52 billion, down 5 percent from 1998 and the third straight year of
declines.
"We're going to choke on these (grain) supplies until we see some demand," said
Tim Hannagan, an analyst with Alaron Trading Corp. in Chicago.
While markets have become more volatile, the Freedom to Farm Act of 1996 continues
to phase out government subsidies. That means the safety net farmers have relied
on since the Depression is frayed when it's needed the most.
"Sometimes my heart aches when I have to tell farmers what their corn is worth,"
said Larry Kippley, manager of the Peavey grain elevator in Waunakee.
Farming has always been a dicey business.
"But the bad farmers were weeded out a long time ago," said Bob Denman with Wisconsin
Farmers Union. "How far do you take this survival of the fittest theory?"
The Tessmans have plowed nearly every dollar they've made from the farm back into
it.
But this year there won't be money for replacing machinery or upgrading a hog facility
they call "the dungeon."
Art Tessman's wife, Marci, already has a job off the farm at ABS Global in DeForest.
That gives the family insurance and a steady income.
"If it's worse next year, chances are I will look for a job off the farm," Art
said. "But the reason I went into farming was I couldn't see spending the better
years of my life working for someone else."
A dangerous ripple effect
Nationwide, farm income is expected
to be down $7.5 billion this year from last year, the latest Department of Agriculture
figures show.
Besides inflicting pain on tens of thousands of farm families, the loss of income
could be devastating to the larger rural economy.
That's because farmers spend roughly 75 percent of their money in local communities,
according to a UW-River Falls study. Using a multiplier formula that accounts for
the number of times money is spent and re-spent in a town, a moderate-size farm with
gross revenue of $200,000 is worth $720,000 to the town.
Farmers buy big-ticket items such as $100,000 tractors. And like everyone else,
they're regular customers of the local car dealerships, hardware stores and sporting
goods shops.
"Main Street USA is going to feel some of the farmers' pain this fall," said Larry
Swain, author of the UW-River Falls study.
"The screws are slowly being tightened," added Mike Myers, vice president of First
National Bank of Platteville. "Plants that make farm machinery are slowing down
the ripple effect will spread to many industries."
Just north of Sauk City, at The Gathering restaurant, farmers were among the breakfast
bunch one recent morning.
Over hefty plates of farm-fresh eggs, bacon and heady cups of coffee, they bemoaned
corn, hog and beef prices.
"You would have to go back 30 years to find hog prices as low as they are today,"
said Jack Wyttenbach, a Sauk City hog farmer.
In some ways, farmers at the restaurant said, they are victims of their own success.
They've been trained to produce, produce, produce, contributing to the problem
of too much grain, too many hogs, too many beef cattle.
Some say it's time for changes in the Freedom to Farm Act; the safety net needs
mending.
Although farmers were eager for the freedom to plant what they liked, many haven't
been able to adequately cover their risks through crop insurance, commodities trading
and other marketing tools.
"The main reason for the bad news (in farm markets) is that Congress has so badly
screwed up our federal farm program with its pig-headed belief that a laissez-faire
approach is good for American agriculture," said Bill Brey, president of the
Wisconsin Farmers Union. "The result is markets are plummeting as we grow more than
we can sell."
Some of this year's grain will rot in piles on the ground because there aren't enough
storage facilities to house it and the surplus from last year.
Storage is expensive, but farmers are turning to anything with a roof over it,
including empty airplane hangars and warehouses.
Cheap grain has reduced livestock feed costs. But it's also encouraged hog producers
to add hundreds of thousands of animals to their inventories even as pork prices
nose dive.
Meanwhile, a Texas drought and a poor grain harvest in the southwest has forced
cattle ranchers to put tens of thousands of animals on the market early in order
to reduce feeding costs. That's trampled beef prices.
"As farmers, we're fighting for the right to produce food as cheaply as possible,"
Wyttenbach from Sauk City said. "But sometimes the better we are at it, the more
we feel the squeeze."
There are a few bright spots in this bleak agricultural picture.
First, low grain and livestock prices have kept the lid on consumer food costs.
Second, cheap grain has been a blessing for dairy farmers who buy it for cattle
feed.
For a variety of reasons, farm milk prices have surged to near-record levels, offsetting
some of the losses farmers face in other areas.
Still, dairy farmers have had their own price woes this year. And some worry that
cheap grain will encourage over-production of milk, bursting the current price bubble.
"The higher prices we're getting now help, but it will take some time to catch
up (from past months) and who knows how long it will last," said Joe Krejchik, a
Sauk City dairy farmer with 275 cows.
Farm auctions on the rise
Farm economists say they're hopeful that the current glut of grain and livestock
will work its way through the system sometime next year.
Then, it is hoped, farmers will see profits.
"That's what keeps us in the game another year," said Judy Klahn, a Lodi grain
and hog farmer.
But farmers sometimes question why they should stay in the game when there's so
much uncertainty about what hand they're going to be dealt.
"Every day you have second thoughts about it," said Keith Ripp, a Lodi grain farmer.
"You can get through one bad year, but after that you're hurting."
Ripp, 36, remembers the farm crisis of the mid-1980s, when banks forced farmers
off their land and Willie Nelson staged benefit concerts.
"It's not that bad now," he said. "But this year, some farmers are going to say
'the heck with it' and take jobs in town."
In Dodgeville, 81-year-old Robert Masters recalls farming through the Depression
with his parents.
A farmer for more than 60 years, he's weathered all of the worst economic storms
since the turn of the century.
"There have been some very hard times," he said. "But you know, years ago we
could pay cash for things and we had some buying power. Today's farmers are getting
deeper and deeper in debt, deeper and deeper in trouble."
The Tessmans are descendants of German immigrants who raised horses for the Kaisers.
Art, 35, and Doug, 34, worked as state prison guards before entering into a farming
partnership with their father, Louis, in the late 1980s.
The Tessmans say they're hopeful that cattle prices are edging upward, offsetting
some of their other losses.
"We won't make money this year, but we're trying to stay close to the break-even
point," Art Tessman said.
Still, it shouldn't take 30 farm auctions a week to convince politicians that
something's wrong with the system, said Bob Denman with Wisconsin Farmers Union.
Normally, farm auctions are down during harvest season, he said. This year, that's
changed as more farmers realize there's no future in the business for them.
"The seeds are there for something very ugly," Denman said.
