Grim Reapings

A record crop buries farmers

In the 1901 novel The Octopus by Frank Norris, which romanticizes the grain farmer, the villain is buried alive under a mountain of wheat. Across the Midwest, many farmers are increasingly fearful that they are about to be buried financially in a similar fashion. Last week the U.S. Department of Agriculture confirmed its estimates of record U.S. and world grain production in 1982. In Minnesota and the Dakotas, farmers are stuffing unsold wheat into their sheds, leaving tractors and combines out in the cold. An abandoned coal mine near Quincy, Ill., and an ammunition depot in Hastings, Neb., were recently readied for the storage of surplus grain. A few Iowa farmers are even planning to burn corn instead of oil in their furnaces this winter, and government officials in Nebraska are promoting the use of popcorn as a packing material. Says one Cornhusker official: "Gotta get rid of the damn corn somehow."

U.S. farmers broke alltime records this fall for corn, wheat and soybeans, harvesting more than 13 billion bu. of the three crops combined. They grew another 1.94 billion bu. of oats, barley and grain sorghum. But elevators, silos and bins are already swelling with a 4.39 billion-bu. carryover from last year's bumper crop. Although new storage facilities are being built at a record rate, they will not be enough to hold this year's harvest. Empty barges and railroad hoppers, airplane hangars, even high school football fields and city streets are being pressed into service as makeshift repositories. Says Agriculture Secretary John Block: "We are going to use every available facility for storage, but there will inevitably be grain on the ground." At least 1 billion bu. will be left outdoors, protected only by tarpaulins.

These huge surpluses, along with slumping sales, left farm prices in October a sharp 5.1% below their level a month earlier, the seventh drop in the past 15 months. The DOA, which regularly reports on the buying power of the farmers' prices, now says that it is the lowest since March 1933, during the very worst of the Depression. Rather than sell at such low rates, farmers are putting up their grain in the hope that they will be paid more for it later. That strategy seems doomed, however, because experts now predict that prices will remain low for another two years.

The grain is piling up not only because farmers are so productive but also because of changes in eating habits. In the U.S., cattle and hog producers are buying less feed grain because the recession has reduced meat sales and consumers are switching to cheaper poultry and other substitutes. What is hurting U.S. farmers most, however, is a drop in overseas sales, which in the past decade have become vitally important. Foreign buyers now take one-third of all U.S.-grown corn, one-half of its soybeans and two-thirds of its wheat. But demand is lagging in the face of the worldwide recession, stiffer competition from other countries and the strong dollar, which makes American-produced goods more expensive and the crops from Canada and Argentina more appetizing. As a result, U.S. exports have fallen for the first time since 1969. Corn sales abroad, for instance, have declined by fully one-third. The Government estimates that the value of agricultural shipments dropped to $39.1 billion in the 1982 fiscal year that ended Sept. 30, down from $43.8 billion last year.

Last week the Government disappointed farmers when it raised its estimate of the Soviet Union's grain harvest by 6%. Once the biggest customer for U.S. grain, the Soviet Union has been shopping elsewhere since the 1980 partial grain embargo. Last year the Soviets bought only about 60% of the 23 million tons of U.S. grain that the Government offered to sell them, and their purchases are expected to be lower this year. At a meeting with American officials in Vienna last month, the Soviet Union's chief negotiator, Boris Gordeyev, refused to commit to any new grain orders. Said he, sounding like a closet free-enterpriser: "Like any commercial man, I will take the right time to buy cheap and sell dear."

Not surprisingly, considering the political clout of the farmers, the Government is not leaving the resolution of the agricultural problem to free-market forces. To boost exports, Agriculture Secretary Block has just announced a three-year $1.5 billion "blended credit" program, in which interest-free Government credits are combined with Government-guaranteed credits from private banks to lower the financing costs for foreign buyers of agricultural commodities. An additional $1 billion in loan guarantees has been provided to Mexico, which is a big buyer of grain but has run into financial problems because of the slump in oil prices. Other agricultural payments and loans have also been boosted. During fiscal 1982, U.S. farmers received $12 billion in price supports, three times as much as in 1981. The U.S. also pays a portion of the storage costs for some growers.

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