Spring 1987 // Volume 25 // Number 1 // Forum // 1FRM2

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Responding to the Farm Crisis


Allan E. Lines
Farm Management Specialist
Department of Agricultural Economics and Rural Sociology
Ohio State University
Columbus, OH

The economic decline that has gripped the U.S. farm economy for the past five years continues unabated. The past is prologue, with more of the same expected. However, I question recognition of the real magnitude of the financial stress associated with the current and continuing decline.

National studies have provided a current appraisal of the "farm financial crisis, " which is used as the basis for discussion of many of the farm problems addressed in the public arena, including Extension funding and programming. This appraisal concludes that only 10% to 15% of all family farms and 15% to 20% of commercial farms are currently experiencing the most severe financial stress and that farming is still basically profitable.

It's my contention, however, based on knowledge of the sector and recently completed research, that reality is represented by a much different scenario. This scenario creates opportunities and challenges demanding action on the part of Extension.

Farm families are adept at employing cash generating and/or conserving strategies that mask their business problems. Hidden costs (depreciation) and internal/external subsidization (unpaid family labor, off-farm income, and decreases in inventory) can and often do obscure the real financial health of many farm businesses. Taking these factors into account, it's likely that 65% to 75% of all family farms and 40% to 50% of commercial farm businesses aren't financially sound, albeit much of it disguised by farmers themselves.

Acceptance of the reality and magnitude of the farm financial crisis and illusory nature of the current assessment demands that Extension continue to set priorities and shift resources to develop and implement educational programs that address the protracted financial ill-health permeating the U.S. farm sector. Extension's response will test its resolve to concentrate resources in critical educational programs, improve its performance, and, in the eyes of some, restore its legitimacy as a change agent in fulfilling its responsibility to improve the social and economic welfare of farm families.

Like the nature of the problem facing farm families, Extension's educational efforts need to incorporate both short- and long-term programming. Extension is to be complimented for its early recognition of and response to the situation. Responsiveness, a hallmark of Extension, is being tested and is wearing well.

However, funding and programming directed toward this problem area have, for the most part, focused on the immediacy of family cash-flow concerns. To effectively address the severity and continuing nature of the problem, we must transcend politically expedient short-run programming and incorporate a longer-run dimension that focuses on farm business profitability without foregoing the farm family's concern with the "here and now. "

Programming of this nature will require welltrained personnel, investment capital, perseverance, a sense of mission, and a sensitivity to individual, family, business, and community capabilities and objectives. However, Extension must be forthright, realistic, and hard-nosed about economic considerations for these entities. Programs should explicitly focus on the profitability of the farm and help families understand and implement the principles of profitable farm business management.

Families (spouses and children) need to be aware of the social and economic implications of: (1) inadequate land, labor, capital, and/or management; (2) subsidizing the farm business with off-farm income and/or unpaid family labor; and (3) living off depreciation.

Extension must openly accept the responsibility to help families examine the advisability and consequences of, so to speak, "mother teaching school to provide family necessities while father pays for the privilege of being a farmer through low, zero, or even negative wages. " Heretical as it may seem, we have a responsibility to help some families out of farming.

Simultaneously, for those families that can realistically expect to operate a profitable business or who decide to continue subsidizing an unprofitable operation, Extension needs to help them look beyond family cash flow to a better understanding, attainment, and maintenance of sound farm business financial health.