The New American Farmer

(2 of 11)
'Oh, a man in hell would love to drink a glass of ice water, but it just can't be done.' "

Some city consumers may sneer at that statement. Though recent polls show widespread sympathy for farmers, there has long been a fashionable opinion that big farmers, at least, are pampered wards of Government living high off the inflation that is pushing up food prices—10% this year. Few realize that 87% of the rise in food prices since 1973 has occurred after the food left the farm. That is a consequence of Americans' insatiable desire for ever fancier processing and packaging, along with rising off-farm wages. Last year, for the first time, workers in slaughterhouses, canneries, freezing plants and supermarkets got more (32%) of the retail food dollar than farmers did. Farmers received only 31% of the money spent in food stores and restaurants, down from 37% in 1973.

Zooming costs of processing and distribution have created a strange paradox. Higher farm prices instantly bring increases at the grocery checkout, but retail food prices can also go on rising while farm prices drop sharply. Example: the Soviet grain purchase of 1972 and other heavy export demand kicked off a few years of unprecedented farm prosperity. Net farm income more than doubled in three years to an unparalleled $33 billion in 1973, and soaring retail food prices combined with OPEC's oil gouging to produce double-digit inflation. In 1976 and 1977, farm prices broke; farm income shriveled to $20.5 billion in 1977, and a noisy American Agriculture Movement sprang up overnight to send farmers rumbling into Washington and state capitals aboard their tractors (some cost $30,000, and a few came with air-conditioned cabs and stereo tape decks).

Now, as farmers rush to gather in a bin-busting harvest, their fortunes have improved. The prices that farmers received averaged 23% higher in September than a year earlier, while the prices they paid for tools, fertilizer and consumer goods—including food—rose only 10%. Most crops have been bountiful enough this year to cause even retail food prices to level off after a frightening winter-spring rise. The Department of Agriculture predicts record 1978 crops of corn, soybeans, hay and fall potatoes. Corn is so abundant that Midwestern farmers are storing it on streets, playgrounds and tennis courts.

As always in agriculture, a diverse industry, one farmer's good fortune may result from another's pinch. An agricultural-loan specialist for California's Bank of America asserts: "You'd have to be pretty incompetent not to make money in cattle this year." Reason: a combination of high prices for meat and relatively low costs for corn and other feeds that has corn growers grumbling. Vegetable growers in central Florida are selling big crops of lettuce at prices that have been pushed abnormally high by the winter-spring rains that made California lettuce scarce and unappetizing.

Net farm income is expected to hit $25 billion this year, almost 25% over 1977 and the third highest on record. But the purchasing power of those dollars is no higher than in 1969. Farmers who raise the grain and cattle curse inflation as vehemently as does the shopper grumbling about the price of bread and steak.

Inflation—and a realization by investors that farm land is a vital resource in a hungry