Farmers buffeted and toughened by cost-price crunch
After years of dos-a-dosing with Iowa farmers for second place in US agriculture, Texas farmers may be losing ground.
The problem is that farming in the Lone Star State is a high-risk, high-cost business. Farmers here see their production costs and risks climbing faster than in other regions which have more water and better weather.
Last year's $10.1 billion in cash receipts from farming and ranching put Texas in third place behind California ($13.5 billion) and Iowa ($10.7 billion).
Farmers are caught in ''an ultra cost-price squeeze,'' says Calvin Pigg, editor of the Southwest Farm Press. This squeeze is caused by high interest rates, bad weather, and sharply reduced world demand for their products. ''For Texas farmers this year, the only chance of making even a slim profit will come where the best farmers are making top yields on their best land.''
One sign of the worsening cost-price squeeze is that while total 1981 farm income climbed back to the 1979 level of $10.1 billion, net income after expenses dropped from 1979's $2.2 billion to just $1.2 billion. In 1980 as well, farmers netted only $1.2 billion out of a drought-reduced gross of $9.2 billion.
And total Texas farm debt is up to roughly $10 billion. This gives the state a 10-to-1 ratio between farm indebtedness and annual farm income, up from a 3 -to-1 ratio just ten years ago.
Texas Corn Growers Association president Carl King expects farm problems to deepen nationwide until Congress ''recognizes the problems on the farm are being caused by low commodity prices and killer interest rates.'' He says that with many farmers unable to pay off bank loans after four bad years, ''a lot more farmers will be bankrupted this year.'' He warns that ''When you break the country's biggest industry, which is agriculture, you are going to break the national economy, just as happened in the 1930s.''
Charles Beach, who farms 2,000 acres near Rockwall in central Texas, says 1981 was his first unprofitable year in 35 years. Because his production costs have risen sharply even on land he calls ''the best in the county,'' he explains , ''The situation is desperate and we are going to see a large amount of farmers that will go under this year.''
Texas Farm Bureau commodity activities director Tommy Klemcke agrees that times are hard for farmers here. But even with cotton production expected to be down 58 percent - largely due to hail damage in the Panhandle - Texas will remain the top US cotton producer. And Texas is unchallenged as the top livestock producing state.
Mr. Klemcke expects agriculture to suffer no more bankruptcies than other business sectors this year. He says many farmers in trouble today may have farming only since 1973. ''This is the first time they've taken a real whipping.''
Farmers with short memories ''want high price supports to get us out of a bad situation now without regard to what it might do next year,'' Klemcke says. Price supports, he says, just encourage overproduction when prices are already low.
The Texas Farm Bureau agrees with other groups here that the federal government can help farmers by promoting farm exports and removing the embargo threat against the Soviet Union, which has driven foreign customers to other suppliers, such as Argentina, Brazil, Australia, and Canada. Many groups also back Gov. William Clements's efforts to implement a statewide program to provide more water for agriculture. Yet Mr. Klemcke is confident that most Texas farmers are tough enough to ''survive this storm.''
Agricultural economist Carl G. Anderson of Texas A&M University says that Texas farmers face ''the most severe problems financially we have had in 50 years, but agriculture will adapt and survive as a major industry.'' Noting that ''major crop prices are down 30 percent,'' he reports that hard economic reality may force many Texas bankers to cut back sharply on loans to farmers for planting their 1983 crops. If present trends continue, Dr. Anderson warns, ''you will see more and more farmers forced to sell their land, with the result that land prices could deteriorate sharply.''
In a state where weather fluctuations from year to year affect yields tremendously, Mr. Anderson says that new policies are needed ''to give agricultural producers more stable and reliable incomes.'' He expects that agricultural research breakthroughs will help stabilize farm incomes. New high-yielding crops more tolerant to drought and temperature extremes already help cotton and grain farmers here. Cattle ranchers hope for similar gains if research succeeds in making twin calving routine.
Texas Cattle Feeders Association marketing director Jim Gill explains that Texas ranchers are going to stay in business simply because ''we are so extremely efficient at producing beef.'' Agriculture is a high-risk business where ''the rewards can be really good but the losses can be great too,'' he points out. Yet he says Texas agriculture, very much like Texas oil, has a bright future despite current difficulties.
Mr. Gill expects that hard times will force some Texas farmers and ranchers out of business. But he says the survivors are becoming ''expert risk managers, making decisions on the basis of cold, hard economic facts, accustomed to making million-dollar deals every day.''