`World's richest growers' beginning to feel farm crisis. Key overseas markets for rice, cotton, other crops dwindle
As still another Mercedes Benz sedan rolled by one morning on the dirt roads lining lemon groves and strawberry fields in coastal Ventura County, a harvest supervisor explained: ``Those are the growers.'' The economics of farming in California, the most productive agricultural state in the nation, has always been a little different from the Midwestern norm.
The climate sustains more than 250 different crops, and that diversity has always insulated California growers somewhat from the ups and downs of the marketplace.
At least by reputation, farmers in California, Texas, Arizona, and Florida are wealthier and own bigger spreads than the average American farmer.
But the crunch between income and debt payments that is threatening farms throughout the United States is hitting the Sunbelt as well.
In 1984, Bank of America, the California's largest agricultural lender, took over more than 80,000 acres of farmland, 35 properties, for unpaid loans. Before last year, the bank had made virtually no foreclosures for years.
Some families have been forced out of the cattle business after generations of ranching.
The worst problems are in the San Joaquin Valley -- the long, irrigated breadbasket running down the center of the state. Rice, cotton, almonds, and Thompson seedless grapes (used for raisins and cheap wines) are the most depressed major crops.
The culprit: the strong dollar. West Germany, for example, is California's largest almond market. In 1984, according to Dick Courtney, Bank of America's vice-president and chief economist, almond prices rose 38 percent for West Germans, but fell 13 percent for growers, all due to exchange rates.
At the same time, key markets for California exports are becoming more self-sufficient. South Korea is providing more of its own rice, or getting it from Thailand. China, until recently a major buyer of American cotton, now can grow all it needs.
Yet some farmers are thriving. Citrus prices are relatively high, and table grapes have a decent market, too.
The farms that are failing, in the Sunbelt as elsewhere in the nation, are those whose owners borrowed heavily against the inflated land values of the late 1970s.
Farm economists see no pattern in the size of the farms in trouble. The failures range from small family farms to some of the largest in the state.
The 35 California farm properties that Bank of America took over last year included 17 investor-owned farms, 4 business corporation-owned farms, 10 absentee family-owned farms, and only 4 traditional family farms with residences on the property.
The problem, as Mr. Courtney explains it, is that the real estate price boom of the late 1970s created a major gap between the price of farmland and the farm income the land could produce. The current crisis is bringing land back into line with its production capacity, he says.
How serious is this crisis? Less serious than in the Midwest, observers agree. Farm economist Henry Schacht has little patience with comparisons to the depression of the 1930s. ``It's not even a patch on the Great Depression,'' he says. ``I think the public is being given the impression that if you're a farmer you're in trouble, which is just not true.''
Dean MacCannell, a professor of rural sociology at the University of California, Davis, notes that farm family incomes in California run 30 percent higher than the national median -- ``the richest farmers on the face of the earth.''
``It probably is the worst it has been since the depression,'' says Dr. MacCannell. But for some of these farmers that may mean, he adds, that ``they can't afford a Lear jet this year.''
Mike Fitch, vice-president for agribusiness affairs at Wells Fargo Bank, estimates that roughly 5 percent of the farms in the bank's loan portfolio are in danger of losing land in lieu of loan payments. ``I am confident that the majority of farmers are doing worse today than they were a year ago,'' he says.
Most of those in trouble will sell off their land before their lenders take it over.
Who will buy it? Other farmers, typically, when the price and the interest rates are low enough to make the land pay again. The result, most farm economists agree, will be greater concentration -- more land belonging to fewer farmers.