Farm Communities in US Enjoy 'Period of Exuberance'

It's harvest time and, as combines sweep up a golden sea of corn and fill towering silos to the brim, the booming Corn Belt seems fit to burst.

America's farmers today are reaping a bumper harvest and a promise of record profits.

"Overall, the economy is probably the best farmers have seen in quite a while," says Greg Fritz, city administrator of Pocahontas, the seat of an Iowa corn-growing county of the same name.

Devastated by farm failures in the mid-1980s, Pocahontas now epitomizes a Grain Belt rebound. Shops and even the old movie house have returned to North Main Street. Iowa farmland, after rising 16 percent this year, costs twice what it did in those lean years, according to the Realtors Land Institute in Des Moines.

"We're in a period of exuberance," says Neil Harl, an expert on agricultural economics at Iowa State University in Ames. "There is a fair amount of optimism and probably the best feelings we've had among farmers since the 1970s."

Farmers harvest in an especially sunny economic climate: record agricultural exports, high commodity prices, and comparatively low interest rates. Good weather in most areas is helping them reap their third-highest yield ever of corn, the nation's No. 1 crop. Uncle Sam is doling out $8.6 billion this year as part of a new seven-year program to ease farmers off federal subsidies. Growers get a fixed amount regardless of market conditions.

Farm profits will total $51 billion this year, up 46 percent from 1995, the US Department of Agriculture (USDA) predicts. Also on a roll is the $10-billion-a-year farm-equipment industry. It enjoys the "most solid position since the late 1970s in terms of profitability, the outlook for demand, and general agricultural activity," says Emmett Barker, president of the Equipment Manufacturers Institute in Chicago.

Not everyone whose livelihood is tied to the land is riding high. Some growers across parts of the Midwest and Plains will reap modest yields because heavy rains delayed planting. Many poorly managed farms, even in a banner year, are unable to shovel away a heavy pile of debt.

Beef producers are badly pinched between high prices for grain and low prices for beef.

And many farmers contracted to sell grain early this year for more than the break-even point of $2.70 per bushel, but well below the record $5 per bushel price of late spring. It is back now to about $2.91 a bushel.

"Trouble is, few farmers around here got to take advantage of high prices - a lot of grain moved at just $3," says Tony Janssen, a farmer of 400 acres and president of the Pocahontas County Farm Bureau.

STILL, the farm economy's broad numbers are bright. Although debts have risen since 1992, interest rates are relatively low, and the debt-to-asset ratio of farms has fallen from 23.4 percent in 1985 to an estimated 15.3 percent. It is the lowest level found by the USDA in 25 years.

The number of bankruptcies has steadily declined. Many farmers with swelling profits are paying off debt.

"Farmers are still risk-averse ... because of the memory of the 1980s debt crisis," says Mr. Harl, a farmer as well as a professor.

Last decade, farmers learned firsthand the bitter lesson that a euphoric boom might be followed by a devastating bust.

In the 1970s, farmers enjoyed skyrocketing prices amid strong demand from the Soviet Union. Assuming exports would hold strong, they borrowed heavily to buy land, equipment, and grandiose houses. But the high crop prices sparked high yields and a worldwide glut in the early 1980s. Grain prices, and then land values, plummeted. In Iowa, the value of farmland fell 63 percent between 1981 and 1986. Thousands of farms folded.

The plunge in fortunes was especially harsh in Pocahontas, which like many Midwest county seats centers around a county courthouse of heavy stone and a huge phalanx of silos. Several farmers filed for bankruptcy. Five farm-equipment dealers in the county closed within a year. Clothing stores and other shops along North Main Street shut down, as did the only movie house, the Rialto. One of two banks - the Commercial State Bank - failed, stirring turmoil among area farmers and business owners.

"There was a very bleak look to the community, especially because Pocahontas had been so wealthy in the past," says Pam Baier, a leader in the town's revival.

Today, the buzz of the lunchtime crowd at the Ideal Cafe on North Main Street testifies to how the town has pulled itself back up through a mix of rebounded fortunes and civic unity.

Storefronts are filled once again. A new bank has opened on the site of the one that went under. A pharmacy and supermarket recently moved into new buildings. Pocahontas successfully floated a $1.5 million bond issue last year to renovate the town swimming pool and medical clinic. Residents gathered $250,000 in donations and reopened the Rialto last year as a nonprofit community playhouse for concerts, drama, and movies. Even the gray-streaked walls of the silos were repainted last month in gleaming white.

Marvels Tom McCartan, president of Pocahontas State Bank, "Compared to the 1980s, we're on the other end of the spectrum."