How Utah's farmers survived the almost decadelong American farm crisis depends on how you look at the economic ledger books.
If the crisis is defined by income, Utah's farmers may be in worse financial shape than farmers in most other states, two Utah State University economists say in a recent study published in "Utah Science," a publication of the Utah Agricultural Experiment Station in Logan.If the crisis is defined as how much Utah farmers owe in relation to their total assets, then the financial condition of Utah agriculture is no worse than average and considerably better than in many other states.
The study was conducted by E. Bruce Godfrey, an associate professor of economics who specializes in issues affecting commercial agriculture and natural resources, and Jay C. Andersen, a professor of economics who specializes in agricultural policy and production problems.
The study offers insight into the farm crisis and some warnings to farmers about the future.
Despite recent claims by government leaders, farm equipment manufacturers, and others that American farmers are on the upswing after a decade of economic slump, the USU study says surveys suggest about 20 percent of America's farmers are still experiencing serious financial difficulty.
Most of those having financial trouble are young farmers who started farming in the 1970s, farmers who incurred debt during that period to significantly expand their operations, and farmers who primarily depend on agricultural production as their source of income.
"If the crisis is defined by income," the two professors conclude, "returns to capital or net farm income available for family living or debt service indicate Utah farmers are in very poor financial conditions."
Fortunately, they say, more than half the farmers in Utah have some profession other than farming, and off-farm income is meeting the cash and income needs for many of them, especially those operating smaller farms.
The gross output from more than 80 percent of Utah's farms is less than $40,000, the USU economists have found. As a result, most of those who are classified as farmers in Utah are small, part-time operators.
Over the past decade, the farm crisis has bankrupted not only hundreds of thousands of American farmers, but also farm implement dealers whose machines stood unsold, banks that could not collect on farm loans, and a host of small town merchants from coast to coast who depended upon the farm community for their livelihoods.
Factors that contributed to the farm crisis, the two USU economists say, were a decline in land prices, high interest rates, reduced exports due to increased production of agricultural products by many foreign countries, high values of the dollar, and high farmer debt loads.
"No single factor would have caused the farm crisis, but all contributed to a decline in farmer income and equity," Godrey and Andersen contend.
The farm crisis in Utah has been reflected by low income rather than by high debt or declining asset values. This suggests that Utah farmers need to be careful managers of capital or problems will worsen.
While land values have bottomed out in the Midwest, they may decline further in much of Utah to match their productive value, the economists warn.
In the future, Utah farmers as well as farmers across America should be especially concerned about net profits - not simply high production; returns on investments - not simply total sales; and should weigh carefully whether to expand their operations or make their pres-ent farms more efficient.
Having gone without new equipment and machinery for a decade or more, many farmers have bottled up the desire to buy new vehicles.
The farm equipment manufacturers know this and have recently put out a variety of shiny new farm implements, hoping farmers will catch on to the optimism the equipment dealers feel. Bankers are smiling again at farmers and talking more freely about farm loans.
Yet it might be wise for many of Utah's farmers, who can pat themselves on the back for having survived the farm crisis, to consider carefully before purchasing new vehicles and equipment or even expanding their farm operations.
They might well ask themselves "how does a brand new, expensive tractor fit into my economic future?" Or "how do those new acres I'm thinking of acquiring fit into my net profits picture?"
The farm crisis can teach everyone many lessons.