MANY AREA AGRI-RELATED BUSINESSES WEATHERED WOES THAT HIT MIDWEST

The tragedy was played out on the evening news hundreds of times during the mid-to-late 1980s.

The chant of the auctioneer meant another farm, which had been the livelihood of a family for generations, had crumbled in economic turmoil -- a victim of too much debt and plunging commodities prices.

Although farmers in southern Missouri did not escape the impact of the mid-1980s farm crisis, agricultural officials here said the impact was not as widespread as it was elsewhere.

William Ellis is a professor of agriculture at Southeast Missouri State University. He also farms 500 acres of row crops in northeast Perry County.

Ellis said the seeds of the 1980s farm crisis were sown in the 1960s and early 1970s when prices for farm products were good because of strong demand for grain and other products in world markets.

"At that time the U.S. Department of Agriculture was urging farmers to plant fence row to fence-row to raise more grain to feed the world export market pipeline," said Ellis. "Many small farmers saw this as an opportunity to become big farmers by taking advantage of low interest rates on loans from their bank to buy more farmland, tractors and farm implements."

Rick Sparks, a farm business and industry specialist with the University of Missouri Extension Center at Jackson, was manager of the MFA Service Center in Jackson from 1978 to 1989. Sparks said: "Everything was right for farmers in the 1970s: Interest rates were low, grain prices were great. Farmers were getting $7 for wheat and $14 for soybeans."

Many farmers expanded by purchasing more land and new equipment. They took on larger debts that had to be serviced. But starting in the late 1970s, a series of events -- some of them outside the control of farmers -- began to occur.

According to Ellis:

-- President Jimmie Carter's disastrous Russian grain embargo left the United States perceived as a nation that could not be depended upon to fulfill its grain-sales contracts.

-- An Arab oil embargo caused the price of gasoline, diesel fuel, fertilizer and farm chemicals to skyrocket.

-- A sharp rise in interest rates developed as inflation reached the double-digit mark and continued into the teens

-- A sharp decline in grain prices and other farm products, in part due to the grain embargo and loss of U.S. world export markets, occurred as other nations sought more dependable sources of food supplies from other countries.

Ellis also said that during the 1960s and 1970s many farmers began to specialize in a single crop or product instead of remaining diversified. "By producing more than one product, if one crop failed or prices were lower than the cost of production that year, the other crops or products would pay the bills until next year," Ellis explained.

Ellis said that during the 1970s the U.S. Agriculture Department began teaching third-world nations that were buying U.S. grain and farm products how to raise their own grain. One example was Brazil; today it exports soybeans in competition with the United States. Ellis said the federal government also failed to recognize and take advantage of the changing shift in world export markets from Europe to Southeast Asia.

Thus, the stage was set for agribusiness problems.

Said Ellis, "By the early to middle 1980s, a lot of farmers had leveraged themselves too long by borrowing too much money for land and new equipment that was depreciating in value because it could no longer generate enough money to service the farmers' high debt loads."

Sparks said instead of carrying a farmer's springtime purchases of seed, fertilizer and chemicals until fall, MFA and other farm service dealers demanded payment upon delivery because of higher interest rates the dealers were paying for their inventories.

The result was a rash of bankruptcies and foreclosures that spread like wildfire across the Midwest. In some cases, suicides occurred.

Agriculture-related businesses that depended on the farmer also suffered, and many of them suffered the same fate as farmers who lost their farms.

"The agribusiness community is and always will be tied directly to the farmer," said Ellis. "When farmers have a good year, they spend their money to pay bills, buy new equipment, seed, fertilizer, farm chemicals, and household items. If they have a bad year, they purchase only what they need, usually seed, fertilizer and chemicals to get started next year. When a farmer loses his farm or goes out of business, he no longer buys anything."

Jerry Strack of Strack Equipment Co. of Jackson is a John Deere dealer. Strack said that when the farm prosperity crumbled sales of new tractors and equipment slowed.

But, said Strack: "The farmers in this area were very conservative. They didn't buy a lot of new equipment or take on extra debt during the good years of the 1970s. When the downturn occurred, they bought new parts to repair their used tractors, combines, plows and other implements. They also brought their farm equipment in for service.

"We did see a reduction in our new-equipment sales during that period, but we were able to hold our own and not lay off anyone because of our increase in new-parts sales and the service and repair business."

Ellis said the impact on farm communities was devastating: Many businesses in towns across the farm belt, including banks, furniture stores, appliance stores and other businesses, failed.

Ellis and other agricultural specialists said farmers in Missouri now are beginning to recover. They cited four reasons:

-- Most farms south of the Missouri River and north of the Missouri Bootheel are classified as small farms in terms of gross sales of products.

-- Most of the farms, particularly those in Southeast Missouri, are owned by families of German heritage who have always been fiscally conservative. "These farmers did not significantly increase their debt load during this period by purchasing more land and equipment," said Ellis.

-- Most of those farmers continued to diversify.

-- Many of those living on and operating the small farms had other sources of income, and when prices for grain and livestock fell they were able to survive on income from other jobs.

Strack believes the turn for the better came around 1990-91. He said, "Since then we've seen our new-tractor and -equipment sales improve quite a bit because farmers are now in a better position to replace the equipment they held onto during the 1980s."

Looking back at the tough times of the mid 1980s, Sparks said: "It made better managers out of all of us -- on the farm and off the farm. It's certainly not a boon time for farmers, but we've got some stability; interest rates and grain commodity prices are pretty stable, and livestock prices are up and down, which is always normal."