The farm crisis in the 1980s left a deep mark on the Midwest. It was the worst downturn in farming since the Depression. After an unprecedented boom in demand for wheat ended, thousands of farmers faced ruin. Agricultural banks and makers of farming equipment were washed away.
Midwestern farmers look at parallels with the 1980s whenever their cyclical industry is heading down. Prices for corn, wheat and other commodities started to fall after their peak in 2013, since when the comparison has been raised again.
Exports of wheat and soybeans nearly tripled in the 1970s, thanks to the weakness of the dollar after the U.S. abandoned the gold standard in 1971, and the Russian wheat deal in 1972, when the U.S. sold the Soviet Union about 440 million bushels of wheat for around $700 million. With that bonanza, U.S. farmers bought more land with more debt. This went well until interest rates jumped, the dollar strengthened and exports to the USSR were halted after the invasion of Afghanistan in 1979. Land dropped in value, which in turn increased farmers’ liabilities until they could not stay in business.
The latest farming boom started in 2006, when demand for such crops as corn, sugar cane and soybeans generated record profits thanks to demand for (corn and sugar-based) ethanol, and the then skyrocketing Chinese economy. U.S. farmers again started to farm more land. They also used more yield-boosting technology — as did farmers in other parts of the world.
Things started to turn sour after a year of record profits in 2013, when the rapidly growing global supply of grains outstripped demand, the appetite for ethanol stagnated and the Chinese economy slowed. American net farm revenue dropped from $120 billion in 2013 to an estimated $62 billion this year.
But unlike the previous big crisis, the balance-sheets of many farmers now are robust. Moreover, interest rates are still low and demand remains steady. And although the values for farmland dropped last year for only the second time since the 1980s, these drops were far less dramatic than they were back then.
Even so, Midwestern farmers have reason to be anxious. The two things that matter most to them — weather and government policy — are unpredictable. “Monkeying around with trade deals makes us nervous,” says Brent Gloy, who farms in southwestern Nebraska. The U.S. exports 20 percent of its farm production; its top export markets are Canada, China and Mexico.