Farming Through the Low Points (Boom and Bust Part 2)

This is a continuation of a look into our farm’s history and my reflections after reading the K.C. Fed’s paper on cyclical agricultural prosperity. I admit. It’s a little nerdy. I’m trying to keep it fun though.

Look back at part 1 to see at some of the cool stories of our family history. I know just as many stories of hard times. In the ’80’s the debt on the hog floor (built in the ’70’s boom) dragged the farm down. The story is more complicated than that, as locals know, but let’s just say Grandpa made the best of a bad situation. I know it caused a pinch in the farm’s finances but money was always tight…because grandpa would always and immediately reinvest earnings back into the farm. He would improve his herd genetics, upgrade equipment, build fencing, build ponds…you with me here? He reinvested earnings…sometimes to the frustration of my grandmother. They were mostly on the same page…except a few times when she wanted a new oven, a couch or some carpeting. She built her own kitchen cabinets. I assume that was more budget than hobby but we still use them.

Sidebar – I have to pause here to explain the relationship between my grandparents as an uncle once explained it to me. My grandma was, in my grandfather’s mind, his trophy wife. The arrangement, made by her, was simple. She would keep the house, he would be a farmer. She was not a farmer. She certainly did not milk cows. She was beautiful. That was that. Apparently grandpa found that to be a favorable arrangement though he did have a sense of humor. Grandma never knew how many people to cook lunch for. Grandpa would feed the men working on the farm, certainly, but who knows who else would be dragged to the table with him. Also, grandpa considered gardening to be a part of the household. Every year he plowed up a big patch of garden for her. Or he would bring home a truckload of peaches to be canned. Grandma had a sense of humor too, though hers was more subtle.

Things are different in our house as I wash dishes and Julie milks the cow. However, as I learn more about my grandfather I marvel at his strength. He bought a tractor before anybody else had one and borrowed money to do it. Grandpa ran a number of businesses, all to support a central theme. He did row cropping, kept pigs and cattle (and brought in Limousin genetics early on), ran a feed and fertilizer business on the farm, sold Badger equipment and always worked to improve his own land, herd genetics and equipment. Along the way he positively impacted an awful lot of people (and ticked off a few). I feel like I’m weird because I ask cattle to eat grass. I can’t imagine how he felt…his entire life. Just know that grandpa feared the debt he held…and for good reason. He had seen downturns in agriculture and was always planting his earnings back into the farm. I think he would be astounded at current land valuations and heading for cover. He probably wouldn’t be selling land but he would be taking full advantage of the cattle price.

To continue, exports are necessary to pay for imports. You can only pay for products with production. If exports dry up, we are in trouble. More so if debt is involved as in the hog floor above. Grandpa stayed out of trouble by selling feed, fertilizer, equipment and livestock and working to minimize debt. But the ’80’s were hard all the way around. Again from the Fed paper:

During the 1970s, surging exports underpinned a new plateau in agricultural commodity prices, and farm revenues reached a record high. From 1971 to 1973, agricultural commodity prices jumped 75 percent and remained elevated throughout the decade.

But then…

A weak global economy, world debt problems, a strong exchange value of the dollar and trade barriers—including a Russian grain embargo—cut U.S. agricultural exports (Drabenstott). In 1986, agricultural exports bottomed at $47 billion, half the levels posted five years earlier.

Our farm bears few scars of the bad times as evidenced by the fact that there is an unbroken chain of family ownership going back to the 1840’s but neighboring farms didn’t fare as well. The father of one neighbor saved during the prosperity of the 1910’s and bought land heavily during the Great Depression. His risk and prudence set his family up for lasting, generational wealth that benefits them to this day. But there were necessarily folks who either didn’t save in the good times, had it worse than others (losses to illness or war, bad business bets, etc.), sought other opportunities with their capital or otherwise gave up on farming. But, apparently, the largest problem was debt. Once again referencing the K.C. Fed:

During the 1920s and 1930s, the collapse in farm incomes and land prices led to a wave of farm bankruptcies. Facing higher interest rates and lower incomes, many farmers struggled to service the debt they accumulated during the 1910s farm boom. The result was a surge in farm foreclosures during the 1920s and 1930s (Stam and Dixon). According to the U.S. Census Bureau, at its worst, almost 6 percent of U.S. farms were sold in 1933, with 70 percent of the sales due to foreclosure.

The ’80’s saw another wave of farm transfer. If you look at the local plat book there are fields that are owned by the local banks and have been since the ’80’s. What happened? More of the same.

The debt accumulation of the 1970s contributed to the economic calamity of the 1980s. By 1982, when interest rates spiked as the Federal Reserve tightened monetary policy, farmers had more debt than they had capacity to service with their existing cash flows. The result was a farm financial crisis, a rise in farm bankruptcies, and the 1980s farm bust.

With shrinking profits and higher real interest rates, farm asset values and capital expenditures plummeted. After peaking in 1981, the average price of farmland dropped more than 40 percent by 1987, returning to 1960s levels. The farm bankruptcy rate spiked, topping levels experienced during the Great Depression. Capital expenditures on machinery, equipment and land improvements dropped 70 percent below the 1970s highs.

This was exasperated by increased productivity on farms.

Agricultural production expanded as farmers planted “fence row to fence row” and productivity gains emerging from the 1970s “Green Revolution” boosted yields. Weak demand and bin-busting supplies placed downward pressure on agricultural commodity prices, and gross farm revenues fell to 1960 levels. With elevated production costs, farm profits declined. By 1983, returns to operators were roughly 10 percent of the 1970s high.

I would like to point out that this is nothing new. It also happened before the turn of the 20th century (emphasis mine):

The most serious problem by far was low prices.  One can approach this problem in a number of ways, but, simply put, low prices resulted from the fact that the supply of farm goods was growing much more rapidly than the demand for farm goods, which meant that farmers had to accept lower prices for their products over time.  Now it is true that the general price level in the United States was falling through much of the late nineteenth century, but, even in this period of general deflation, farm prices fell more than prices in other sectors of the economy, which hurt farmers in a relative sense.

Low prices hurt farmers particularly hard because many were debtors.  In a deflationary economy, it is especially difficult to repay debts because the real cost of a debt rises as money becomes harder to come by.  During the late nineteenth century, as more and more farmers commercialized their operations, specialized and mechanized, they often took on significant levels of debt, which became harder and harder to repay.  As a result, many lost part or all of their farms, leading to a great rise in the number of tenants and sharecroppers, on the one hand, and the movement of many farmers out of agriculture altogether, on the other.

Back to the story. Things got pretty tight on the farm several times but I never heard Grandpa Tom complain. I mean that. I never heard my grandpa complain. Plastic knees, prostate cancer or blown engine in a tractor…he just took it all in stride. Grandpa said they weren’t aware of the Great Depression, they had plenty to eat. Because of his father’s illness and a mentally handicapped older brother, grandpa was head of household and couldn’t go to war for WW2. The only problem I ever heard of was in the ’80’s but grandpa was able to cover the loan for the hog equipment – though I don’t know how – and I never heard him talk about it. At the same time I watched an uncle refinance his land repeatedly until finally selling his best ground to get out from under it. Farmers were so discouraged through the ’80’s they stopped buying. Either they were convinced that the downward trend would never end or they were buried under a mountain of debt. That’s how my coal miner father became a land owner. Farmers weren’t showing up to buy so, on grandpa’s suggestion, after a whole lot of prayer, thought and worry, mom and dad did.

Obviously my grandpa is a hero to me but he wasn’t the only area farmer to survive the ’80’s. In fact, a number of farmers were able to expand. Just like in other downturns. To contrast that, Julie’s great-grandma Alice married a Fillager late in life. The Fillager family owned 1,000 or so acres 1893. Much more land later.


The Fillager siblings didn’t have children of their own so the estate was auctioned off little by little following funerals. Some of that wealth was donated (war bonds), hence the Fillager clinic in Greenfield. I have friends who own Fillager ground (and everyone was convinced there was gold buried on the property so they kept after him for years, “Did you find the gold yet?” He denies finding any. Of course.) Some of that Joseph Fillager land was owned by Julie’s grandparents until the ’80’s. Julie’s parents had several acres until around 2002 but they sold and moved to town. Julie has a great-aunt who still owns a large portion of the farm. Otherwise, it’s all gone. Over 100 years of unbroken family legacy…no family to give it to.

There were financial mistakes made along the way. There was also a genetic dead-end as no Fillagers had kids! Same thing happened on the other side of Julie’s family. Julie’s grandpa grew up poor. His stepmother did not. My understanding is she was part of a prosperous farming family. Her brothers stayed home and farmed and expected her to do the same. Nobody had time for family. Later in life Ruth found a family in need of a mother. Julie’s great-grandma Ruth left the prosperous farm behind and, in the process, lost her claim on the estate (please correct me in comments if I am mistaken here). I guess her siblings held the farm together while they lived but the family legacy ended. There was no next generation to own and work the ground. I’m not even sure where their farm was now. Or Julie’s grandpa’s farm. I don’t think there are even houses at those locations now.

Clarence and Ruth (Mitchell) Ashby

All good things come to an end. It happens. I have the next generation thing covered but how can I keep our heritage in place through the downturn that is eventually coming? And what can I do to positively impact my neighbors so the whole community can weather the storm? Nobody wins if the banks own all the land, not even the banks. They are in the business of loan origination (money creation) not land management. And short-term tenants are hard on the land. In the book Family Wealth the author is discussing drawbacks of perpetual trusts (and I don’t think it’s a stretch to suggest that this thinking holds true to land owned by banks).

…[lands held in perpetual trust] were often poorly administered, because they had no owner who cared about their improvement, since he or she would never own them outright. Many life tenants sought to receive the maximum annual return possible without regard to such a policy’s long-term effect on land’s productivity.

Low prices could crush us…could crush me indirectly. Our friends at the Fed are freightened of deflation. They are working to do everything they can to keep the money flowing through the economy, not just in terms of currency supply but also in terms of velocity. But if it’s not enough…well…then what? What if the dollar strengthens and American agricultural products are more expensive (because of currency valuations) than those of other countries? I’m no mercantilist but I can see the effects on our current way of life. Even the supposedly favorable ratio of debt to equity carried by current farmers could turn sour in a hurry. I have to work to minimize my exposure to those risks by focusing on providing value to customers, lowering my production costs, minimizing my exposure to debt and putting away some cash for a rainy day.

But I’m getting ahead of myself. Farming has seen some rough times. Debt has drowned many farming families. I’ll do what I can to lay out our plan in my next post.

When to Harvest Money (Historical Highs and Lows of Farming Part 1)

I found a 2011 paper by the Kansas City Federal Reserve titled, Agriculture’s Boom-Bust Cycles: Is This Time Different? What a thought-provoking read. Let’s skip to the end. No. This time is not different unless you mean worse. Now, let’s look through their paper together and talk about a few interesting things. (So interesting I had to break this up into several parts.)

The Fed’s paper looks at agricultural boom and bust cycles over the last 100+ years. Not only can I see evidence of those cycles on my own farm, I can see evidence of them in my plat book. In fact, if we leave the paper behind for a moment you can see a timeline that illustrates the changes over time here (link). Notice the entry from 1889-1919 is called simply “Farm Prosperity”. Some of this was, apparently, the result of increased farm productivity. Farmers were able to grow and sell surpluses rather than just work for subsistance as noted in the transcript of a speech by Peter A. Coclanis:

During the period between the Civil War and World War I, we find other changes in the agricultural sector as well. American farmers became much more commercialized in this period, offering more and more of their annual output for sale on local, regional, national, and international markets. Put another way, there were fewer and fewer subsistence farmers and fewer and fewer farmers striving for, let alone achieving self- sufficiency.

This period of prosperity is obvious on our farm. The main part of our house was built in 1911 by Dick Chism (my great, great uncle). Our big barn was built in 1914 by men hired by uncle French and my great-grandfather Charlie (all brothers).

FamilyAmerican farmers were productive at that time and the world (which was at war) needed our agricultural products…anything from wheat to mules.

The British Army also purchased a large number of mules from the USA. The mule has amazing stamina and endured the terrible conditions in the front-line better than the horse. At the end of the war the army owned 213,300 mules.

But the Great War ended. Cars became cool. Europe could focus on feeding themselves again. Not only did a large portion of our agricultural exports cease, our need for livestock feed fell off because we had fewer animals in harness (and thank God). So more of the ground used to grow livestock feed could be used to grow grains for human consumption. This led to huge surpluses in crops and a crash in agriculture. From the K.C. Fed Report:

Farm prosperity, however, was short-lived as global food production rebounded, export demand collapsed, and farm incomes fell. With the conclusion of the war, export demand faded. By 1922, U.S. agricultural exports returned to pre-war levels, slashing agricultural commodity prices by 40 percent from 1919 to 1921. Returns to operators plummeted.

Moreover, the industrialization of U.S. agriculture through the adoption of the tractor and other mechanized equipment reduced the need for feed grains for draft animals. The combination of weak exports and increased food grain production led to another collapse in agricultural commodity prices and profits during the early years of the Great Depression.

But nothing brings high prices like low prices (the inverse is true too) and nothing generates demand for food like hungry people. And when the world went to war again we were busy feeding the world. Farming became valuable again. Again from the Fed notes:

Similar to the 1910s, World War II sparked another farm export and income boom. A surge in wartime food demand boosted U.S. exports through the 1940s. After bottoming at $4.3 billion in 1941, real agricultural exports quickly rose to $25 billion by 1944. Similar to World War I, a wave of livestock exports fueled U.S. export growth during the war, while crop exports increased moderately.

The paper goes on to note that exports remained high following the war and into the ’60’s. In what must have been around 1937 (at age 16) my grandpa borrowed money directly from Oliver to buy a new Oliver 70…the first tractor in the neighborhood.

Sidebar – This story is a part of my own life because around 1984 my grandma wanted to buy a dress. Grandpa said they didn’t have the money for a new dress (we’ll discuss the ’80’s next time). In spite of the cash flow issue grandpa went to a farm auction and came home with a rusty old Oliver 66. Grandma, at least slightly angry, said, “Tom, what is that?” Grandpa, knowing he was caught, said, “um…that’s for Christopher. It’s…ummm…like the tractor I started with.” Some time later we went to the farm for a visit. Before I got out of the car grandma was on the porch yelling for me. “Christopher, go to the machine shop and see the tractor your grandfather bought for you!” You can imagine my shock! Apparently grandpa was shocked too. He stood, defeated and staring at his feet as I ran off to the shed. I have had that tractor for nearly 30 years now. Dad restored it when I was a kid. Truth be told, it’s more of dad’s tractor than mine…or it’s a memory we share. He has something apart on it even now.

Shortly after grandpa bought that first tractor, my great-grandfather and all of his sons sold their horses. The story goes that my great-grandpa got sick (had a stroke?) and grandpa Tom had to take over the farm. He got the tractor and earned $1/acre plowing the neighbor’s fields. Everybody saw the productivity gains available with the tractor and grandpa’s business only lasted one season. My great-grandfather wasn’t having any of it. By reputation, he was a little hard-headed and demanded that men work hard because men should work hard. (That notion may be countered by the story that my great grandpa bought a car but couldn’t drive it. So he told my pre-teen grandfather learn to drive.) I guess my great-grandpa Charlie recovered enough that the two of them decided to go out and plow in the spring, grandpa Tom with the tractor, his father with the horses. By the time lunch came around my great-grandpa decided it was time to unhitch the horses forever. Grandpa Tom claimed to have little use for horses, just as his sister is shocked that we milk cows (lol). Guess they were done doing things the hard way.


Grandpa went bananas building ponds and bulldozing the world around 1955. At one point he even moved a creek bed! I have heard that neighbor teens (who are all grandparents now) would gather and swim at the beach on the pond. Water lines were trenched all over the farm (and are now overdue for replacement). In the ’60’s my grandpa’s cousin built an addition on to the house. We have some nice pictures of my parents wedding reception in that room as well as family reunions and Christmas dinners every year. That’s the room our wood stove is in now. All that stuff and all of those memories were built by a time of agricultural prosperity.


When dad first came to the farm grandpa was still farrowing pigs on pasture. There is a story of a big rain flooding the pastures surrounding my house and washing away pigs. So in the late 70’s grandpa and his hired man built a concrete hog floor and a pig nursery at the home place. This was top of the line stuff at the time. The floor and slurry pond are still there, though overgrown, and we use the pig nursery as a chick brooder (and it’s awesome!).

Look at all the wealth that has been accumulated on our farm over the last 100 years. The infrastructure changes line up perfectly with the boom periods outlined by the K.C. Fed. But I have left out the busts.

Every boom is followed by a bust. The views are great on top of the mountain but the fruit is grown in the valley. At least if you are optimistic about low points. At certain points, my ancestors took money off of the table. Rather than spend that money they made infrastructure improvements and parked that wealth in the farm itself. This is like planting a tree knowing you will never rest in its shade. This is planning for abundance in future generations.


Come back next time and I’ll tell you about the low points in our own farm’s history, how grandpa held things together and I’ll share some of the neighborhood history. I can point out 20 barns nearby that are roughly the same age as ours. Not very many are still owned by the builder’s family. The Fed paper says there is a reason for that. Debt.