Farm Crisis, 1979–1987

Minnesota’s farmers enjoyed an economic boom in the 1970s. Land values soared, United States exports of agricultural products grew, and farmers gained access to easy credit to expand their operations. When the 1980s brought a sharp decline in exports and land values, rising production costs, and higher interest rates on loans, many farmers found themselves in serious financial trouble. The farm crisis of the 1980s caused many farm foreclosures and bankruptcies—the worst economic conditions the agricultural sector had seen since the Great Depression.

Several factors contributed to the farm crisis of the 1980s. Minnesota’s net farm income rose to nearly $2.25 billion in 1973, a more than 130 percent increase over the previous year. Land values in Minnesota grew nearly 30 percent from $898 per acre in 1978 to $1,165 by 1982, making many farmers millionaires on paper. A weak US dollar, combined with severe drought conditions around the world, caused a large increase in US exports of agricultural products. The federal government encouraged farmers to increase production to meet the demand.

Expecting the booming economy to continue, farmers flocked to banks to accept offers of easy credit to buy more land and equipment. As a result, many found themselves overextended when the economy went into recession at the end of the decade.

In the early 1980s, exports flagged due to a strengthening US dollar, recovering agriculture abroad, and a grain embargo imposed against the Soviet Union. Land values and prices for farm products fell, while production costs continued to rise. The average value of farmland per acre in Minnesota fell nearly 40 percent from $1,165 in 1982 to $700 in 1987. Jackson County farmers experienced the sharpest decrease in land values in Minnesota during this period, with prices falling nearly 54 percent, from $1,991 to $921 per acre. The average value of machinery and equipment on all Minnesota farms increased nearly 25 percent from 1978 to 1982. Farmers also faced increasing fuel, fertilizer, and other input costs.

By 1984, Minnesota farms carried nearly $12 billion in debt. Interest payments added another $1.5 billion. By 1987, Commodity Credit Corporation loans alone totaled more than $810 million.

Prices for commodities and net farm income fell as farmers received a smaller percentage of what consumers paid for their products. Minnesota’s total net farm income fell 58 percent, from just over $1.2 billion in 1981 to less than $500 million in 1983. By 1986, in spite of government programs providing price supports and income subsidies, farm prices had fallen to just 51 percent of parity (the purchasing power of a commodity compared to its purchasing power during America's "Golden Age" of agriculture, 1909–1914). It was the lowest percentage since the Great Depression. In an attempt to offset bad debt, some lenders raised interest rates by more than 20 percent by 1982. Farmers’ lower net incomes couldn’t keep pace with the rising cost of debt repayment, causing many to fail.

Government subsidies to farmers helped somewhat to offset losses in net income. In 1987 nearly 49,000 Minnesota farms received payments totaling $712.8 million. Government payments increasingly depended on compliance with new conservation measures for farmland use.

Some farmers resorted to selling off land or machinery to pay down the principal so the lender would extend the loan or lower the interest rate. Selling assets, however, could impact neighboring farms by lowering adjacent land values. Even with these options, thousands of farmers defaulted on their loans and faced bankruptcy or foreclosure.

By 1982, 49 percent of the 11,000 farmers in Minnesota with Farmers Home Administration (FmHA) loans were in delinquency, and more than 300 farms faced foreclosure. In 1983, in response to high unemployment and the poor farm economy, the state legislature passed a moratorium on mortgage foreclosure and contracts for deed termination similar to the Agricultural Adjustment Act of 1933, then extended it in 1984. The law required sixty days’ notice of a contract for deed or default on a mortgage, and eight weeks’ notice on foreclosures to give the mortgage holder time to remedy the situation. The following November, 250,000 farmers nationwide brought a class-action suit against the FmHA resulting in a suspension of farm foreclosures until a loan deferment program could be approved. This granted farmers the right to mediation in liquidation proceedings.

The Minnesota Department of Agriculture launched the Farm Advocate Program in the spring of 1984. The program offers free financial and legal counseling to farmers dealing with debt and provides emotional support to families in crisis. In the first six weeks, thirty-five advocates assisted 550 farm families.

Farm protests gained momentum. A 1984 bank protest in Paynesville supported by Citizens Organized Acting Together (COACT) prompted the start of Groundswell, a grassroots farm movement. On January 21, 1985, organizers held a rally that brought an estimated 10,000 people to the state capitol to call attention to the farm crisis. Demands included state-guaranteed operating loans, a 120-day moratorium on farm foreclosures, and fair prices for farm products. As a result, the legislature ordered a report on farm finances and appropriated money for farm business education and other assistance programs.

In 1986, Congress passed the Family Farmer Bankruptcy Act (Chapter 12 bankruptcy) as a way to keep families on their farms. The act provided the options of reducing debt and interest rates, and lengthening the repayment period. That same year, the state's Agricultural Extension Service began to provide mediation to assist farmers in meetings with creditors, which saved some farms. Nationwide, 9,556 farmers filed for Chapter 12 bankruptcy in the 1980s. Minnesota bankruptcies totaled more than 600 in 1987, but dropped to 230 the following year as the economy began to improve.

The number of farms in Minnesota decreased from 98,671 in 1978 to 85,079 in 1987. While some fell victim to poor financial management, others were lost due to a lack of good jobs available off the farm to subsidize household income, and to the retirement of an aging generation of farmers.

For families losing their farms, it meant not only the loss of their livelihood, but of their preferred way of life. For those with a long history on the farm, it ended the tradition of passing the farm on to the next generation. The emotional toll led to depression and, in severe cases, suicide.

As farms were lost, the average size of surviving farms grew. Owners of corporate farms began to take over more acreage. In spite of state laws designed to protect family farms, non-farmers owned 28 percent of all Minnesota farms by 1982. Farmers and local lenders resented outside investors, many of whom were absentee landlords.

The farm crisis of the 1980s claimed other victims. Small town bankers faced the difficulty of having to call in loans, go through debt mediation, and foreclose on friends and neighbors. Agricultural suppliers lost customers. Main street businesses in rural communities suffered as farm families had less expendable income. Rural communities were faced with the challenge of luring non-agricultural industries to town to bolster their sagging economies.

Although the farm economy began to recover in the late 1980s, the number of Minnesota farms is still in decline (down from 85,079 farms in 1987 to 74,542 reported in 2012), and farmers continue to face serious economic challenges in the twenty-first century.