bank failures. Major structural changes could be expected in both
farming and institutions providing credit to farmers.
Among the policy initiatives that have been suggested to address
the excess debt problem in agriculture are government loan guaran-
tees, principal forgiveness or buy-downs, interest buy-downs, a fore-
closure moratorium, and a federally chartered agency that would buy
land and, in so doing, help stabilize farm real estate prices. Several
issues are common to each of these alternatives: How should debt
burdens in agriculture be shifted? What would be the cost of shifting
debt burdens? Who would have operational control of agricultural pro-
duction after the shift occurred? Should public policy toward debt in
the agricultural sector attempt to “buy time,” or should any initiatives
taken be considered permanent?
If debt restructuring occurs in the family farm sector, it is almost a
tautology to suggest that assets will be restructured as well. A likely
prospect is that there will be increased separation of ownership and
operation of agricultural assets. This, in turn, raises a number of im-
portant questions: What should be the property rights of tenants ver-
sus landlords? How much outside equity should be allowed in
agriculture? Will new institutional structures need to be found to as-
sure efficient operation of farm firms?
Concluding Comment
There’s a tendency for many of us — especially those of us who are
economists — to project the future on the basis of current conditions.
In the 1950s and 1960s, this method of prognostication worked quite
well for the agricultural sector. It has not worked well in the 1970s
and 1980s because of the sector’s growing dependence on the macroe-
conomy and international markets. Perhaps some “bolt out of the blue”
(such as the Russian grain purchases in 1972) will improve financial
conditions more quickly than expected. Even then, however, one has
to wonder how much benefit would permanently accrue to family farms,
given the competitive cost structure that they face and a future de-
mand function that is uncertain at best.
REFERENCES
Γl 1 Jolly, R.W. and D.G. Doye. Farm Income and the Financial Condition of United States Agricul-
ture. FAPRI StaffReport 8-85, Iowa State University, July 1985.
[2] Krause, K.R. and L.R. Kyle. Midwestern Corn Farms: Economic Status and Potential for Large
and Family Size Units. Washington DC: USDA ERS Agr. Econ. Rep. 216, 1971.
[3] Krenz, R.D., W.G. Heid, Jr., and Harry Sitler. Economies of Large Wheat Farms in the Great
Plains. Washington DC: USDA ERS Agr. Econ. Rep. 264, 1974.
[4] Madden, J. Patrick. Economies of Size in Farming. Washington DC: USDA ERS Agr. Econ. Rep.
107, 1967.
[5] Miller, T.A., G.E. Rodewald, and R.G. McElroy. Economies of Size in United States CropFarming.
Washington DC: USDA ERS Agr. Econ. Rep. 472, 1981.
[61 Smith, E.G., J. W. Richardson, and R.D. Knutson. Cost and Pecuniary Economies in Cotton Pro-
duction and Marketing: A Study of Texas Southern High Plains Cotton Producers. Tex. Agr. Exp.
Sta. Rep. B-1475, Texas A&M University, 1984.
94