The farm financial crisis of the 1980s was one of the worst times in modern history of farming. It was such a painful time for many that it might be good to re-visit it so that we don't ever repeat it in the future. It is like opening an old wound.

The 1970s had been of a boom time for many agricultural producers. Lowered trade barriers, along with record Soviet purchases of grain led Secretary of Agriculture Earl Butz to utter those famous words "plant fence row to fence row" and "get big or get out". Increased lending and rising land values, along with low interest rates, led many people to increase their debt load and expand their operations. "They aren't making anymore land" was the prevailing logic. Many aggressive lenders would loan you more operating money than you asked for. Times were good! Maybe too good.

Farmers used rising land values as collateral to secure more loans. But interest rates started rising and soared to levels as high as 21.5% in 1981. This suddenly made the cost of borrowing money prohibitive for everyone - especially farmers. Other things happened to make matters worse. The Soviets had invaded Afghanistan and, since agricultural commodities have always been the ultimate political football, the President put on a grain embargo and stopped shipment of farm products to the Soviet Union. Tight money, high interest rates, and collapsed demand all came together . . . and spelled doom for many farmers. Land values that had peaked in 1980-81, plummeted and suddenly many loans weren't adequately secured. Things got crazy in a hurry.

On a personal note, I had just accepted this job in Kentucky, bought a house here and couldn't sell one in Mississippi. Things were tight. A few years earlier, I had bought some land in Tennessee with a "hand-shake" loan from Production Credit Association (PCA). The person that made the loan to me was let go. The next one was a friend of mine too, but he was also soon released. The next manager started calling me well before the yearly payment was due. Lenders were trying to raise money anyway possible. A bank was willing to finance my little venture but many people weren't as fortunate. I will never forget being on a program in Bowling Green when a representative from PCA was being introduced to speak and the entire room of farmers got up and walked out. They came back for my talk, but there was no question that nerves were raw and feelings ran deep. Agricultural lenders were in a difficult place, too but I couldn't help but be sympathetic to "my" farmers. It was difficult for them to understand how lenders could suddenly go from loaning on a handshake to pushing you for their money. Times were bad.

The 1980's was our "Great Depression" and it is estimated that 300,000 farmers defaulted on loans. Many multi-generational "century" farms went under and the emotional toll on those farmers was devastating. In 5 years (1981 to 1986) one quarter of the assessed value of farm land disappeared - a 300 billion dollar decline in farm asset values. In parts of the Midwest, land values dropped nearly 60%. In 1983, public farm auctions averaged about 500 per month. We must not allow that to happen again.

Dr. David Kohl, professor emeritus of agricultural economics at Virginia Tech, says that we (agriculture) are now in transition from a 10-year wealth period, particularly in the grain sector. Agriculture is facing a correction in land values (again) and there may be decreased wealth in the grain sector along with large capital investments in the livestock sector. He believes that there's good money to be made in the livestock sector but warns that the biggest mistakes are always made during profitable times! Good times can lead to complacency, higher non-farm capital purchases and a lack of attention to best management practices and proper planning. He advises farmers to write down their goals, form an advisory team for their operation and nurture their relationship with a lender who is consistent in good times and bad.

I understand the concept of "high risk, high reward" but my advice is simple - "don't ever get leveraged to the point that someone else controls your destiny". This is a good time to pay down debt and protect your independence. Those that don't learn from history are doomed to repeat it.