Could the United States be facing an economic crisis in the agricultural industry similar to the farmers’ debt crisis in the 1980s? There is the possibility that it may happen when we observe the events that occurred during those times. Farmers were consumed in debt which caused them to lose their land, equipment and homes. It affected global economies because of incurred loan debts and decreased assets value. The same thing happened in the mortgage industry beginning in 2007, which resulted in homeowners and entrepreneurs losing their assets.
In the 1980s, farmers relied on bank loans to purchase new equipment and inevitably increased prices for their farm products, such as chickens and turkeys. The profitability margin increased for many farmers, but only lasted for a little while. The agricultural debt in the U.S. increased to more than $350 billion by the end of 1981. Farmers were heavily in loan debt with low value of assets. According to The Huffington Post, over 60,000 farmers lost their farm and homes between 1981 through 1986.
It appears that farmers who raise poultry, including chickens and turkeys are subjected to loan debt compared to large chicken factories. Companies, such as Perdue and Tyson contract with farmers to produce the products. The poultry farmers obtain loans and put their whole possessions up for collateral without knowledge of the outcome. Just because the interest rates are low during the time of the loan, the Federal Reserve can interest rates at any time.
But, what happens when farmers have to refinance at a higher interest rate? It causes financial stress, risk, and burden on the farmer and his or her family. To start a chicken farm business, the entrepreneur needs approximately $1 million or more in capital. That’s an enormous debt for farmers considering one chicken is sold at approximately five cents per pound. So, who’s really bringing in high revenue, the chicken companies and manufacturers.
Farmers incur mostly financial debt and risk, rather than profits when they use their assets as collateral to receive loans from banking institutions. The banks are protected by federal government agencies, including Farm Service and Small Business. Who is protecting the farmers when they are encouraged to get loans and eventually default? Maybe the government can do something to start protecting the farmers who do all the hard work to raise chickens and turkeys.