NFO-205 (AV10707): US Farm Report: Dialogue From Rochester

us farm reports a public information program brought to you in the interest of agriculture rural business and the well-being of our nation by members of the national farmers organization in this area and others interested in having American agriculture receive cost of production plus a reasonable profits American farmers and ranchers are building a brighter future for agriculture through the national farmers organization the organization that awoke America and represents the leadership of Agriculture u.s. farm report now presents a dialogue from Rochester as the Rochester Minnesota Chamber of Commerce launches its first agribusiness day with economists businessmen and farmers participating we will hear two of the important speakers of this event Ray Aune a banker from Southern Minnesota and a member of the committee that arranged this conference and Erhard Pfingsten national vice-president of the NFO and acting as hostess Phil Allen veteran farm news analyst heard on many radio and television programs the dialogue in Rochester played two and over the overflow crowd had one of the biggest hotels in this growing community in southern Minnesota it's unusual in the fact that there's a heavy snow cover in southern Minnesota as there isn't a great deal of the northern part of the Middle West at the time of this important conference I think it was significant because it's one of a type mister Aune I'm sure will bear me out on this point that chambers and commerce agricultural economists businessmen and farmers are gathering this season I expect you folks in the television audience can note other communities where they've had similar conferences on a similar subject at Rochester and their first agribusiness day they asked the question collective bargaining and 831 turning out through the snows to hear this discussion well the overflow crowd was part of them were fed that one of the nearby hotels across the street and then they stayed all during the afternoon to talk about this important question we're going to raise some questions on the program is it because the alternatives to collective bargaining seem to be disappearing is it because agriculture is condition now is such that business people and farmers well one spokesman put it this way we all sink together or survive together I'm going to apply a number of questions to mr. auntie who is a banker and a businessman you were a member of the committee that helped promote this weren't you mr. Aune that's correct and your bank as I understand it as a member of the independent bankers especially we're an independent bank naomi's Oh what might you say to this audience about the condition of Agriculture as you've seen it through the years in financing farm operations well I might say I'm going back long long ways back to 1922 when I first started on my first job as an Ag teacher I like to make this statement that there's never been a time when it's been so difficult for a young man to get started farming as it is at the present time very definitely and of course a high capitalization the large amount of money it takes to get started farming we used to think in terms of seventy five hundred thousand dollars well now a minimum is almost one hundred and fifty thousand dollars with a price of land that they're asking and this price of land is going up because the larger operators are bidding it up and of course some outside buyers come in use it as an inflation hedge so that's a problem let's get the high price that with the income that's available it's almost impossible pay for these parks when a farmer comes into your bank to borrow for either for his operating expenses or for any other purpose of renewing or enlarging does it seem to you that the loan that you might make to the farmer also affects the rest of the community life yes I think very definitely and of course these farms you get them bigger during the past 12 years I can think of about 110 different farmers that have that we have loaned money to for the down payment on the adjoining 80 160 acres and enlargement I can think of a couple that are on their sixth and seventh farm it just goes to show what's happening I mean the bigger ones are getting bigger buying up the neighboring farms and some of these smaller ones are passing out of existence and the coming part-time farms the price structure that the farmer receives of course that's a highly important to a banker making a loan isn't it the price that he gets because that enables him to repay the law very definitely we do a lot of budgeting we got to figure out to some of these loans running over a hundred thousand dollars we have to do quite a bit of figuring as to the income and expenses and you know after all we're only about number three on the getting payments on his loan he's first gotta pay operating expenses he's got a support his family and then if there's anything left while we may get some that to reduce the loan and that's where many of them get short we hear some talk these days about the efficiency of farmers and weather getting efficient or being larger is a help in survival of the farm does it does it seem to you there's a correlation well we hear so much about get larger and get larger I was [unclear] for good many years and I was involved in some of those programs farm planning and all that and that was pretty much the thing they talked about you got to get larger you gotta milk more cows you got to keep more sows and all that well the good question is how large can you get but definitely there's some of these people get them larger that certainly have their financial problems you've described the serious condition mister Aune and yet you were part of the part of the workings of this community Rochester one of the best favored in the northern Middle West that proposed to have a conference today about collective bargaining does it seem to you that this is a a hopeful solution or part of the solution well I think very definitely this meeting that we had here at Rochester the first rule or the meeting agribusiness meeting I think definitely meant a great deal and you know the businessmen they need a lot of Education and quite a few of those we had the rotary and Kiwanis and Lions Club they're all they're known for their but I noticed there were at slide over station but you know they they they don't know what's going on many of these businessmen they're even born race not on the farm years ago but they don't know what as far as they financial problems on the farmers concerned that is that many unborn - of course if you do but that's situation I'd like to get back to one or two more of these points mister Aune about the increasing understanding businesspeople can have this I'd like to turn to mr. Pfingsten who is the vice president of the NFO he was one of the speakers on the panel I think that you may again compare this to a conference like this you may have had nearby your city or your community where farm organization leaders participated mr. Pfingsten does it seem to you that collective bargaining as a question to Center these conferences on is the proper focus for these times or or I think very definitely I don't think that there's any thinking man or any progressive man that doesn't realize that from time to time any business any industry has to make changes or it's going to stagnate or even get complete destruction and I think the thinking farmers in the United States very definitely realize that it has to be done I think they're more and more coming to realize that it's not going the problems not going to solve itself because the situation has been deteriorating steadily for the last 15 years and I think this thought is gone now that they can just sit back and wait for itself to correct so I think that the thinking the progressive farmers are definitely ready for a change and they are of course joining NFO in vast numbers for collective bargaining to get a voice in establishing their own price and this of course is the big failure in agriculture the farmer is operating in a very highly organized economy and yet he as an individual goes to the market and asks these modernized national buyers but it pleases them to pay he says what will you give me well I don't think it takes very much thinking to realize that when you consider that every corporation in this nation was set up for one purpose and one purpose only and that's to make profit that they soon realize that they can't continue to go to those people and ask them what it pleases them to pay and hope to get a fair price it just isn't in the cards so I'd say that definitely the trend is reversing yeah I mean the thinking in so far is that they have to do something about it we have well more than double the area in which we're organized and of course these are bigger and bigger farmers altogether so there is in my opinion a definite movement toward collective bargaining do you feel that time is on the side of the of the great thrust toward collective bargaining is time playing on the side of getting together in bargaining for a price at the present time it looks that the time is there if things keep moving as they have been but I think that we are probably in a much much more critical time situation than most people care to realize and I think they had better do it fast and take no chances on whether there is time or not yes what mr. Aune is describing here it shows that there is certainly a situation that is confronting not only farmers but the whole business life well the rural communities got to go whether that the farmers go out that's the customers of the rural community and what is there left after you lose those so I'd say this is probably part of the reason why right now our homes are not what they once were we've got sons daughters or grandchildren that have gone to the east coast the west coast leaving the Midwest well this continues what's it gonna stand on I noticed there was a good bit of agreement in principle at the discussion today the ag economists mentioned it and so did the farm organization leaders and I got the impression there is a good bit of agreement in principle that collective bargaining is is here it must be expanded and developed and yet I heard you address yourself specifically to a question mr. Pfingsten about the type of collective bargaining the NFO's has put together under the capper-volstead Act would you comment a bit about that what sort of a structure collective bargaining well of course you have to recognize the condition under which we're marketing where our buyers are national in scope can bypass any area any market in the individual and actually pit one against the other so the farmer is totally helpless if he as an individual refuses to take the price that is being offered through the national organization he's got no place to go he's helpless so a farmer goes to the market and says what will you give me well to get out of that situation he has to become a businessman and conduct his business of marketing exactly the way every good industry and business in this nation has always done it to set his own price a price based on what it costs to produce this is the first thing sell it under contract at least a year ahead and then produce for that contract now in order to do that it takes a national organization because it's a national problem even a local group si can be bypassed just as easily as an individual just so it takes a national organization for that reason it takes an organization dealing in all commodities bringing them all up in relative balance because if you try to do it by individual commodities let's say each group go its own way then you're going to have a shifting into that because they're not gonna lose money in one field if there's a good profit in the other they're gonna shift to it well that'll destroy that or any gains that you might have made then I think the next thing an organization that looks after the whole problem and this we have in the NFO not just the pricing but sees to it that the excess production is taken care of so it has to be a surplus disposal setup so the program of the NFO in the next step would be through the con- control of the sale of the production supply the market with all that it can use at a full fair price but no more see this has been our failing in the past we have let any excess production establish the price on all of it in other words the last pound of production that we had set the price on the very first pound so control the sale supply the market with all that little pay whole fair price for but no more then if you have any excess of beyond that channel that into world markets secondary markets or let's say at a discount rate but don't take that discount on the entire year's production and failing to be able to move it then isolate it from the market so that it cannot be used to let's say destroy the price structure other examples of this and other businesses know if they do this with their oh yes I don't think there's any business I think you have everyday your merchants he sets his price any customer goes in there easy they're gonna pay that price or you don't get that production now we're used to year-end sales they buy quite a ways ahead they'll buy six months to a year ahead I'm talking about department stores and so forth they buy for the next season well if they have anything left let's take shirts for example they have shirts left at the end of the year sure they'll sell out what they have at a discount but they don't start selling the entire new delivery at a lower price because they've got some left so I think this is very important and then of course the final point that no organization can ever do this under is if they're not ready to use the power of the production itself this is the only power that there is in bargaining is the control of that production let them have it when they pay a fair price for it don't let them have it if they refuse and this and of course will effect eventually reflects itself in contracts once your contracting on a year ahead the either contractor they're out of business so the the production itself has to be used for the power and of course you don't start any year off without any production in agriculture you always have production there so it's going to take a holding action in some form or another to break that pattern you have to first of all show that you've got the pressure and the only way you can do it is with the power of the production itself I heard you reply to one question I suppose it was asking in the form of whether- whether Supply Management has to be accomplished by law whether there needs to be enabling legislation for collective bargaining and all of that could you say some things on the subject of the NFO with reference to farm programs for example and with reference to possible legislation in the field of collective bargaining well we we can and are using the present farm programs the loan setup and the government programs we are using them to an advantage in our programs and I think that the farmer should cooperate in those programs it does very definitely stiffen our hand at this particular time and I think it would be a catastrophe to eliminate those programs until the farmer was ready to run his own program into its own pricing now as for the additional legislation that they're talking about or an enabling legislation you've never heard that out of the NFO the NFO does not need additional legislation we have all that we need this is a reason that we had to build an entirely new organization to comply with the laws that are in existence didn't the NFO brief on the capper-volstead Act before even organizing the structure I should hope to tell you we did and by all the experts in the legal field that we could get a hold of I think the Sunkist decision by the Supreme Court just a few months ago brought that out very clearly well the Supreme Court denied them the exemption from the antitrust laws granted by virtue of capper-volstead Act that they had I think the figure used was 15% non producing members in their organization and they they lost on that basis this is the reason see why we have never let anybody but farmers into our organization or producers of farm products and this is also the reason why we don't go into business see this is another gray area so there really wasn't any organization at all that could go into that field without very decidedly changing the structure of the organization that's one of the things that makes ours different than the others is we are set up on the basis of the laws now in existence so we don't need enabling legislation and this seems to be the concern of others that they'd like to have a legislation so that they too get-get into the field one more question before I turn back to one thing I'd like to develop a bit further with mr. Aune since you've described a kind of a unique and sharply focused attitude of the NFO toward bargaining and only bargaining then is the NFO really in conflict with any of their farm organizations no there's no conflict at all the other organizations were set up to bring far more service services of various kinds they've done this they've done it well but they're not set up for collective bargaining again this is why we had to build an entirely new organization that was set up for that and it is our only program so there is no conflict here with any other group or individual that honestly wants farmers to have a fair price there just simply cannot be because there is no conflict in any area for anybody at wants farmers to have a fair price we are not asking the government to do the job for us weird asking the farmers to do it themselves to be businessmen to run their industry the way the automobile company the way every big business runs theirs so there can't be any conflict if a man is really and truly honest in wanting the farmers to have a fair price so I suppose a rancher or a farmer could belong to his own organization that he has for years or several of them and also be an honorable man that's right see they still need the services that other groups are providing the fact that they join NFO isn't going to relieve the necessity of those services but they also need a price so we're not asking them to desert their present organization but asking them to join ours for the purpose of getting a price so ours really is every farmers organization there's no conflict here political or otherwise because this is the only program of the NFO to get farmers a price so it's not going to be a sideline with us it is everything to us now one of the best points you made it seemed to me during the luncheon at today's Rochester agribusiness day was the interdependence of Town and Country mr. Aune could you say a bit more about that do you feel that the city man needs the farmer as much as the farmer needs the city very definitely no question about that I think on various occasions that we notice that the farmers aren't buying the machinery buying various consumer goods because they don't have the income that shows up there once in a while no question about that are very much dependent on each other I'd like to ask race one question here you know the high cost of money now at the present time 7% on federal land bank loans and seven and a half eight percent on operating loans and according to a statement made at the meeting the average earnings are less than five percent well how are we gonna pay seven eight percent on a major part of your capped investment if you only earning five percent that's a good question certainly is you had some figures on that today didn't you mr. Pfingsten yes the figures I was using were from the economic indicator in fact I have them here and that is on the sale of the farm production and that figures I was using was 68 or 67 figures because the 68 figures are not complete but the sale of all farm production in the United States was for forty two point eight billion dollars the production expenses were thirty four point eight so we had actually eight billion dollars profit on the sale of our production our investment in that same year was two hundred and seventy four so that figures out actually less than three percent and of course there's other things too that they do figure in they figure non money and come for me living in my own home you know and that sort of thing zooming with the firewood you burn from your own woodlot this income yes would I bring my electric range and in my gas furnace and that's how you could get eight point five billion from the sale of commodities when the AG department figures for what they called net income for that year was around fourteen that's right fourteen to part of this was government government payments would be in there and then the rest of it is all monkey business figured in I think mr. Aune has a point here you were you were mentioning if it's below five percent if you counted even the fourteen busy or what eight point five billion as from the sale of farm commodities then mister fingsten said at the meeting today that that would figure less than three percent on an investment now as a banker what problems do you see there well one is three percent or five percent when they're paying seventy eight percent for an operating capital remember in many of these farms the borrowed money probably represents two-thirds of the entire capital structure so it just doesn't just impossible to come out of that kind of a situation my correct in understanding that you have said that two-thirds of the capital structure for farmers and ranchers is borrowed money well probably not overall but certainly many of these beginners Oh once in a while it gets down to three parts oh it's that high yes of course that's where we have problems lending money to those with a low equity I heard you mention a few minutes before we went on the camera that a cattle man might face this problem and let's see how how are you going into his problem there you probably helped finance cattle often oh yes well you mean the interest my figure I think mr. Pfingsten had to figure on that yes this is of course see in my home area where we buy cattle and we borrow all the money usually from our banker to feed them well where we got into this discussion there are predictions that by July we want might very well be up to ten percent interest on the point that I was making in that case the man who borrows his money to buy and to feed cattle is going to have to give one out of every ten of those cattle yes just for the use of the money yes when he thinks of it in those terms he'd be giving away one out of ten cattle would and when a cattle feeder starts thinking of that it is an utter impossibility to make any money then you're clear past the three percent and the five percent that somehow looks a great deal more real than just figuring out a percentage that's right too often I think we're so used to figures that kind of escape us just like this method of marketing that we're in go on and ask and what'll you give me and then wondering why we're not getting a price I think where we've lived with it so long and so close to it that it's kind of grown on us we can't let loose of it or you might say we're so close to the forest we can't see the forest don't account in the trees and so it does have to be pointed out mr. Aune did you have any other observation that you wanted to make here from the standpoint of the of a businessman well I do work out budgets with these farmers all the costs are going up every year taxes are going higher the tractors a higher price combines for a higher price everything is going up so the squeeze is getting tighter and tighter and the only way out is to get a higher price from what the farmer sells yes and when you think of it in those terms you mention some of the things you're mentioning are the very lifeblood of a community in at least in this part of the country where agriculture is the principal industry as it is in vast stretches of America when you talk about not being able to buy cars or tractors you're talking about the very survival of the community that's right very definitely every every businessman in the rural area is certainly depending on the farmer and he's interested in the price of that farmer gets very definitely well am i right in assuming that what you're talking about it's quite a large number of transactions which means that the whole experience of your business is based on family agriculture isn't that's right so even though you could produce a sufficient or an equal quantity of food and fiber with the farmers leaving and going to cause the Continental tilt by leaving for the West Coast this would reduce the number of transactions and no absolutely no question about that I might mention one thing you know our grandfathers and our fathers they're used to paying for farms by making sacrifices they held off buying this and buying that well in this day and age you can't expect the roll family to make too many sacrifices trying to make farm payments and all that after all they should live there the same as people working I mean jobs in the city absolutely sense of justice that's right I'd like to close on this note since your committee helped form a discussion on the subject of collective bargaining and since the NFO has made some strides in the direction of building actual structures for collective bargaining could you say one or two things about this mr. Pfingsten do you look upon it with optimism and in what has been accomplished so far oh very definitely we're way beyond having built structures we're not only talking about collective bargaining we're doing it through our holding action last year we did breakthrough in livestock we now have three of the major packers under contract this was a result of the of the holding action we have in many many areas now break through on grain these are popping so fast that one man can't even keep track of them anymore and certainly in the northwest and the potato industry where they were getting 80 cents a hundred for their potatoes last year are right now contracting under NFO for four and a quarter for number ones two and a quarter for 240 I believe it is for number two and on the B or the small potato that they used to get as little as fifteen cents a ton for I've heard about they are now contracting for a dollar a hundred on those that's way over a thousand percent increase so we're not only talking about it we're doing it where we're going this program has been a discussion of collective bargaining which is the first topic of an annual agribusiness day promoted here in southern Minnesota I've been talking with mr. ray Aune who is a businessman in this area and the vice-president of the NFO Erhard Pfingsten for today is something to think about u.s. farm report has presented a dialogue from Rochester with mr. ray Aune southern Minnesota banker and member of the agribusiness Committee of the Rochester Chamber of Commerce and mr. Erhard Pfingsten national vice-president of the NFO moderator was Phil Allen members of the National Farmers organization invite you to tune in again next week at this time for more facts on Agriculture and Rural America the gear wheel in our economy that produces the majority of our nation's new well the farm income pattern sets the nation's prosperity and the national farmers organization represents new thinking in a new gen raishin of agricultural producers a brighter day for American agriculture