Paul Lasley: Timing was everything. So the most vulnerable were those beginning farmers or farm families that expanded, took on debts to expand their operation for a son or daughter or son-in-law, daughter-in-law to get started in farming.
Debts piled up. With less demand and lower prices for their products, U.S. farmers had no way to pay back their creditors. Yet many borrowed even more money hoping that better crops and better prices would rescue them in a year or two. It didn’t happen.
Senator Charles Grassley: Farmers were doing what they thought they had to do to protect themselves. They were encouraged to get bigger because bigger is better, you know. And you just kind of get yourself, like a dog chasing its tail, you never catch it and it just gets away from you.
Norma Fetter recalls things running smoothly on the farm during the 1970s. She and her husband Phil enjoyed taking care of the livestock. But even that proved to be perilous.
Norma Fetter: We got a swine disease in the hog operation so that curtailed raising hogs. So that was kind o the beginning of it. Then we got a large loan with Federal Land Bank to keep things going and we just didn't have the money to pay back the loans when they were due.
The Sullivan family found itself in a similar situation.
Bob Sullivan: We operated on borrowed capital a lot of the time. We never had any money of our own and that is what got us as far as we ever made it. But then when the interest rates went up so high we were kind of getting behind on the operation and then all of a sudden they took about, we figured 65% of our equity with the same thing. So the banks got worried and I said, well, what are you talking about? I said, we're doing the same good job farming that we did when you loaned us the money, we still are. So you've changed, we didn't.
Collapsed demand, tight money, and high interest rates were all coming together to create the perfect storm. After land values peaked at $2,147 per acre in 1981, farmland values crashed soon thereafter. Two decades would pass before land values fully recovered.
Mark Pearson: I can remember visiting with a farmer who made a statement which became prophetic, which was, farmland prices will not go up again for a generation. It will take a generation for these memories to be washed away if what happened with some farmland prices go back down. And he was right.
For the first time in history, total interest payments on farm loans exceeded total net farm income. In January 1984, the Federal Reserve Board issued a report estimating that one-third of all American farmers held nearly two-thirds of the nation's total farm debt. Many were buried in debt almost before they knew it. They failed to understand why their lenders suddenly went from handing out money with a handshake to becoming to tight-fisted and in some cases critical of how the farmers ran their operations.
Theresa Sullivan: I can remember the day that Bob came home and said the bank was cutting us off and they were going, they might start a foreclosure. I was baking bread, homemade bread, and I really punched it down. First I had to cry a little bit and then I was angry. So I just kind of tore into it.
Bob Sullivan: Took it out on the bread, that's good.
Theresa Sullivan: Well, I had to have something to take it out on.
Bob Sullivan: But it was kind of a jolt to think that, you know, we thought we were doing well and everybody worked as a team and then all of a sudden, you know, we didn't have anything. That was quite a switch.