Home on the range where the money is tight

By Alan Deans

New York view

The state of the American economy is a topic that has been generating plenty of glib expressions. "Goldilocks" is one favourite, a term lifted from the famous fairytale because the nation is seen to be running neither too hot nor too cold - rather, just right.

Then there is "wealth effect", a term that refers to how even average householders are spending up large because they are sitting on windfall paper profits from stock market investments. They don't actually have the money in their pockets, but who cares?

These are both feel-good terms, ones that carry strong political capital but which inevitably gloss over sectors of the economy that are not doing so well.

They are an extension of the glamour image shown daily on dozens of television soap operas - those that focus on neatly clothed, healthy people all with jobs, living in large houses and getting an A-grade education.

But tough times are biting hard down on the land among the ranchers and farmers that many still see as representing real America.

It is not yet as bad as during the mid-1980s, but most believe the squeeze will get worse before it gets better.

The culprit is the same as that hitting farmers elsewhere in the world, low commodity prices caused by slack international demand in the wake of the Asian and Latin American economic crises.

The US counts on these two regions for 60 per cent of its agricultural exports, but this is expected to tumble because of falling demand and the high US dollar.

Hog farmers are among the hardest hit, along with corn, wheat and soybean producers.

The dairy industry, too, is falling fast, prompting Federal Agriculture secretary Dan Glickman early this month to start shovelling out aid from the Government's emergency reserves. Government forecasts are for beef, chicken, vegetable and fruit producers to do well this year, although the same seers also said dairy farmers would do well.

Alarm bells are ringing also on farm borrowings. Federal Reserve chairman Alan Greenspan warned this week of deepening financial troubles, saying institutions that lend to the rural sector might have to be more carefully monitored because bad loans are likely to grow.

Backing this up, loan deficiency payments advanced to farmers by the Government jumped to 1.5 million last year from a mere 2000 in 1997. This year is expected to be even worse.

Within America, people who do not depend on farming for their incomes don't seem to care much. They know that low meat and grain prices translate into reduced grocery bills, a major factor for the continued containment of inflation.

Goldilocks can fill her bowl to overflowing with cheap oats, so what's the worry?

But New Zealand farmers should be concerned because of actions the US might take to ease the pain. Washington is doing all it can to spur demand for farm output, with Mr Glickman even citing the easing of sanctions imposed on India and Pakistan over their nuclear testing as being tied to pressure to re-open valuable wheat markets.

Then, of course, there is the bleating coming from the American sheep meat industry - such as it is. New Zealand and Australian lamb producers have achieved considerable market penetration in the US through persistently smart moves to market quality produce.

This has happened partly because American farmers had done nothing to protect their market. Indeed, they let it run to seed.

Now they want tariffs or quotas imposed because they are losing sales topping $US130 million annually.

In recent hearings, New Zealand ambassador Jim Bolger and others have forcefully argued that importers get little domestic assistance and have done nothing wrong.

Indeed, Mr Bolger even offered to help the Americans rebuild their market share with promotional assistance.

America is moving into the long, silly season before next year's presidential election. Candidates are crawling out of the woodwork to test policies, seek critical funding and try to shore up constituencies as they jockey for nominations in the primaries.

The farm vote is a large and important one, and can be very vocal when it wants to be.

The Clinton Administration has been trying to shore up its support by saying that its hands are tied on issues like farm assistance because of spending restrictions enacted in the 1996 Farm Bill. That was written when times were comparatively rosy, so pressure to weaken its constraints can increase only if commodity prices remain low.

It is anyone's guess what the Republicans will do when confronted with this criticism, but they sure won't want to alienate a core support base.

* Alan Deans is New York correspondent for the Australian Financial Review.