INGRAINED ECONOMY

Irvin Sobek’s morning started with a dawn drive from his Edwall farm into downtown Spokane. He had a list of things to do: service his truck, get a haircut, fix a hydraulic cylinder, pick up some office equipment, drop off a video for reproduction, gas up and grab a bite of lunch. Between checking off each errand on his list, he takes time to talk about a problem: Farmers are losing money. Some are going broke. “It’s not much fun anymore,” he said, reflecting on his more than two decades of farming.

The plight of the American farmer is a story told seemingly year after year after year.

But there is genuine concern that this time the troubles can’t be overstated. High diesel, fertilizer and freight prices, set against low grain prices, might be a tipping point, even during a year when many farmers harvested an above-average crop.

Within a year or two, 10 percent of the wheat farmers in Washington could be forced out of business. That’s the equivalent of hundreds of people like Sobek, who will have less reason to spend dollars in Spokane.

“We’re talking about an entire industry on the edge,” said Tom Mick, chief executive of the Washington Wheat Commission.

Such an exodus of farmers would be the worst since the farm crisis of the 1980s, when mounting foreclosures and broken-hearted farm families inspired filmmakers, and musicians, including Willie Nelson, launched Farm Aid.

There’s no such organization this time, even though farm failures of such magnitude would further devastate small towns and cut deeply into the Spokane economy. Consider that last year’s wheat crop was worth $524 million and spun more than $1 billion through the state economy.

“The two are linked,” Mick said of Spokane’s economy and the health of wheat farming.

Sobek summed it up this way: “If things don’t get better, farmers won’t be buying new pickups. We’ll cut back on Christmas spending and we’ll keep running all of our old equipment,” he said. “That’s for starters.”

Though the problems are many and complex, farmers blame a 47 percent rise in fertilizer costs, and diesel prices that have climbed 67 percent in a year, according to a Washington State University study.

At the same time, the price of a bushel of wheat has dropped 10 percent.

For the first time since the Great Depression, a gallon of diesel is more expensive that a bushel of wheat.

Messages are mixed in Washington. Congress is wrestling with a proposal to trim crop subsidies, which are the government’s lifeline to farmers, while under political pressure from farmers to cobble together legislation that will pump some cash back into agriculture.

The war in Iraq, hurricanes, bailouts and tax cuts means most every non-military government agency is looking for cost savings. Congress may direct the U.S. Department of Agriculture to cut some support programs, including slicing $1.3 billion in financial aid and subsidy programs each year through 2010, and another $1 billion in conservation payments, which have become an increasingly important financial factor during tough times.

Some older farmers are beginning to sell equipment to keep the farm running. Others are raiding their retirement savings — a virtual red flag snapping in the wind.

“As an accountant advising these folks, I see what’s happening and frankly, I’m telling some of them ‘Let’s look at getting you out,’” said Todd King, a farm accountant with Leffel, Otis & Warwick in Davenport.

That’s for the older guys who have that ability.

For younger farmers, King has this advice: “You better be lean, mean and learn to live at the poverty level.”

Of course, it’s not just farmers who are being hurt by higher energy costs.

Price spikes affect many, from employees who can’t adjust mileage reimbursements to major industrial companies.

Potlatch Corp., for example, saw its profit more than halved during the summer months because of the high cost of energy.

Hecla Mining Co. announced last week higher fuel prices are one of several factors that will reduce the amount of gold produced this year.Some are able to pass along the higher costs.

Burlington Northern Santa Fe boosted its fuel surcharges to collect an extra $296 million during the past quarter. Still, company officials said the surcharges covered only 70 percent of the railroad’s higher fuel expenses. Executives of the grain, coal and freight shipper hope to recoup 80 percent next year.

Some seem to be profiteering.

Exxon Mobil Corp. reaped a record a $10 billion profit for the third quarter.

ConocoPhillips, the nation’s third-largest oil and gas company, reported a $3.8 billion profit.

Farmers complain that they are powerless to add such a thing as a fuel surcharge. Combines, tractors and work pickup all drink diesel and parking one means scaling back crop production.

Since they can’t simply pass along added costs to consumers, they turn to government for help.

And lately, there’s not as much aid available. Grain prices have not fallen far enough to trigger two subsidy programs, including the so-called “counter-cyclical” payments mandated under the 2002 Farm Bill.

Farmers are getting a 52 cent-a-bushel direct payment — a main subsidy relief — but that’s quickly gobbled up by the high fuel and fertilizer costs.

“We’re stuck,” said Sobek, who decided to cut his farming operation by 20 percent next year to reduce his fuel costs.

Farmers met Tuesday with members of Congress to find relief, said an aide to Sen. Patty Murray, D-Wash.

Gretchen Borck, issues director for the Washington Association of Wheat Growers, said the wheat industry is proposing an energy emergency assistance package.

With Congressional approval, this would enable farmers to submit receipts for fuel purchases, which would be fed into a calculation designed to award at least a small reimbursement for extraordinary fuel costs. Borck said farmers hope the money would be equal to the 52-cent direct payment already collected.

Jim Fitzgerald, who ran a wheat and cattle operation in Asotin County before the Bush Administration appointed him state director of Farm Service Agency offices in Washington, has heard the worries and said farmers have an opportunity to share concerns and ideas this week when U.S. Agriculture Secretary Mike Johanns holds a listening session at Eastern Washington University.

“He’s coming to hear from folks,” Fitzgerald said.

There are a few bright spots.

Though farm profits have waned, the price of land has remained high.

An auction in Lind, Wash., netted about $350 an acre earlier this year. Another auction of land near Ritzville netted more than $700 an acre.

Why so much for land that’s only marginal-to-good for growing wheat?

Real estate, whether it’s dirt near Davenport or a duplex in Spokane, is a popular choice for investors rattled by the ups and downs in the stock market, or burned in bond fiascos like Metropolitan Mortgage.

It may be just the thing to nudge farmers out, according to King.

“I’m not a cheerleader for telling people to throw in their marbles and go home, but …,” he said, his voice trailing off.

Buying new combines and tractors are out of the question for many wheat growers, leaving them to hunt for parts and spend time and money repairing older equipment while at the same time attempting to grow the size of their farm in an effort to offset declining profit margins.

The farmers that are still left, King said, are astute operators. The marginal producers were gone a long time ago.

“That’s why this is so frustrating,” added Mick of the Wheat Commission. “These are good business people who have done everything right but it still doesn’t matter.”