Turn around and take them back to the dealership.” What happened in the next 45 minutes became legendary in Marshall County. And the lesson it taught is one that every farmer, young or old, needs to hear before they make the biggest financial mistake of their life. Before I explain exactly what happened between Earl Patterson and his son that morning, you need to understand the agricultural environment of the late 1970s because this wasn’t just a family dispute.
This was a collision between two completely different philosophies of farming happening at the exact moment when American agriculture was splitting into two camps. Those who believed debt and expansion were the path to survival and those who believed debt was a noose waiting to tighten. By 1978, the boom years of the early ‘7s were over.
Corn prices, which had peaked above $3 per bushel in 1973 to74, had settled back to around $210 to $230. Land values were still high. Iowa farmland was averaging $1,800 to $2,000 per acre, but the explosive appreciation had slowed. Interest rates were creeping upward as the Federal Reserve tried to control inflation, and equipment prices had gone through the roof.
That John Deere 4440 that cost $47,000 in 1978. A comparable tractor in 1970 would have cost about $12,000. Equipment costs had nearly quadrupled while commodity prices had barely doubled. But here’s what made 1978 particularly dangerous. The agricultural lending industry was still operating on the assumption that the boom would continue.
Banks were eager to lend to farmers, especially young farmers who wanted to expand and modernize. The term progressive farmer was thrown around like a badge of honor. If you weren’t expanding, if you weren’t upgrading to bigger equipment, if you weren’t planning fence row to fence row, you were considered backward, old-fashioned, destined to be left behind.
The John Deere dealerships and the farm credit lenders had basically formed a partnership. The dealers would sell the dream of modern farming and the lenders would finance it with 7 to 10 year loans that seem manageable when you looked at the monthly payment in isolation. What they didn’t emphasize was a total debt burden or what would happen if prices dropped or how quickly things could unravel if you had even one or two bad years.
