North Dakota’s legacy on ’80s ag recovery: Farmer helped implement famous PIK program
MOTT, N.D. — An ambitious man from Mott was an early victim of the 1980s farm credit crisis and would play a key government role in getting money back in the hands of farmers.
Milton J. “Milt” Hertz ran a 26,000-acre farm, with 750 beef cows. The farm had up to 30 full-time and seasonal employees and ran five of the iconic Steiger tractors that were made in Fargo. His son, Shane, graduated high school in 1980 and was at his side. But the juggernaut stopped rolling with a farm sale in 1982.
Fate would send Milt to Washington and his son into a smaller farming career.
Next big thing
Milt stood 6 feet 6 inches tall and had big ideas about farming. In 1969, Milt was one of four farmers nationwide to be named a winner of the Jaycees Outstanding Young Farmer award. Among the other winners was John Block, a hog and corn farmer from Illinois.
Milt was one of the first to bring anhydrous ammonia, a form of nitrogen fertilizer, to western North Dakota. In the early 1970s, Milt became an early promoter of sunflowers in the western part of the state. One year, he grew 11,000 acres of sunflowers.
“He was constantly looking for something out of the norm to better our operation and take it to the next step,” Shane said.
Along with his impressive farm, Hertz became president of the Mott School Board and a member and president of the North Dakota Board of Higher Education. His wife, Carol, was active in state Republican politics and the Jaycees.
The 1980 and 1981, droughts changed things. Hertz Farms was fighting 20% annual interest rates on loans and low commodity prices. In 1982, Milt folded the tent on the “big operation” and sold out.
“Everyone got paid,” Shane says.
In 1981, President Ronald Reagan appointed Milt’s Outstanding Younger Farmer friend, Block, as his secretary of agriculture. Block succeeded Bob Bergland, from Roseau, Minn., who served under President Jimmy Carter.
Carter in 1980 placed an embargo on grain sales to Russia, which helped depress prices and fill bins.
Milt would serve in the Agricultural Stabilization and Conservation Service — later renamed the Farm Service Agency — in Washington, D.C. He started as deputy administrator for state and county operations, then associate administrator in 1985 and, finally, administrator from 1988 to 1989.
Back home, Shane bought two of his father’s tractors and went into farming with his grandfather, Gothold, on 3,000 family acres.
“He was down there trying to save all the farmers in North Dakota and do the best he could with it,” Shane says. “If the government was going to use our commodities as (political) leverage, we should probably be getting something in return.”
Big ‘crop swap’
Hertz was instrumental in administering the famous emergency “payment-in-kind” program, which idled some 82.3 million acres of land previously planted to wheat, corn and other crops. The program handed out $12 billion in so-called “free” grain in return for cutting production by 36%. PIK payments were exempt from a $50,000 federal farm program payment cap per farmer per year.
“It’s really a crop swap,” Reagan told his supporters in the American Farm Bureau Federation meeting in Dallas in 1983.
In the PIK program, a farmer would idle 10% to 30% of the acres they’d normally grow of wheat and feed grains and, in exchange, could acquire grain out of government storage. On top of that, they’d also take out 20% of their wheat or corn production under preexisting “diversion” programs of the day. So the total idled was up to 50% of a farmer’s “base” acres of wheat and feed grains, such as corn.
Significantly, the farmer wouldn’t incur input costs of seed and fertilizer, or the machinery costs. The 1985 Farm Bill included a Conservation Reserve Program, which started at 15 million acres in 1987 and grew to 30 million by 1990.
With lack of production, equipment manufacturers suffered. Fargo’s Steiger Tractor Co. would file Chapter 11 bankruptcy in 1986.
Under PIK, farmers would redeem grain certificates for grain, and sell it for market-clearing prices. It was a circus of sorts. Cert “redemption rates” differed among counties, and farmers flew into small airports in some remote counties across the country where they could acquire the most grain.
Shane says he couldn’t do any of the fancy PIK moves, with the government and media watching his father.
“I was told not to,” Shane remembers. “Dad said that was not the idea of how it was supposed to be working.”
Now 57, Shane says that, once again, markets are poor and government intervention is having a negative effect on trade and markets. The Trump administration’s trade wars with China and disruptions in the North American and European Union markets are reminiscent of the Russian grain embargo.
“It scares the hell out of me,” he said.
Interest rates are going down now, but Shane thinks that if interest rates would climb to 10%, farmers would be in the “same or worse” straits than they were in the 1980s. But the Hertzes are taking the long view.
“Our farm’s been around since 1905,” Shane said. “We’re proud of that ground. It’s put a lot of kids through college. It’s done a lot for us. I am the steward of that land and I would like a say in the next generation that farms it.”