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BPA Buy-back Helping Farmers, Could Hurt Others by Mike Lee, Herald staff writer Tri-City Herald, April 17, 2001

The Bonneville Power Administration is taking 15,000 more acres of the Columbia Basin out of production than planned, a move that bodes well for farmers but adds economic uncertainty for farm service businesses.

"It has ramifications through the whole economy," said Bob Cazier, director of marketing for Horizon Ag-Products, which produces humic acid fertilizer in Wallula. "Sooner or later, it will get down to the guy selling pickups if it hasn't already."

BPA official Ron Rodewald said Monday that an initial tally of land eligible for the agency's water buy-back program had been increased to 600,000 acres. That boosts the agency's program limit to 90,000 acres from 75,000 acres and ensures virtually all land submitted for the program will be included.

Buying water from the Columbia Basin Project allows BPA to keep it in the Columbia River to generate power at Grand Coulee and other federal dams -- power that will be badly needed this summer, given the region-wide drought.

"It's a sizable block of water," Rodewald said of the increased volume BPA is buying. "The way this year is shaping up, every bit of water is extremely valuable."

BPA's offer of $330 an acre convinced droves of farmers to take land out of production, a welcome reprieve from the terrible prices many crops are bringing. But 90,000 acres of fallow land creates a huge hole for businesses that sell farm equipment and services. Fuel, machinery, spare parts, fertilizer and irrigation equipment repair companies are among those likely to suffer.

"It looks like it is going to be a major hit for us, but it hasn't happened yet," said Larry Hawley, owner of B&H Ag Chem in Othello. His business gets a double-whammy -- he won't get hired to fertilize land that is fallow, and he won't be asked to come back later to apply pesticides.

BPA limited its program to 15 percent of Basin farmland to avoid large-scale disruption of the farm economy. "You don't want to do something that harms the whole economic engine east of the Cascades," Rodewald said.

In better times, the limits might have worked. But the situation in farm country is so bad this spring that one report from the state Legislature said a quarter of Washington's farmers had not secured financing for the 2001 growing season.

"We have been taking a major hit here in the last few years because the ag economy is the way it is," Hawley said. "For this (BPA program) to come along, it's really going to hurt. I hope we'll survive, but it's really going to hurt."

At Horizon Ag-Products, Cazier just finished revising the company's annual financial outlook. Instead of seeing a steady 20 percent increase in business as expected, growth is expected to "flat line" as his customers suffer the multiplied impacts of drought, power price increases, BPA buybacks and a poor farm economy.

"The whole situation has created a degree of uneasiness," Cazier said. "Paranoia might be stretching it -- but everybody is uneasy, and they are playing it fairly cautiously."

It's not clear how deeply the BPA buy-back will cut into food processors' ability to find product. "We have talked about it," said Dave Klick, executive vice president at the Northwest Food Processors Association. "But I don't think we have enough information yet to see what the big picture is."

The biggest losers probably won't be known for several weeks when all planting decisions are clear and businesses that cater specifically to the crops that are cut back will start to feel their incomes slip.

Already, it's widely assumed potato plantings will decline substantially from last year's record. Also, reports are that BPA buy-backs will include lots of land that produced sugar beets, beans and wheat, crops with minimal profit.

At Saddle Mountain Farm Supply in Othello, owner Bob Parrish realizes the service industry is in for tight summer, but he takes a positive view.

For starters, he doesn't expect his core business with hay growers to decline much. But besides that, said Parrish, there's a chance that limiting production will buoy some commodity prices.

"There might be a silver lining," he said. "If that will help (farmers) keep their heads above water, I'm all for it. Hopefully, we'll all get through it together."