Farm Credit Agency Officials: This Is Not the 1980s

May 20, 2016 12:00 PM
Farm Credit Agency Officials: This Is Not the 1980s

Despite forecasts of falling farm incomes, producers are not about to relive the 1980s, Farm Credit System officials told members of the U.S. Senate Committee on Agriculture, Nutrition and Forestry on Thursday.

One major reason: Crop insurance.

“In the 80s, less than 5% of crops were insured. Today in the U.S., 95% of (crops) are (insured),” said Leonard Wolfe, president, CEO, and chairman of the board at United Bank and Trust in Marysville, Kansas.  “That makes a huge difference for producers to know they will be around for the next season.”

Doug Stark, president and CEO of Farm Credit Services of America and Frontier Farm Credit in Omaha, Neb., added that federal crop insurance has changed the way farmers are considered for loans.

“Most of the producers in the marketplace carry some level of crop insurance,” he said.  “We take that into strong consideration. If they didn’t consider crop insurance, we would require significant improvements in liquidity in order to start or continue their financing.”

Such programs are particularly important for young producers, according to Stark.

“We council them a lot about how much coverage they should have,” Stark said. “Most of them don’t have working capital if in fact something should happen to their crop production year.”

For those producers who do encounter a crisis, the Farm Credit System is there to help, officials said.

During the farm crisis of the 1980s, the Farm Credit System realized it was their obligation to provide a high level of strength and commitment to rural America, according to Dallas Tonsager, a South Dakota farmer and member of the Farm Credit Agency board of directors.

Tonsager said that Farm Credit, currently sitting on nearly $50 billion of capital, is prepared to assist farmers through whatever challenges might be ahead for agriculture.

“The stability of the system and relationship with the producers is going to make a lot of difference,” he said. “In the 80s, we saw a lot of producers who simply couldn’t get the credit they needed at the time or extended credit, so their income was replaced by credit, and they lost land.”

That’s another thing that is different between the 1980s and today. Farmers have lower leverage and more capital than they did in the 1980s, according to Wolfe, which gives them more resources to withstand a downturn.


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Spell Check

Western, NE
5/20/2016 09:27 PM

  A buddy of mine that works for Farm Credit in their special assets side (read as distressed loans) said that the current generation of FCS loan officers are doing nothing more than selling money. They have no idea how to service a loan. The local FCS office wanted a neighbor to get out of his CRP contracts this year so they could rent out the ground as pasture on a per head basis. Try cash flowing liquidated damages to FSA for a CRP contract that's been in for 10 years with 5 years remaining. Good luck renting out that pasture for $400 per acre. Production ag is in a tough spot for the next 5 to 7 years. Without breaking even, it won't take long for any cash reserves to be depleted. Not sure the farmers financial statement is as rosy as FCS will lead us to believe.

Retired Banker
Tipton, IA
5/20/2016 04:10 PM

  Yeah....Farm Credit wants you to have 3:1 or better ratio before they'll lend you money....why would You need them if you had 3 dollars to every one you need to borrow? They're hurting now they just won't admit it. The past 10 years, they've been throwing money at over priced land.... Wait until La Niña doesn't happen and we've got 2.9 billion carryover into '17.... Then we see whose strong

Thomas, OK
5/21/2016 07:57 AM

  Why don't we tell the whole story about "production credit" . Farmers that were called on loans even though they had never missed a payment. Tell me this, If farm credit was so good to producers back then, why is there a law against that now? 5 years ago I was fortunate enough to have half of a quarter given to me. Farm credit wanted me to get a co-signer for a loan to purchase the remainder. Long story short, I found a lender very easily and farm nearly 1000 acres now. I honorably served in the military for 4 years. I had excellent credit, had never missed any payment in my life and Farm Credit wouldn't lend me money. People that they will loan money to are 0% risk people like Bob Funk.....does he really need a loan from Farm Credit?


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