Archive for Friday, September 26, 2008

Credit plentiful for farmers

September 26, 2008


— The economic turmoil on Wall Street has not reached the dusty country roads in the nation's Heartland, where a rural economic boom has meant farmers are not having much trouble getting loans to plant crops, buy land and replace equipment.

"The fundamentals of agriculture right now, in terms of income and opportunities, is good. There are profits to be made, so I think that is underpinning the willingness to lend to that sector," said Jason Henderson, a branch executive with the Federal Reserve Bank of Kansas City.

The 10th Federal Reserve District - which encompasses Colorado, Kansas, Nebraska, Oklahoma, Wyoming and parts of New Mexico and Missouri - surveys banks each quarter for its agricultural credit conditions report.

Henderson, the Omaha branch executive who writes that quarterly snapshot, said although the official third quarter report will not be available until later this year, they have found anecdotally in talking to bankers that Wall Street's financial troubles have not affected rural banks' funding sources or changed their farm lending practices much.

"Their funding comes more from depositors, and that hasn't been impacted, and so they have funds available," Henderson said.

Although agricultural credit conditions have tightened somewhat as lenders ask more questions of farm borrowers and increase the amount of needed collateral, those are modest things and the Federal Reserve Bank has not seen any sharp changes, he said.

Farm interest rates have been coming down over the last year and farm delinquencies are at historic lows. But agricultural loan demand in the 10th Federal Reserve District has risen sharply as farmers borrow more operating funds to cover the rising input costs.

So many Kansas farmers have been able to obtain loans through their hometown banks that agricultural loan volumes of government lenders like the Department of Agriculture's Farm Service Agency have actually gone down.

The Farm Service Agency - which offers both direct loans and government-guaranteed bank loans - is widely known as the lender of last resort for producers who cannot obtain commercial loans elsewhere.

While their loan numbers are almost identical to a year ago, the dollar volume of farm loans for this fiscal year is expected to be down about $10 million in the state, said Arlyn Stiebe, the agency's farm loan chief in Kansas.


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