Lenders warn of erosion of farm equity

While others are concerned about the next farm bill, Arkansas bankers are worried about something more immediate. On Oct. 14, both USDA officials and state politicians heard that loud and clear at the USDA's “farm bill listening tour” stop in Little Rock.

Continuing a chorus that began earlier this summer, the bankers and lenders predicted an unhappy reality will soon hit agriculture. When it does, the USDA can't claim it wasn't warned.

Lenders speak

Farmers this winter will “definitely” see “a real erosion of equity,” said Fred Cole with the Farm Credit System in Arkansas. “Being in the financial business, we get to see the big picture with farmers — the income statements, how much is made, how much is spent, how much they receive from farm subsidies.”

Bob Cook, president of BancorpSouth's Stuttgart Banking Division, told USDA Deputy Secretary Chuck Connor, “Never have so many spent so much to produce abundance and realized so little. That applies to every (farmer in attendance) — I don't care what kind of production agriculture (they're in).”

Critics of the distribution of agriculture program payments have presented their side of the story, said Cook. “The interesting thing is they always talk about the cost of program payments. We never have dialogue about the net, the bottom line (farmers) realize…

“I can assure you that we calculate repayment of crop production loans on five-year production averages…If not for program payments, none of these operations cash flows. And I look at loan applications from farmers from Brinkley, Hazen, Devall's Bluff, Des Arc, Carlisle, Lonoke, Stuttgart, and DeWitt (Ark.). They're all in the same situation.”

Financial jeopardy

Glen Bauman with Farmers and Merchants Bank in Stuttgart, echoed his fellow lenders' concerns. Farmers who visit his bank “are scared. We're here talking about a new farm bill. Well, I'm not sure some of them will make it long enough to see a new farm bill.

“The financial statements and net worths just keep going down and down. This year, I see farmers having to mortgage their farms and houses to try to farm another year. It scares me — if next year isn't any better what will happen? They'll lose it all.”

The farm bill, said Bauman, “has a lot to do with rural America. The small towns and businesses up and down Main Street are all dependent on the farmer. If the farmer doesn't make it, the small towns won't make it.”

On the heels of the bankers, Harvey Joe Sanner, a farmer and activist from Des Arc, Ark., told Connor he was “too nice a guy to be working with such a mean bunch of cats in the USDA and White House. We've got real, real troubles…

“I started hearing from bankers and farmers back in the summer. We're talking about some wholesale bankruptcies…coming this winter. This is at a time when the Bush administration is talking about dismantling (FSA) offices, cutting funding for programs, doing away with subsidies.”

The Bush administration's constant attacks on agriculture through budget proposals are “totally unfair. It's not our fault (Bush) mismanaged the treasury and got into debt.”

According to Sanner, it's a myth that “somehow we can trade our safety net for market access…There's not a commodity being produced in Arkansas that can be sold on the world market and make a profit. Not one. And I don't think there's been one in 10 years.”

The politicians

The last time agriculture faced “anything close to the distress we are in today — and I don't mean a few months from now, but today — was during the Great Depression,” Rep. Marion Berry, a Democrat, told Connor. “At that time, we put in place public policy that provided a safety net for producers that has produced the most powerful, innovative, productive food and fiber system…in history.”

Berry is not impressed with the proposals being floated for trade and the new farm bill. “We are literally taking what we know works and turning it into something we don't have a good reason to think might work. It's an experiment, at best.”

Berry said he was spurred to the microphone by recent quotes from U.S. Trade Representative Rob Portman.

“Portman said he is willing to take a 60 percent cut in farm subsidies. In his words, ‘We might have to accept some pain.’ Now, that would be just fine if he was the one to accept it. But I know Portman. He…isn't going to be hurt a frazzling bit.”

Berry said while the lesser of two guilty parties, Democrats deserve some blame for current conditions.

“We have an unholy alliance between the environmentalists and the ideologues on the conservative side. (They say) ‘If we just beat the tar out of the ag and poultry community for long enough, we'll take all this wonderful, productive land and all this wonderful people and turn it into a national park or something.’ I never have figured out what their objective is.

“But I can tell you this: we're hanging on by a thread. Our ability to produce and sustain ourselves — and not get into the situation with food and fiber that we're in with petroleum — is very real. It is here today and we need to do something about it right now.”

Rep. Mike Ross, D-Ark., told Connor some of his farming constituents “spent $20,000 on diesel in August (2004). This August, they spent $70,000. The energy prices are absolutely driving our farm families out of business. They need an energy policy that works for them.

“I believe (payment limits, the three-entity rule) and the $3 billion in proposed cuts ought to be off the table. There should be no room for compromise in negotiations in the $3 billion this administration is proposing. There should be no cuts…”

Ross pointed out that at the same time the Bush administration wants to cut agriculture programs, it's proposing $106 billion in tax cuts.

“This is about priorities and I believe priority number one should be to keep the promise we made to America's farm families in the 2002 farm bill.”