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Bankers Onboard
By Cara Hetland
November 4, 1999
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Members of Congress are starting to hear from a sector in the agriculture business they haven't heard much from before -- bankers. For the first time a task force of the American Bankers Association is taking a position on ag policy and recommending solutions to permanently lift farmers out of financial crisis mode.

DENNY EVERSON HAS CHANGED HIS MIND about the effects the farm crisis would have on the people who work the land. Two months ago, the Yankton, South Dakota banker would have told you 15 percent of his farmers would have been forced off the farm. That number is less now, more like five percent. He credits the $9 billion federal disaster package and another season of bumper crops. Both he says are bandages but enough to bridge farmers through another year.
Getting an Agriculture Loan
These are the questions to which a banker wants answers before giving a loan to a farmer.

How much money do you need?
What is the money going to be used for?
How will the loan affect your financial position?
What will be pledged as collateral?
How will you repay the loan?
When will the money be needed and when will the loan be repaid?
Are your projections reasonable and supported by documented historical information?
How will different scenarios affect your repayment ability?
How will you repay the loan if the first repayment plan fails?
How much can you afford to lose and still maintain a viable operation?
How will you manage risk?
What have been the trends in the business's key financial position and performance indicators?

Source: American Bankers Association
Everson: I won't go as so far to say it will offset previous cash flows, but may bring a lot of people pretty close to break-even than we had anticipated. And even though break-even isn't something businesses are interested in, that's as good as we can get in 1999 and far better than 60 days ago.
Of course the true effects of the current low prices depends on whose kitchen table you're sitting at. Regardless, Everson says there have to be some drastic changes soon. Everson was the chairman of the American Bankers Association's task force on 21st century agricultural banking. He says the U.S. must export farm products at a faster pace as a way to level the playing field in international trade. Everson supports a position held by North Dakota Senator Byron Dorgan that the U.S. must invest close to $55 billion to compete against the European economic community.
Everson: We're the last-resort purchaser as it relates to ag exports. They'll go to about anybody before they come to us. We've got to change that and the only way we can is to go the route Conrad is suggesting and that's to pull out mega-dollars and fight fire with fire.
Everson says the investment is more for consumers to keep food cheep than it is for producers. The banking task force also recommends changes in the Freedom to Farm legislation and wants more federally guaranteed loans.

Bankers and farmers are trying hard not to repeat mistakes made in the mid-'80s. Everson says farmers have become better at their business and treat their farm as a business not a lifestyle. Bankers have better technology and can warn farmers earlier about potential trouble. Everson says farmers need to band together with bankers to develop better federal ag policy.
Everson: We're down to probably where some 350,000 farmers control 80 percent of the production in the United States. Their voice isn't heard very loud and there aren't very many people on the hill anymore that concern themselves with agriculture. And food comes out of a store and not our of the fields.
Because the U.S. economy is strong, it's been tough to draw attention to the difficult financial times farmers face. David Dahl is the public-affairs economist with the Federal Reserve Bank of Minneapolis. He recently completed a study looking at bank loans and deposits in southwestern Minnesota's Lyon County since 1914. Dahl says ag banks are healthy now, and there's been no decline in bank profitability. But, he says one thing is very clear to predict: to preserve existing farms, farmers need to make a profit; that's not on the horizon.
For More Information
See MPR Online's"Trouble on the Farm" section.
Dahl: But the fact remains there are very strong incentives that remain in place for farm consolidation. Regardless of prices five years from now, regardless of prices fewer farms than today.
Yankton banker Denny Everson's concerns are perhaps more immediate; how to save the young farmer who's racked up high debts to survive until now.
Everson: They're the future. And I've got 10 to 20 people in a portfolio of 600 farmers. This is really by biggest task. How do I keep them in business? I mean, they're goers. They're doing as much risk management as they can. They're highly leveraged and the industry can't afford to lose them. That's my biggest concern.
Everson says the nations' bankers are behind his efforts. He hopes they can team up with the agriculture unions and cooperative groups to lobby congress together.