Tweet Post to Your Wall.

Farm Credit Banks: Despite Drought, Finances Strong

On behalf of the Farm Credit System, the chief executives of the nation's four Farm Credit banks issued a joint statement Wednesday pledging to stand by farmers, ranchers, cooperatives and other agricultural borrowers grappling with severe drought conditions across the country.

The four banks – AgFirst, AgriBank, CoBank and Farm Credit Bank of Texas – act as the funding banks for 82 borrower-owned Farm Credit associations operating in all 50 states. Together, the banks and associations of the Farm Credit System function as the largest source of credit for American agriculture, accounting for an estimated 40%of all ag lending nationwide.

The four chief executives are Tim Amerson of AgFirst; Bill York of AgriBank; Bob Engel of CoBank, and Larry Doyle of Farm Credit Bank of Texas.

The hardest-hit areas of the Grain Belt are experiencing sharply lower yields and acreage abandonment, while livestock, dairy and other sectors will be negatively impacted by recent increases in prices for corn, soybeans, hay and other feedstuffs. Nonetheless, the CEOs said, the Farm Credit System is working collaboratively with borrowers on a case-by-case basis in these industries to ensure continued access to loans and other financial services, including those experiencing distress as a result of the drought.

"The drought's impact may differ from region to region, but Farm Credit's commitment to its mission is the same everywhere," the CEOs said. "The System's role is to stand by its customers, in good times and bad, and it will continue to fulfill that need in a safe and sound manner."

The CEOs note that financial conditions across much of U.S. agriculture are far better than in 1988, the last time the nation experienced a drought of similar magnitude. "Many producers are coming off several consecutive years of strong profits, which have enabled them to reduce leverage, improve liquidity and invest in equipment," the statement says. "In addition, the agriculture sector has become much more sophisticated in utilizing important risk management tools to mitigate earnings volatility, such as futures contracts and crop insurance. Agricultural cooperatives, meanwhile, have also strengthened their balance sheets in recent years and are in a better overall position to withstand any drought-related business impacts."

The CEOs said the Farm Credit System has the necessary size, strength and flexibility to manage through the drought crisis. "The U.S. is fortunate to have an organization like the Farm Credit System, as well as other lenders, that are devoted to supporting agricultural and the rural economy," the CEOs said.

"We remain enormously optimistic about the long-term prospects for American agriculture," the CEOs said. "Whatever the challenges presented by the drought, access to credit will not be one of them. The System will continue to focus on delivering dependable credit to U.S. agriculture and supporting its ongoing growth and success."