Gains allow more farmers to pay off govt. loans, seek other lending sources
WILLMAR — Higher grain prices and resulting increased income are enabling more crop farmers to pay off their government loans from the Farm Service Agency and look to private lenders for financing.
According to the U.S. Department of Agriculture’s Economic Research Service, net farm income is forecast to exceed $122 billion in 2012 and net cash income is expected to exceed $139 billion, both record values. The expected increase in income reflects large price-led gains in corn and soybean receipts.
Michael Forsberg, farm loan manager at USDA’s Farm Service Agency office in Benson, works with farmers in six counties.
In the grain industry, cash grain has been king, he said.
During the last five years, times have been very good for cash grain producers, says Forsberg.
“I don’t think historically they have had a run as they’ve had in this part of the country,’’ says Forsberg. “From FSA’s perspective, FSA is designed to supplement. We try not to replace (private lenders). The goal is to help a viable farming unit that is unable to get credit elsewhere and supply credit to them to achieve a viable unit.’’
If the Farm Service Agency makes a loan, he said, the goal is to have the borrower graduate back to the private sector because they are strong enough and no longer need Farm Service Agency assistance.
“Because of the good times that we’ve had in the last several years, we’re having quite a few of our clients get to the point that they have the ability to graduate back to the private sector,’’ said Forsberg.
“It would be a safe assumption that because of the times these guys have been having, many of my clients over time have worked enough profit to be able to pay down the debt and gain equity. They get strong enough and go back to the private sector,’’ he said.
Forsberg said Farm Service Agency becomes more involved with beginning farmers because costs for land and inputs are rising and beginning farmers have not had a chance to build up their profitability.
Forsberg says producers are pleased when they can graduate and go to the private sector for their financing.
“Yes, that’s everybody’s goal, to get back to the private sector, and that’s the banks’ goal, too,’’ said Forsberg.
“We’ve had a lot of clients that when they get done paying us off, we’ll have a handshake and they’ll tell us thanks because we get them going and without it they wouldn’t have gotten started,’’ he said.
“And now times are such that they can go back to the private sector like everybody else. The private sector is glad to have them’’
That sentiment is echoed by Kevin Crowley, vice president and senior ag lender for Heritage Bank. He agrees more farmers are graduating from Farm Service Agency into the private sector due to the good run the last five years and because farmers have more cash in their pockets.
“Yes, they’ve made very good progress,’’ he said. “We’re able to pick them up. That’s good from the private standpoint.’’
Crowley says grain farmers had a wonderful 2012 crop compared to what they thought they were going to have in August and September. He attributed the crop to timely rains and more drought-resistant genetics being developed by seed companies.
“It surprised everybody,’’ he said. “We’re very fortunate.’’