Andy Lowrey, president of Columbia-based AgFirst Farm Credit Bank, believes that while Southeastern farmers are facing an uncertain future, the industry is in better shape than many others, according to a detailed interview that appears in Southeastern Farm Press.
Agriculture is in the eye of this financial hurricane, the South Carolina banker told the publication. At the end of 2008, short-term investments are there for agriculture. Long-term investments for agriculture or virtually any other area of industry are just hard to come by, he said.
“Fortunately agriculture is in a stronger financial position tha other sectors of U.S. industry, but we cannot dodge all the financial bullets created by problems in housing and other segments of the financial industry,” he said.
The Farm Credit System was created in 1916 to give rural America better access to credit. Now, the organization is split into 12 regions and is owned by more than 400,000 farmers.
The Farm Credit System is in great financial shape compared to other banking institutions. Short-term there is plenty of money. Long-term the outlook is not so bright, Lowrey said.
“We used to have multiple financial institutions bidding for our business. Now, we are lucky to have three or four we can depend on,” he added.
Lowrey told Southeastern Farm Press that most of the financial problems in the agriculture sector are tied to home lending and can be laid at the feet of the U.S. Congress.
“Fannie Mae set out to increase home ownership in the U.S. from about 60 percent to over 90 percent. In the background, Congress was involved urging higher home ownership. When home lending got an AAA rating, banks and pension funds got involved,” he told the publication.
“Everybody thought home prices could not drop by 20 percent, but they did — and more in many areas of the country. They should have taken a look at farmland prices — in 1980 farmland prices climbed and everyone was saying land prices would never go back to 1970’s levels. By 1987, farm land prices were well below 1980 levels,” he said.
For this year, short-term financing for a crop in the Southeast is still realistic for most farmers, Lowrey believes. Most of AgFirst’s customers who needed $250,000 to finance a crop 2-3 years ago now need $350,000-$400,000 for the same size operation, he said.
“Long-term, buying a farm or making multiple equipment purchases, as farmers move from one crop to another, will be increasingly difficult,” Lowrey contended.
“I visited with 20 farmers recently and all agreed they are going to put off making input purchases, especially fertilizer until the last minute. If this happens on a big scale, supply problems will be a big issue. Sometimes wait-and-see may be wise, but not healthy,” Lowrey stressed.
“The current recession is likely to be long and protracted, but not very deep. It is likely to persist most of 2009. Going into 2010, I think the economic recovery will be slow, but steady,” Lowrey said.
“Consolidation of financial regulators is likely to happen in the future. This is not good for agriculture because most bank regulators know little or nothing about the business cycles that drive agriculture,” he added.
Speaking at a recent agricultural meeting Lowrey said in closing, “Of all the dire things I’ve said about our economy and our financial situation, by far the most frightening is that, going into 2009, the financial universe is in Washington D.C.”