UNITED STATES-BANK FAILURE ANOTHER BLOW FOR FARMERS.
While the fallout from the failure of northern Colorado ’s largest bank has yet to be fully ascertained, New Frontier Bank’s takeover by federal officials last week might be felt the most in rural areas miles beyond the city limits.
Farmers and dairy operators who rely on loans at the start of the growing season to finance the purchase of seed, fertilizer and other inputs generally don’t see returns until they begin their harvests later in the year. The failure of New Frontier, one of agriculture’s largest lenders, couldn’t have come at a worse time, said Tony Miller, president of First FarmBank of Greeley
"This is the time of year when farmers need to rely on a line of credit," Miller said.
Now, they are lining up at other banks hoping for loans that Miller and other small, community lenders say they may not be able to provide.
Miller said First FarmBank has had 20-25 applications from former New Frontier borrowers, seeking loans of about $16 million.
"We’re not that big of a bank and can’t handle that," Miller said at a meeting last week between an aide for U.S. Sen. Michael Bennet, D-Colo., and a dozen farmers, farm organization representatives and bankers at the Greeley Chamber of Commerce.
Les Hardesty, who owns dairies in Greeley and Windsor, said New Frontier financed about 30 percent of the purchase of dairy cows in the state, which puts additional stress on an already struggling industry.
"For every truck you see with a load of milk on the highway, you see a $3,000 loss to that dairyman," Hardesty said.
That’s the result of milk prices that have dropped by $5 to $6 per hundred pounds from levels dairy producers were receiving last year, he said, adding that the net price dairy farmers are getting currently represents less than $1 a gallon.
Miller, along with Kent Peppler and Leland Swenson of the Rocky Mountain Farmers Union, suggested that reducing the red tape of guaranteed loans from the USDA’s Farm Service Agency might be a way to ease that problem. Miller said his bank is not opposed to FSA guaranteed loans, but he said it takes 45-60 days to complete the paperwork for those loans.
"The USDA needs to let community banks make more decisions with less involvement by the FSA," said Peppler, who farms near Mead.
Jon Slutsky, who has a dairy near Wellington , said he started that operation in 1981 and got $15 per 100 pounds of milk he produced. He said dairy farmers are now operating on equity, noting "I don’t have a clue how far (prices) will go down, but when you run out of equity ... this is the worse than I’ve ever experienced."
Both said that situation also has a trickle down reaction.
"As we burn equity and our line of credit, we don’t have the money to pay the corn guys for their crop," Hardesty said, noting the industry needs to be stabilized. The pending construction of the Leprino Foods cheese plant in Greeley will help, he said, but the economy and other factors have slowed the progress on that facility, set for opening in 2011.
Dairy Farmers of America, which Hardesty also represents, supplies Leprino with 80 percent to 85 percent of the milk it uses.
"They (Leprino) know over the long-term, we’ll be fine, but the global demand for their product has also gone down," he said, noting the cyclical nature of the dairy industry -- and agriculture in general -- will change for the positive, eventually.
Other livestock industries are also struggling, said Don Rutledge, a farmer from Yuma who also feeds cattle and pigs. He said the cost of planting an acre of corn has gone from $550 an acre a couple of years ago to about $700 an acre this year because of increased prices of fuel, fertilizer and chemicals. Mark Sponsler, executive director of Colorado Corn, said the price farmers have received for that crop has declined significantly in the past six months, following the path of the general economy.
Rutledge, who also is the president of the Colorado Livestock Association, said he contracts to sell his pigs to Smithfield Foods and has realized a $50 per head loss during the past few months, while the cattle he’s been feeding have lost $200 per head. And he said, dairy animals that were worth $2,500 per head six months ago are now bringing $1,400.
"Credit is pretty good in our area, but right now banks are lending based on history and not cash flow," Rutledge said, adding the farm economy, "is the worse I’ve seen since the 1980s." A good sign, he said, is that exports of U.S. beef products are up and almost to the level "they were five or six years ago."
Doug Melcher, a corn and wheat producer from Prowers County in eastern Colorado , said farmers need financing now to get their crop planted. He said smaller banks in that part of the state have refused stimulus money because by taking it they lose too much control of their banks.
Melcher and Bruce Unruh, who farms near Burlington , told Bennet’s aide, Katharine Ferguson, that the USDA needs to extend payments to farmers who have land in the Conservation Reserve Program, which was started several years ago and pays farmers to take highly erodible land out of production. Unruh said there are farmers with plows sitting next to some of those fields ready to put that land back into production if the program is eliminated.
That would result in the release of carbon from that land, adding to more greenhouse emissions and off-setting carbon sequestration programs started by many farmers in the past couple of years, they said.
"There’s too much invested in the CRP program to just do away with it," Swenson pointed out.
The two-hour discussion also covered renewable energy including infrastructure for those projects and methane digesters, other USDA programs including nutrition efforts, the need for additional water storage in the state, finding ways to get more young people involved in agriculture, and the importance of additional ethanol plants, including increasing the amount of ethanol in gasoline mixtures and opening more ethanol pumps.
In response to the closing of New Frontier Bank, the Colorado Farm Bureau in conjunction with Weld County Farm Bureau will host a meeting in Greeley from 1-3 p.m. Tuesday. The purpose of the meeting is to introduce those members and ag producers impacted by the New Frontier Bank closing to Farm Bureau Bank in hopes that FB Bank would be able to assist some producers looking for financing options. Bank personnel will be on hand to answer questions about services and assistance FB Bank can provide.
The meeting will be in Conference Room A on the west side of the Event Center in Island Grove Regional Park.
