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Veteran ag lenders helping provide guidance through 2020 crisis

Farm Credit System focuses on efficiencies to create more earnings, retain equity, and to serve agriculture in good times and bad.

Forrest Laws

June 23, 2020

The 1980s were a difficult period in history for agriculture in the Mid-South and the rest of the United States. Greg Cole knows this because he was just starting his career with the Farm Credit System in Arkansas in the 1980s.

The experience Cole and his peers gained during the 1980s ag recession is helping today's Farm Credit System institutions, commercial banks and other lenders better navigate the financial crisis from the trade wars and the current pandemic.

"The Farm Credit System has very strong risk-bearing ability and capital," Cole said during an online presentation at the seventh annual Mid-South Agricultural and Environmental Conference June 4-5. "Actually you could argue we're stronger now than we have been in 100 years. We're ready to withstand a level 5 hurricane.

"If you ask why, a lot of the leaders in the Farm Credit System are like me, they're P-80s or products of the 1980s," said Cole, who is president and CEO of AgHeritage Farm Credit Services. "They had a front-row seat on D-Day, so they saw how bad it is."

As those leaders have risen to the top of their organizations, they "have been focused on efficiencies to create more earnings, retain equity and have been very disciplined in following our underwriting standards. And our mission is to serve agriculture in good times and not so good times now."

Farm Credit institutions are now conducting loan deferral programs for farmers who are stressed financially, and "we're working with borrowers to help them get through this."

Cole said he and his peers have observed that, in general, commercial banks have done a good job of staying with borrowers "through these tough times. Now they will tell you the same thing — that what's driven this is government intervention with the subsidies and strong asset values."

Meanwhile, commercial banks have been undergoing significant consolidations. "In 20 years here in Arkansas, we've lost two-thirds of our banks," he said. "We went from more than 280 headquartered here in Arkansas in 2000 to less than 90 today.

"My observation is that as banks get bigger they seem to lose their appetite or interest in agriculture because they have other alternative means to invest in less riskier type of lending than in agriculture," said Cole.

"The thing that I would watch for going forward with a COVID-19 event is this: A lot of the commercial banks that are more diversified, if they have stress in their commercial portfolio, lending to restaurants, especially in commercial real estate, that could lead to less appetite to work with borrowers in the ag sector."

For more information on the conference, go to https://nationalaglawcenter.org/.

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About the Author(s)

Forrest Laws

Forrest Laws spent 10 years with The Memphis Press-Scimitar before joining Delta Farm Press in 1980. He has written extensively on farm production practices, crop marketing, farm legislation, environmental regulations and alternative energy. He resides in Memphis, Tenn. He served as a missile launch officer in the U.S. Air Force before resuming his career in journalism with The Press-Scimitar.

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