Farm Credit Services harvests clients’ trust

GREELEY – Tied to the downturn in the agricultural industry in the late 1980s, Farm Credit Services’ Ninth District office in Greeley has seen its loan portfolio expand tremendously in recent years, as it repositions itself with the changing industry.Mike Flesher, vice president and corporate secretary of the Ninth Farm Credit District office, said the office’s loan portfolio now stands at $3.2 billion. Loan volume has increased some 34 percent from 1990 to 1996, he said.
Nationwide, Farm Credit Services boasts $63 billion of loans outstanding to farmers and ranchers, making it one of the largest banking entities in the country, he said.
“We were doing niche marketing long before it became popular,” Flesher said.
The coop is structured identically to a credit union, he said. “We’re a lending cooperative, and our customers are our stockholders,” he said. “They’re required to buy a minimum amount of stock, and that allows them to become a member of the coop.”
Farm Credit’s stock price remains flat at a $5 par value and is not a traded stock.
“It doesn’t fluctuate like a publicly traded stock,” he said.
The agricultural industry was hard-hit in the mid- to late-’80s, when commodity prices fell.
“It was a very traumatic time for people in agriculture,” Flesher said. “A lot of people lost their farms due to high interest rates and input costs. It caused us to look at how we were doing business and try to become more efficient.”
The Greeley office of Farm Credit foreclosed on only 3 percent of its loans during that period, he said. But the borrowers who continued to make their payments did so at a sacrifice. Some farmers and ranchers took jobs in town to generate income.
Many farmers and ranchers saw how fickle commercial banks were during this time and later returned to Farm Credit, which handles agricultural lending exclusively, Flesher said.
“We understand the agricultural business, because that’s all we do,” he said. “We recognized the industry was changing. We have gradually built back loan volume, mostly by increasing market share.”
Business has grown steadily since that time.
“We have good credit and a good quality portfolio,” he said.
The Greeley office’s assets totaled $81.7 million as of June 30, compared with $60.9 million a year ago. The agency’s portfolio consists of agricultural-production and equipment loans to farmers and ranchers.
Bob Mekelburg, chief executive officer of Agland Inc., an agricultural cooperative in Eaton, said Farm Credit Services is very popular with people in the agricultural industry.
“A lot of people use it. It gives them an option from a commercial bank,” he said.
Agland is primarily a supply coop handling chemical fertilizer and other products, he said.
Farm Credit Services will celebrate its 80th anniversary next year, Flesher said. The agricultural lending coop was created in 1917 “when commercial banks refused to loan money to agriculture because of the high risk,” he said.
Due to weather vagaries and other factors, the agricultural industry has always involved high-risk lending. Farm Credit Services was chartered by Congress as a lender exclusively for farmers and ranchers.
Although the Greeley office retains the Ninth District name, Farm Credit now has only seven districts nationwide due to district consolidations over the years, Flesher said.
Because of the tremendous diversity in the agricultural business, the founders of Farm Credit divided different areas of the country into districts to protect the lending coop from adverse risk, he said.
“While cattle producers may be doing well, the corn growers may not be. So there’s some kind of risk management,” he said.
The Ninth District office in Greeley encompasses Colorado, Oklahoma, New Mexico and Kansas.
In Kansas and Oklahoma, the primary agricultural products are wheat and cattle, he said. But Colorado, particularly the Greeley-Fort Collins-Denver area, is more diversified, with cattle ranching, dairy operations, corn, wheat, potatoes, onions, carrots, the floral industry, pinto beans and sugar beets. The state also has hog and sheep operations.
New Mexico deals predominantly in cattle raising, but the area near Las Cruces harvests chile peppers, pecans and cotton, he said.
In the late ’80s, it became obvious in the agricultural industry that farms had to become bigger and tap into economies of scale, or they wouldn’t survive.
“The mom-and-pop farmer operation has been diminishing” for the last 15 years, he said.
One trend affecting the agricultural industry here is the relocation of several dairy farms from California to this part of Colorado, he said.
“A lot of that had to do with environmental regulations. They’re less stringent here than in California,” he said.
Flesher also noted that a bimodal type of agricultural business is developing in Northern Colorado.
On one hand, there’s the full-time farmer or rancher whose operation has grown in acreage or livestock production.
“They’re looking to market directly to the consumer,” he said. “They’re more involved in the retail end rather than selling wholesale as they were in the past. Their operations are larger to increase efficiency.”
Then there’s the part-time farmer or rancher – a professional with a regular paycheck who works for a corporation but wants to live on a 35-acre parcel of land and raise livestock.
“They don’t have to worry about whether their part-time farming venture is profitable, since they have a regular income,” Flesher said.
Many people in this area are becoming part-time farmers, he said.
“They’re not concerned about making money. Their debt on the farm or ranch is serviced by their regular income. They just want a rural lifestyle,” he said.
Flesher believes that the demand for water and urban development in this area will continue to escalate, driving more farmers and ranchers to sell off their land.
“There’s been some sales of farmland already,” he said.
Since the average age of a farmer or rancher is 56, older than the general population, they’re often ready to make a good deal on their land and retire, Flesher said.
“Others may go ahead and sell and move further east of here,” he said.
But that region doesn’t offer the rich soil and water that can be found along the Front Range, even though it can be cultivated for wheat growing, corn production under sprinklers, and livestock operations, he said.
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