Cost of farm financing may be a bit higher and producers may need to be more prepared when they apply for operating and capital investment loans in 2009, say Texas agricultural lenders Alan Eubank and Jeff Taylor, both with the Panhandle-Plains Land Bank.

Eubank, vice president and real estate specialist from Pampa, Texas, and Taylor, assistant vice president and an agriculture mortgage specialist from Plainview, talked about farm lending recently from their booth at the Amarillo Farm Show.

They both expressed concern over the cost/price squeeze farmers currently face.

“If commodity prices stay low and inputs stay up, the recession will hurt next spring,” Eubank said.

“It’s like guessing the weather,” Taylor said. “The recession is already affecting the cost of money.”

They say funds are available. “We anticipate enough to meet demand,” Taylor said, “but money will cost more.”

Lender requirements to release those funds may be more stringent, too. Both lenders say cash flow statements will be critical and with commodity prices low, penciling in profits may be difficult.

“We hope to see prices improve by spring,” Eubank said, “but we can’t lend on what might be.”

He said lenders will look at both historical and current financial situations. “We’ll consider equity and assets, but will not loan on just appraisals.”

They suggested prospective borrowers come in with strong supporting figures.

“Lenders want to see a crop mix plan for 2009, a current financial statement, the current operating note, any carryover debt and amount of unsold commodities.”

They said many farmers are holding unsold grain or cotton that would bring less than their production cost.

“Some bankers may advise on next year’s crop mix,” Taylor said. “We’re all interested in what changes a farmer is planning.”

They said tax returns may not be good indicators of economic well-being. “Tax returns are notorious for highs and low,” Eubank said. “They leave gaps in information.”

They said farmers need a cash flow plan and a better business plan and long-term goals.

Eubank said he’s detected “a little pessimism” from farmers this fall. “They are not selling grain or cotton when they finish harvest. But land values are holding and there is some optimism there.”

Eubank said a few farmers continue to buy land, but availability might be limited. “We’re seeing pressure from wind rights,” he said. “We need to see what wind energy demand does to farm land availability.”

They said farmers are not making wholesale enterprise changes yet. “Many are still finishing harvest,” Eubank said. “They have to put out the fires first, before they make plans to change,” Taylor said.

Despite the low prices, the high production costs and the fear of a recession filtering down into the farm economy, they said opportunities still exist.

‘We’re cautiously optimistic," Eubank said.

email: rsmith@farmpress.com