If 2000 was a pivotal year on the Texas High Plains, 2001 is likely to be “super pivotal,” with the outcome for many farmers depending on the passage of new farm legislation, according to ag lenders.

“Last year, many of the farmers said that 2000 was a pivotal year in farm production,” says Royce Wittie, senior vice president for agricultural lending with the American Bank of Commerce in Wolfforth, Texas. “If 2000 was a pivotal year, 2001 will be a super-pivotal year.

“In my 30 years in ag lending, I don't think I've ever seen a year quite like 2000 where it cost so much money to produce a crop that turned out to be worth so little.”

A member of a panel on “Agricultural Lending and Credit” at the Plains Cotton Ginners' Association annual meeting in Lubbock, Wittie said the year 2000 had instilled a new way of thinking in many producers and ag lenders.

“Some of our farmers have even talked about 2000 being the beginning of the end for farming as we know it,” he noted. “Of course, we've tried to take that idea and put some optimism into it to try to help our producers overcome this attitude of worry and depression.”

Wittie said one farmer told him that prior to 2000, there were two kinds of farmers — those who lived to farm and those who farmed to live.

“He said that he farmed up to the year 2000 because he enjoyed the life,” said Wittie. “But he had come to the realization that he could no longer farm because he enjoyed farming. He now had to farm just to make a living.”

Many farmers began this year in what was, for them, an unusual situation. “We had farmers who for the first time in their farming careers were not able to pay off the previous year's debts,” said Wittie.

“We went through an extended period of time trying to determine the financial viability of each of our farm customers, whether or not they could continue for another year. We finally closed for funding our last 2001 production loan in July. Normally, it takes one to two months early in the year to set up our production loans.”

Fortunately, his bank was able to work through most of the problem situations, he said. “We only had a few — less than half-dozen — of our 200 or more borrowers who had to quit farming this year.”

Wittie and other panel members said many of their customers have changed their farming operations in 2001.

“Normally by this time of year, some of our farmers have gone through their budgets and have come back for money to finish out the year,” Wittie noted. “Today, we have had a very small number of farmers seeking additional funding.”

“From what we're seeing, this will be one of our cheapest cotton crops ever,” said Curtis Griffith, panel moderator and chairman of the board of City Bank in Lubbock. “We think that's what it's going to take to help our producers survive this crisis.”

“The ones that we can get out of 2001 whole with their expenses paid and money for debt service we think will be able to make further changes that will help them be stronger financially,” said Wittie.

A new farm bill, specifically the legislation passed by the House Agriculture Committee in late July, could determine whether many farmers continue in the business, another panel member said.

“I think that a definitive program so that we know what the effects of a new farm bill will be is going to be critical to our producers next year and in the years to come,” said Terry Dane, president of First Texas Ag Credit, a member of the Farm Credit System.

“The last two or three years of low commodity prices coupled with drought out here have crippled our ag sector. Without the government payments, we would have a lot less people in the farming business than we've had in the last couple of years.”

Dane said there was a time in the ag lending business when, if a farmer had one bad year, the farmer could shake off the loss and go forward. “That's not the case anymore,” he noted. “Now, you have growers borrowing against real estate who have been debt-free a number of years. You have equipment that is old and worn out and needs to be replaced. There's no money for that.

“Most ag lenders are working with the Farm Service Agency to obtain loan guarantees or whatever it takes to stay with these producers to get them into another year. If we can do that, it's going to be critical that we have a new farm bill to help producers get back on their feet.”

It will be important for everyone involved in agriculture to do everything they can to help producers. “We don't want to see further fallout in agriculture, not just because of the impact on farmers but because of the impact it can have on many of our communities on the High Plains.”

Dane said his institution did experience “some collection problems” on loans in 2001, “but it wasn't as bad as I anticipated. I think our producers are doing everything they can to try to stay in business and survive until times get better.”

The number of loans involving FSA guarantees has increased substantially on the High Plains in the last two years, indicating the worsening economic climate in the region, said Larry Owen, the chief of the Farm Service Agency's Ag Credit Division in Texas.

“We approved $58 million in direct loans this year, an increase of about 40 percent compared to last year,” he said. “We've issued guarantees for almost $158 million, a 69 percent increase from this time last year.

“The only place we have experienced a decrease is in the direct farm ownership loan program in which we made $6 million in loans, a 31 percent decline. In the guaranteed farm ownership loans, we've loaned about $21 million, a 67 percent decrease. I think that indicates few people are wanting to expand their operations.”

Owen thanked the lenders on the panel and other lenders in the area for working with FSA on the guaranteed loan program in the last two years.

“I hear comments that the ‘bankers are being hard-nosed and cutting people off,’ but most of the requests for guaranteed loans I've seen indicate they've taken all the steps they can to help producers whose credit history shows they deserve an opportunity to come through this crisis and survive.

“We've seen all kinds of arrangements,” he said. “It's kind of scary seeing farmers taking out home equity loans to try to reduce their carryover debts and stay in business.”

Owen urged farmers to begin preparing to file loan requests for 2002 as early as possible. “If we see another 40 percent increase in direct loans and 70 percent increase in guaranteed loans, it will be difficult for the county FSA offices to process them with our current staffing levels.”

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