Published: April 21, 2008 11:48 am            

Agricultural lending a blossoming business

Loaning money to ag businesses is fertile ground for Enid area financiers

After a disastrous year for wheat farmers in 2007, things are really looking up this year.

Kyle Hohmann, president of Farm Credit of Enid, said the first quarter of 2008 has been one of the busiest they have had in the past 10 years.

“We have a full range of different products, real estate, cattle, machinery, a wide array. There’s not one area where demand is not coming from health financial areas. The health of agriculture is good now,” Hohmann said.

There also is a good loan quality, which is also reflected in the increase in land value. Both are examples of the health of agriculture, he said. Agriculture prices are much stronger and Hohmann said there are many factors causing that. Wheat, after last year’s disaster is seeing much higher prices, the ethanol industry has increased the level of all commodity prices.

However, there are some “red flags” to consider. Input costs are higher due to the increased costs of fuel and fertilizers. Hohmann thinks it is still an opportune time for customers to take advantage of high prices and risk reduction strategies as well as locking in some interest rates.

Lower interest rates are encouraging to producers if they want to expand or buy another farm, the interest rates are favorable, he said.

“It’s unfortunate in the housing market in the rest of the nation, but we are fortunate here in the Midwest. The federal reserve decreasing the interest rates has been good for agriculture customers,” Hohmann said.

As wheat is good, livestock markets are seeing tough times with high commodity prices affecting the cost of grain and creating a negative impact on some operations.

However, Hohmann believes the overall financial health is good, repayment of loans is good and demand is excellent.

Jerry Schmidt, senior vice president of Security National Bank is cautiously optimistic about the improving agriculture economy.

“We came through a bad situation with crops last year, most in this area came through in good fashion,” Schmidt said.

There are 60 days until harvest and everyone is optimistic about the condition of crops so far, but Schmidt said we will not really know until 60 days from now.

Schmidt did caution that costs for everything farmers buy have gone up. Prices for fuel, equipment, fertilizer are all extremely high, he said. Although Schmidt said he is cautiously optimistic about prices, no one can say what they will be, but he does expect prices to be stronger than last year.

“We’re in a good rate environment. Rates are down, its a good time to look at short term debt, may want to transfer it into a long term debt at more favorable rates. Long term rates are at comparably low level,” he said.