Bankers gather in Colorado to speculate on future of ag economy

Northwestern Financial Review, Nov 20, 1999 by Bengtson, Tom

Moskow painted a mixed view of the current farm situation. While noting that net farm income will increase 9 percent this year, he said income actually will drop 20 percent if you subtract government subsidies. Although he encouraged bankers to work with farmers, Moskow said that in some situations bankers will need to turn the borrower down. "Farmers and their lenders need to have a plan..for some farmers, that plan should not involve additional credit."

While Moskow urged caution toward ag lending, the industry is forging ahead as the largest lender to farmers. Total ag loans by the banking industry increased by $6 billion last year to a total of $70 billion. The total means that 41 percent of the ag industry's lending needs are being met by bankers.

Many of those bankers are undoubtedly wondering what the role of government will be in the farm industry going forward. Allen said Congress has abandoned the 1996 Freedom to Farm law. Ron Knutson, director of the Agriculture and Food Policy Center at Texas A&M University, said "Freedom to Farm was dead in 1998 and it is deader now."

Knutson and Barry Flinchbaugh, professor at Kansas State University, debated the merits of the Freedom to Farm law in an entertaining exchange moderated by Kohl. Flinchbaugh said that any attempt to control production or affect price will give advantages to competing producers in other parts of the world. Flinchbaugh defended Freedom to Farm, saying that it was being unfairly blamed for today's ag sector problems. "What we have today is a temporary cash flow problem that requires a temporary fix," he said.

Flinchbaugh, Knutson and Kohl all agreed that Congress would be looking at farm policy again. They said Congress will likely continue to move away from the Freedom to Farm law toward a system that contains some sort of "counter cyclical income payment, a farm savings account, and a whole farm revenue insurance package."