DUMAS -- The Arkansas chairman of Simmons First National Bank told farmers Wednesday that the bank is looking to expand its portfolio of agricultural loans.
"We're not running and hiding when things get rough," said Freddie Black.
He spoke at an agricultural conference hosted in Dumas by the Pine Bluff-based bank. About 300 farmers and others attended the event.
Commodity prices fell sharply last year, driven down by excess supply and weak demand. The U.S. Department of Agriculture has estimated that net farm income declined 38.2 percent in 2015.
With prices for many agricultural commodities at or below break-even levels, Arkansas farmers are trying to cut costs and find a mix of crops for 2016 that will generate the best return in a difficult environment. Industry observers have said some farmers are dropping out, partly because of the difficulty of getting the loans they need to plant a new crop.
In an interview, Black said Simmons has about $200 million in outstanding agricultural production loans.
"We don't have anybody being forced out," Black said. "That's not true everywhere."
Black said Simmons wants to expand its agricultural lending business in spite of the pressures on the farm economy.
"We understand the business," he said. "We understand it's cyclical."
A marketing consultant told the farmers that he believed the overall economy was nearing its bottom.
Richard Brock, principal at Brock Associates, cautioned that any improvement in commodity prices would be slow, however.
"I think we're going to start seeing the prices of the grains and rice that we sell stabilizing, and we're going to start seeing our input prices come down," Brock said. "I don't think we'll see a lot of improvement until 2018 or '19. Bottoms take a long time. You've got to build demand and figure some way to get rid of these big piles of corn and soybeans that we've got around the world."
Brock said it would take more than a weather disruption to reduce global commodity stockpiles.
"The biggest thing is, who's going to invent the next big piece of demand like ethanol? If you keep anything low for three or four years, someone will figure out a way to use more of it," Brock said. "But we've only started that process. Right now, I don't see anything on the horizon."
Demand for ethanol drove dramatic increases in corn prices before the downturn that started in 2013.
Brock said rice would remain a relative bright spot.
"You've always got a steady demand for rice," he said. "As our production costs come down, I think rice will be profitable for most of these guys."
He also predicted that farmers who have the capital to expand their operations would be able to buy additional land on some of the best terms since the farm crisis of the 1980s forced many producers out of business.
"The best opportunities we've had for expanding farming were in 1986 and '87," he said. "Your lowest risk since then is going to be in the next three years, I think."
Business on 01/21/2016