STUTTGART -- East Arkansas farmers who survive the yearslong downturn in the agricultural economy will be stronger than before, the head of one of the state's largest agricultural lenders said Tuesday.
"If you own land in the Delta, don't ever sell it," said Greg Cole, president and chief executive officer of AgHeritage Farm Credit Services.
Cole, speaking at the annual meeting of the state Soybean Association, said east Arkansas would be "the most strategically positioned location on the planet" to take advantage of rising demand for food as the world population grows. The region's large-scale farms, ability to grow a variety of crops and easy access to Mississippi River shipping are invaluable assets, Cole said.
"We can get [agricultural commodities] to where the customers are, and the customers are going to be in the developing countries," Cole said in an interview.
Arkansas Agriculture Secretary Wes Ward, speaking earlier to the Soybean Association, said the state exports about 30 percent of its agricultural production and ranks 13th in the nation in total exports. It is the top exporter of rice.
Commodity prices have fallen because global supplies exceed current demand. Arkansas growers and their bankers are trying to come to terms on 2016 production loans at a time when those prices are at or below break-even levels for most crops.
Cole said most Arkansas farmers lost money in 2014, even after receiving payments under the new federal safety-net program. The program makes payments only when markets or yields are down, unlike the previous system under which the government issued payments designed to provide producers with a minimum guaranteed income.
Operators of 16,339 Arkansas farms received safety-net payments for the 2014 market year, according to the U.S. Department of Agriculture. The payments, received late last year, totaled more than $217 million, the USDA said.
Most Arkansas farmers again lost money in 2015, Cole said, adding that he knew of individual results that varied from losses of $250 per acre to profits of $100 per acre.
Margins will be thin in 2016, as well, he said, even with reductions in the costs of fertilizer and fuel. More red ink in the Delta is inevitable before the farm economy recovers, Cole said.
The farmers in greatest danger are those who rent most of their land, carry high levels of debt, have little cash on hand and exhibit weak management skills, he said. The state could lose 25 percent of its farmers if the downturn persists into 2018 or 2019, he said.
But farmers with strong balance sheets will have the opportunity to expand their operations, Cole said, echoing observations by other industry experts.
"This is an opportunity to pick up [good land] at good prices," Cole said.
Farmland prices in Arkansas rose dramatically every year since 1987, Cole said, and now are moderating to year-over-year increases of about 3.5 percent.
He said loans would continue to be available to farmers who have healthy balance sheets. Cole said AgHeritage, a customer-owned cooperative, was restructuring loans for otherwise sound farmers who didn't earn profits last year and intended to expand its portfolio in 2016.
The four associations that make up the farm credit system in Arkansas have more than $3 billion in outstanding loans, Cole said. AgHeritage's share of that total is more than $1 billion, he said.
"We're a player," he told those at the Soybean Association meeting. "We're going to be in this thing."
The Arkansas chairman of Simmons National Bank said last week that his bank also was expanding its lending to farmers.
Business on 01/27/2016