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Increased competition will be good for ag producers
The Community Bankers Association of Kansas Chairman Paul Boeding recently criticized Farm Credit in a letter to the editor (June 11, Page 4-B). Disregarding the apparently obsessive fears he has about competing with Frontier Farm Credit, there are several claims he makes that deserve rebuttal. The most absurd claim made is that Farm Credit should not seek to serve more customers because, as he put it, there is no "...indication that there is a lack of credit in rural areas." The Farm Credit System was specifically created to be a permanent source of competition for the credit needs of agriculture and rural areas. Areas, according to recent statistics from the Federal Reserve in Kansas City lag urban areas in economic growth by over 15 percent. Competition is generally considered to be a positive because it serves to lower the cost of borrowing. A bigger concern to me for the farmers, ranchers, and agribusiness customers we serve is that fewer and fewer rural community banks are either available or committed to serving the needs of this increasingly sophisticated and specialized industry. For example, at a proficiency award luncheon at this year's FFA convention I happened to sit beside a gentlemen that owned a small farm but also owned a feed store. This feed store is important to the farmers and ranchers in the area. He had asked our local loan officer about a loan for the feed store. Unfortunately under our current restrictions he did not qualify because of earning more than half his income from "off-farm" activities. That really frustrated him because he wants to work with a lender devoted to agriculture. He is really frustrated with the inability of his local banks to both understand both his business and the business of his farmer customers. This isn't an example about Farm Credit competing unfairly. It's about serving customer needs that are not being met. Since this business will no doubt still need a depository relationship, if regulations would allow, Farm Credit could serve his specialized credit needs perhaps even in cooperation with a local bank. That in no way creates an unfair situation for a local lender. I believe that most people would recognize that where there is only one provider of loans it is more accurate to call it a monopoly than to say "there is no indication of a lack of credit." Another misleading claim is to compare the target for bank earnings, expressed in ROA (Return On Assets), with the actual results for Frontier Farm Credit. This comparison neglects the fact that the bank owners receive profits from community banks, whereas Frontier Farm Credit is organized as a cooperative, where farmer and rancher customers are also an owner and entitled to a patronage dividend. Last year we paid out $4.4 million of our profits to our customer owners. Beyond the misleading claims about competition and profits, there is the implied claim that we do not serve the needs of the agricultural industry. Most of our staff was born and raised on farms and ranches and are devoted to improving the economic well being of our customers. We are committed to the future of agriculture and the people who farm and ranch in Kansas. Each year we demonstrate that commitment by supporting local and state 4-H and FFA, local and state economic development efforts including agritourism, disaster relief contributions such as the unfortunate situation in Greensburg, the Kansas Agricultural and Rural Leadership Program (KARL), K-State's MAST program for distance education to farmers and ranchers, and many other local and state organizations. I am proud that Frontier Farm Credit backs up its dedication to agriculture by investing in current needs and our future leaders. In March of 2007 I sent a letter to the Kansas Bankers' Association (whose members include many community banks) offering to meet and talk about a shared vision for the future of agriculture and rural Kansas. I offered to look for ways to collaborate with banks to improve rural economic conditions and really hoped we could open some doors to communication and better understanding. I am sorry to say that the offer to meet was flatly rejected. We are still willing to have that conversation, and to explain the modest provisions we are proposing for inclusion in the farm bill. We have many friendly competitors in community banking and it's disappointing to me to see this kind of negative rhetoric, which mostly comes from the banking trade association representatives festering an unfounded fear and lack of knowledge about the actual intent of our proposed legislative changes. What is the proposal from bommunity bankers to improve economic conditions in rural Kansas? I haven't heard a positive proposal from them yet. Only calls to limit and decrease competition which evidently means higher interest rates and less services for customers. Customers that do not share in profits like our Frontier Farm Credit customers do as a member of a cooperative. Our interest in legislative changes is to better serve our customers and better serve rural Kansas. Our proposal imposes limits on what we can and can't do and keeps our activity focused on agriculture. We import money from Wall Street into rural Kansas versus taking deposits increasing the flow of money which should result in positive economic results for everyone including community banks. The old adage, "Rising water lifts all boats" should apply. I can only hope the heated rhetoric will eventually calm and Congress will do what is best for their constituents in rural Kansas. --Doug Hofbauer, President/CEO, Frontier Farm Credit, Manhattan, Kan.
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