Farm Credit Services Delivers $3.2 Million to Patrons

Farm Credit Services of Western Arkansas on Feb. 26 cut patronage refund checks totaling $3.2 million to customers in the western-most 41 of Arkansas’ 75 counties. More than 100 farmers in Benton and Washington counties received the checks, which function like profit-sharing returns. Local disbursement figures were not available.

The Russellville lender, the largest of four farmer-owned financial cooperatives in Arkansas, has an annual loan portfolio of $440 million. Last year, the Fayetteville branch had volume of $50 million, and the Bentonville branch, $40 million.

Poultry-related loans make up 65 to 70 percent of Farm Credit’s business in Northwest Arkansas, Fayetteville branch manager Ken Knies said. Beef cattle operations drive most of the remainder.

Many of the checks in Benton and Washington counties were hand-delivered by Farm Credit’s agents. Knies said the patronage refund program is only one of the perks that set Farm Credit apart from traditional lenders.

“Our loan officers work entirely within the agriculture industry,” Knies said. “That keeps them really tuned in to agri issues. Also, when you have a loan outstanding with us, you get stockholder benefits like participating in board elections.

“Our rates compare favorably to banks, and we’re always looking at the long-term value we can bring our farm customers with products especially tailored for them.”

Farm Credit offers several fixed-rate, long-term products instead of traditional balloon notes. It has several loan products now available in the 8 percent range, which compares favorably to banks.

Refunds are based in part on the size of an investor’s loan and the cooperative’s annual profit. The higher the participation and profits, the higher the refunds.

Knies said the market for poultry start-ups remains steady, although the number of new operations fluctuates every year. He said 1996 was an unusually good year for new business, while 2000 was closer to average. (See chart.)

Integrated companies like Tyson Foods Inc., George’s Inc. and Simmons Foods Inc. generate many new start-ups. But, Knies said, every year, several local producers stop producing poultry because family members or their facilities have gotten older.

“The overall look is positive in that we have a great poultry infrastructure in this area,” Knies said. “The biggest trend we see is producers coming to us with sharper pencils because the marketplace demands that they become sharp business people.”

As producer margins become slimmer, more of Farm Credit’s customers are supplementing their poultry business with cow and calf herds.

Jerry Singleton, senior loan officer at Farm Credit’s Bentonville branch, said beef cattle operations helped many poultry producers this winter.

When natural gas and propane prices skyrocketed to $1.70 (per gallon of propane), compared with an average of 78 cents in other recent winters, a strong beef market acted as a hedge. On average, calf prices ran $1 per pound this winter, compared with about 80 cents in previous years.

“There are a lot of agri segments not doing well right now,” Singleton said. “Because of strains from high fuel costs, some farmers are even thinking about cutting back in other areas to save. A lot of farmers are considering whether or not to fertilize their pastures this year. But the other side is that will eventually decrease their calf-weaning weights and the quality of their hay.”

Singleton said Farm Credit has a variety of programs and products that can help. Lately, he said, the company has had a surge in business as a result of integrators encouraging growers to upgrade their equipment. On average, growers are spending $20,000 to $28,000 per chicken house, and most farms have three to five broiler houses, Singleton said.

He said new tunnel ventilation and cooling cells, which efficiently control heat and humidity in the summer, are the most popular add-ons.

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