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Drought Emphasizes Banker-Farmer Relationships

By: Linda Geist

“We’re here for the long haul just as they are,” said community banker Dan Putrah, president of Paris (Mo.) National, as he talked about grain and livestock producers who suffered through the drought of 2012.

Community bankers such as Putrah understand the close relationship that exists between bankers and farmers, especially during times of crisis.

PNB officers visit their customers’ farms in the late fall annually to review their financial information to assist in planning for the next year. “It helps us view their outlook for the rest of the year and see if we can help,” Putrah said. “It also helps us (as a bank) plan for next year.”

In addition to offering advice on finances this year, bankers offered help with resources available through state and federal agencies. “We also offered moral support and let them know to keep their heads up,” Putrah said. Putrah grew up on a farm and has a small farm in Monroe County, where PNB is located.

This past year, Putrah and other community bankers across the state reached out to drought-distressed farmers and livestock producers in hard-hit Northeast Missouri where rainfall dropped approximately 20 inches below averages for the first half of the year and record-breaking temperatures scorched corn, soybean and hay crops.

Putrah was on hand when Monroe County farmers Mike and Aaron Whelan hosted an informational meeting this summer with Federal Crop Insurance’s top administrator, William Murphy, at the Whelan farm. Mike Whelan said he recognized the importance of a local banker when he began farming at age 18, and he had stuck with PNB as he grew his operation. Having survived back-to-back droughts in 1983 and 1984 and 19 percent interest rates, Whelan said, “A good bank is your partner.” He said he could not overstate the importance of having a local banker who understood the ups and downs of farming. “I never went in and didn’t get anything I didn’t ask for,” he said, but added, “I didn’t ask for anything I didn’t need.”

The ability of community bankers to work hand-in-hand with farmers is nothing new, but it is especially important during tough times, said Jim Behrens, president of Ralls County State in New London, Mo.

“Part of that is that the local bank has a vested interest in the local farmer. It’s easy for a bank whose decision making is done three states away to say, ‘We don’t want to take the risk,’” he said, but independent banks depend on the agribusiness community, and vice versa. “Whether it’s a drought, tornado or economic disaster, the more localized your banking system, the more integral it is to that area,” he said. New London is located in Ralls County’s Mark Twain Lake area and was declared the driest county in the state by the National Weather Service earlier in 2012.

Behrens said grain farmers have benefited from federal crop insurance, which has gained popularity since the last major drought in the area in 1988. “Without crop insurance, grain farmers would be devastated,” Behrens said. “Crop insurance has enabled grain farmers to struggle through in a year that would be disastrous in previous times.”

Alliant Bank Community President and Senior Lender Ed Thomas of Monroe City, Mo., agreed. “With the type of federal crop insurance we have available now, the farmers are not insuring their crops, but their income,” he said. As a result, agribusinesses and producers are in better shape financially than they would have been in the 1980s when historic droughts took their tolls.

Tough Time for Livestock Producers

Unfortunately, few programs are available for cattle and hog producers, creating a “double whammy” for these groups, Behrens said. Low yields in the fields, coupled with rising petroleum prices that have driven fuel and fertilizer prices up, means that livestock producers face a long winter ahead.

Putrah agrees that cattle producers are most likely to face the most long-term challenges, not only for the farmers but also for the community as a whole. According to the U.S. Census, Monroe County’s 8,734 residents have a median household income of $38,750. The loss of $30–$40 million in the county due to loss of crop production this year translates into economic woes for other Monroe County businesses, Putrah said.

And that means that community bankers’ flexibility will be in high demand. Putrah said he anticipates that there will be forbearances, and independent banks have this option due to their stability.

“We may go interest-only on a payment because people are strapped for cash flow,” said Mark L. Smith, president and CEO of First Missouri Bank, Brookfield. There also may be restructuring of equipment debt, he said.

Smith said requests will be done on a case-by-case basis, but he anticipates that community banks across the state will be helping livestock producers facing cash-flow issues. He said grain farmers have benefited from use of crop insurance programs and higher market prices this year, despite reduced yields. But cattle producers facing high feed prices and hay shortages are beginning to cull their herds to sell off the least productive cows in his northern Missouri area. Calves are also being weaned earlier to save grass for their mothers. Smith, who is also a cattle producer, said Missouri’s experience this summer follows droughts in cattle-producing areas of Texas and Oklahoma the previous two years. As a result, cattle numbers are down, and this could result in higher market prices that will help offset higher feed costs. Brookfield is located in north central Missouri with many part-time farmers whose main income comes from off-of-the-farm employment.

“Farmers are resilient and community banks can be much more flexible in tough times than other lenders,” he said.

Their resilience, aided by a helping hand from community bank partners, assures that the heartland will be ready to face the spring.

Linda Geist is a contributing writer based in Monroe City, Mo.

Copyright (c) December 2012 by BankNews Media