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May 15
Farm Credit System Provides Certainty During Down Cycle

By: Dave Armstrong

During the past two years, farmers in Michigan and throughout the nation have faced a significant economic downturn, seeing lower prices for their goods following a decade or more of strong commodity prices. No doubt, a career in agriculture comes with significant uncertainty. The U.S. Department of Agriculture’s Economic Research Service recently forecast the fourth straight year of decline in Net Farm Income (NFI), a key growth indicator. That’s a significant turnaround from the record NFI most farms experienced just a few years ago.

It is important to note, however, the low prices projected by most economists haven’t yet reached the “crisis” point that was seen across America in the mid-1980s. That’s due to many different factors – including the disciplined lending practices in place within our federal Farm Credit System, designed to protect family farmers.

During downturns like this one, credit is still key, which is why it’s more important than ever for the Farm Credit System to continue following core principles that help farmers.

Created by Congress in 1916, the Farm Credit System was created to provide a dependable, affordable source of lending for agriculture. The network of producer-owned financial cooperatives was built on the belief that by working together, farmers would be stronger financially and well-positioned to grow. In Michigan and northeast Wisconsin, our cooperative, GreenStone Farm Credit Services, is part of that national Farm Credit System.

Regardless of the size of operation or the products grown, access to stable credit is important for many successful farming operations. Farmers rely on credit to make investments in their business, manage growing season expenditures, hedge against risk and maintain strong balance sheets.

Before making a loan, Farm Credit lenders work closely with farmers and rural business owners to review current financial information and ensure strong business planning. This proactive approach helps improve the quality of decisions and ultimately the success of the farmer.

Second, proactive communication helps farmers more successfully weather these inevitable downturns.

A significant advantage of working with Farm Credit is working with a local staff in rural communities who have real-life agricultural experience and regularly work with borrowers through training and education programs, community events, and beyond. This focus on relationships helps open and maintain lines of communication that can make all the difference during times of financial stress.

Finally, the proactive work we’ve done with farmers during previous upticks in the farm economy has proved beneficial for them. During periods of higher prices and income, we focus on helping our clients ensure they are in a position to be well-capitalized over the long term. As a result, the debt-to-income ratio among many farmers remains strong, thanks to good planning on the part of our borrowers.

Thanks to these factors, and the smart business decisions by our dedicated and hardworking farmers, the overwhelming majority of GreenStone’s loans remain healthy, even during today’s low commodity prices. This is an important factor, given that every loan we make impacts the overall financial health of our 24,000-member cooperative.

The agricultural outlook may be challenging, but these tough times are precisely why Farm Credit System lenders like GreenStone were created -- to keep agriculture going strong now and for years to come.

Dave Armstrong, GreenStone's President and CEO, provides his thoughts related to the value of the Farm Credit System, as published in the Lansing State Journal on May 14, 2017.

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