Farm banks' 2010 loans increase by 4.9 percent

The American Bankers Association says farm loans across the country are up.

According to the trade group's annual Farm Bank Performance Review released Monday, farm banks increased farm loans by 4.9 percent in 2010. The study said farm banks held $60 billion in farm loans at the end of 2010.

The ABA defines a farm bank as a bank insured by the Federal Deposit Insurance Corp. with less than $1 billion in assets and whose ratio of domestic farm loans to total domestic loans was greater than or equal to 13.95 percent in 2010.

Leaders of a couple of local farm banks said there are some good reasons why farm loans are up.

John Boyer, chairman and CEO of Kingman-based Kanza Bank, said the main driver is higher input costs for farmers, namely fuel and fertilizer.

Higher fuel prices mean farmers need larger lines of credit to purchase fuel for their equipment. Fertilizer that is fuel-based also affects their pocketbooks, he said.

Jane Deterding, executive vice president and general counsel of Citizens Bank of Kansas, said farm loans at her bank — also based in Kingman — were up by about the same amount as the national figure.

Deterding said that although input costs for farmers are higher, business-savvy farmers are able to reap some benefit from the higher commodity prices by taking advantage of things such as forward contracts.

Forward contracts allow farmers to lock in a certain price for a commodity, such as wheat, as long as they deliver on their end of a contract, such as receiving a given dollar amount from their local co-op or elevator by agreeing to provide a certain amount of the commodity.

Deterding said it looks like farm loans will increase again this year.

"Just based on what we've seen so far, I would say a similar increase, around the 5 percent mark," she said. "Folks that have lived within their line of credit are still needing a little bit more to cover (higher input costs)."