Sunday, Jan. 20, 2008

Lending, down on the farm

New crop of growers and ranchers gets a lesson on loans

Every year for farmers, the weather warms, the plants leaf out, and the lenders cut checks.

Loans are a crucial part of agriculture in the San Joaquin Valley and elsewhere. They help growers get through the lean months each year, before the crop is sold, and they help pay for land, tractors and other long-term needs.

Several bankers and other experts took part in a meeting last week aimed at explaining the options, especially for beginning farmers.

They advised them to write business plans, to keep their financial records in order and to know the market they aim to supply.

"I'm starting to get a feel for what they're looking for," said Trevor Borba, 26, of Escalon, who was raised in the beef cattle business and hopes to buy his own ranch.

"I'd like to get to know my market," added Borba, who is considering organic or grass-fed beef, two niche products.

The meeting was hosted at the Stanislaus County Agricultural Center by California FarmLink, a nonprofit group that connects retiring farmers to people who might take over.

Fresh faces are needed, said Steve Schwartz, executive director of the Sebastopol-based group. The number of farmers 65 or older is eight times the number under 35, he said.

FarmLink and other groups are urging lawmakers to boost programs for beginners in the next five-year farm bill, still awaiting passage in Congress.

Lenders of all types urged applicants to

project their costs for land, labor, fuel, fertilizer and whatever else they need. And they need sound data, not guesswork, lenders said.

Applicants also must show that they can sell the farm product, be it milk to a cheesemaker, cherries to a packer or alfalfa to a broker.

"You can have the greatest crop in the world, but if you have a tough time marketing it, it's not going to do a great deal for you," said Steve Taylor, regional vice president of American AgCredit in Turlock.

Farmers and their lenders also face the risk of drought, labor shortages, foreign competition and other forces out of their control.

Prices can rise and fall with supply and demand. Almonds, for example, have been strong for most of this decade, spiking close to $4 a pound a couple of years ago, but that might not always be the case.

"If you project every year at $3.75 for almonds, that is too pie-in-the-sky, and you're not preparing for the years when the price is going to dip," said Sue Gribben, a loan officer for the federal Farm Service Agency in Stockton.

Kevin Oflazian, vice president of agricultural services at Bank of the West in Fresno, stressed the need for detail.

"We have seen applications on the back of a coffee shop napkin -- true story -- and I'm sure other lenders will verify that," he said.

Borba, the aspiring rancher, is taking a steady approach. He is studying agricultural business at Modesto Junior College and hopes to continue at California State University, Stanislaus. He runs 10 cow-calf pairs amid his grandmother's cattle in the Valley Home area.

"I'd like to eventually be a full-time farmer," he said. "I've seen people who start out small and then expand as they grow."

Land costs could be a challenge, Borba said, because of the competition from home builders. Still, he thinks he can succeed at becoming the third generation of ranchers in his family.

"It's something I enjoy," he said. "It's something that's just in my blood."

Bee staff writer John Holland can be reached at jholland@modbee.com or 578-2385.

ADVICE FOR BEGINNERS

Advice for aspiring farmers seeking loans:

• Write a detailed business plan, including your résumé, your farm's projected costs and income, and your plan for marketing the crops.

• Keep detailed financial records for potential lenders.

• Be aware that crop prices can rise and fall. Today's hot commodities, such as almonds in the San Joaquin Valley, can cool when supply exceeds demand.

• Consider renting farm equipment, or hiring someone who does custom harvesting and other services.

• Get several quotes on feed, seed, fertilizer and other items.

• Seek advice from seasoned farmers, bankers and other experts.

• Stay abreast of trends, such as the water supply, labor and environmental rules, competing imports and consumer tastes.

• Keep your current job until your farm makes enough money to support you.