As of August, just two of Yosemite Farm Credit's roughly 3,200 borrowers were delinquent on their payments.
You read that right. In this time of financial disarray, caused mainly by residential mortgages gone bad, the farm lending business is looking good.
Yosemite Farm Credit, based in Turlock, and other ag lenders are benefiting from the high prices for many farm products these days. The growers can make the payments on the loans they took out for land, equipment and other needs.
"The fundamental economics of agriculture overall are positive," said Roger Sturdevant, an executive vice president with Bank of the West and manager of its farm lending division, based in Fresno.
In the Northern San Joaquin Valley, where residential foreclosures are rampant, the contrast with ag lending is stark.
Those Yosemite Farm Credit delinquencies are just 0.06 percent of the loans from this lender, which mainly serves Stanislaus and Merced counties.
The home-loan delinquency rate, on the other hand, was 11.7 percent in Stanislaus and 15.2 percent in Merced in June, according to First American CoreLogic, a private company that collects mortgage data.
The residential troubles have resulted mainly from a plunge in home values, which left many people owing more than their property is worth. The median sale price in August was down 41.3 percent in Stanislaus County and 47 percent in Merced County compared with a year earlier, according to DataQuick, a real estate research firm.
Farmland values, meanwhile, are holding strong, said Leonard Van Elderen, president and chief executive officer at Yosemite Farm Credit.
"We don't have the issues that Fannie and
Freddie have," he said, referring to Fannie Mae and Freddie Mac, two home mortgage giants that needed a federal takeover last month.
The residential market was soured by subprime mortgages, aimed at marginal buyers and often coming with sharp increases in monthly payments. On some loans, critics said, applicants falsified their income statements and got away with it -- or were allowed to.
Try that with one of the ag lenders, and you'll likely be shown the door. They require details on the applicants' assets, including land and equipment, and on production costs such as labor, fuel, water and fertilizer. The growers also must show that they can sell what they produce.
It's pretty clear they can, judging by recent reports on net farm income -- what's left over after production costs are subtracted from gross receipts.
Last year, net income in California hit $12.7 billion, up 60 percent from 2006, the U.S. Department of Agriculture reported. It projects that net income nationwide will rise 10 percent this year, to $95.7 billion.
"With commodity prices high and farmers being able to generate reasonable returns on their activities, we don't really have any weak sectors in agriculture," said Kent Steinwert, president and chief executive officer at Farmers & Merchants Bank of Central California.
In ag-heavy regions such as the north valley, the farm income reverberates. Farmers spend some of their earnings on tractors, fertilizer and the like, creating jobs in the process. And the raw farm products go to canneries, wineries, poultry processors and other plants that employ tens of thousands of people in the region.
All these people -- the farmers, their suppliers and the processors -- spend some of their earnings at department stores, gas stations and countless other local businesses. And they pay taxes that provide jobs for teachers, police officers and other public-sector people.
Ag lenders caution that the strong conditions could change: The drought could continue, putting land out of production. The dollar could strengthen, making U.S. farm products more expensive in other countries. Oversupplies could return for almonds, wine grapes and other crops. Production costs could continue to rise.
But for now, things look fairly bright for farming and for the credit systems that support it.
"We remain very committed to agriculture," Steinwert said, "because we believe that a strong agrarian base is essential to any economy remaining strong in the long term."
Bee staff writer John Holland can be reached at firstname.lastname@example.org or 578-2385.