American agriculture can survive the current financial crisis facing the country and the globe, but must find ways to prepare for future challenges, the head of the Farm Credit Administration recently told a group of bankers and financial officials in Chicago.
“The question is – how long will this go on? In my heart, I don’t believe this is going to be a mid-’80s style event in agriculture,” said Leland Strom, chairman of the board and chief executive officer of the Farm Credit Administration.
Strom was appointed to a six-year term on the FCA board by former President George W. Bush in December 2006. He was designed chairman and CEO in May 2008.
Strom spoke from the viewpoint of an ag finance official who was involved in the Farm Credit System during the turbulent 1980s. He was a member of the restructuring task force of the sixth Farm Credit District in the 1980s.
He also spoke as a farmer. Strom is a third-generation family farmer in Kane County in northeastern Illinois.
He and his family live on the farm started by his Swedish immigrant grandparents. The original dairy farm is now a grain operation.
Facing an audience mostly made up of bankers and agricultural finance professionals, Strom addressed some of the challenges facing American agriculture now and in the months and years to come. He voiced confidence that agriculture as a whole can weather the current financial storm.
“Agriculture balance sheets are still strong enough. Farm can absorb – although I know producers in the dairy and hog industries might argue this – but I know agriculture still does have a strong balance sheet and can absorb many of these losses,” he said.
Strom said one of the biggest challenges going forward will be the federal deficit and its effect on farming programs.
“For agriculture, I believe this means the concerns about money for farm programs are heightened,” he said, adding the 2008 farm bill changed the federal safety net for agriculture and that agriculture should be prepared for farm programs and money for them to be focused on different areas.
“The focus of farm policy is shifting toward revenue protection, crop insurance products and away from higher target prices. The 2008 act also shifts spending priorities toward nutrition, renewable fuels, conservation and rural development,” Strom told an audience that included Colleen Callahan, the recently-appointed director of Illinois Rural Development, as well as Illinois Department of Agriculture head Tom Jennings.
“We can also expect the budget deficit issues to be in the forefront when the next farm bill is debated in the months leading up to 2013,” Strom said.
Another challenge, said Strom, who started farming on the family farm when he was 22 years old, is attracting and keeping more young people in farming.
“I intend to make sure that Farm Credit Services focuses on that mission because this is a highly important factor for the future of U.S. agriculture,” he said, sharing his own story of returning to the family farm upon graduating from college.
Faced with farming a large number of rented acres and surrounded by neighboring farmers who were ready to retire, Strom said he drew up a business plan and presented it to a local banker. That banker suggested he go to Production Credit Association, then part of the Farm Credit System.
“Two days later, I laid that same business plan in front of them and Farm Credit took me on as a risk. Sometimes I think ‘what were they thinking?’ A young kid, 22 years old, needing a quarter of a million dollars,” Strom said. That experience with the Farm Credit System was the first step on the journey that would lead him to head FCA.
Strom emphasized the necessity for the renewable fuels industry to maintain its growth so that second-generation cellulosic biofuels can become a reality.
“Wall Street and most commercial banks have turned away from financing new ethanol plants, which may make it difficult for second generation cellulosic plants to get financing,” he said, adding government policy needs to keep pace — as well to grow — all sectors of the renewable fuels industry.
Strom acknowledged the hardest-hit sectors of agriculture in the dairy and pork industries.
“Among the hardest-hit industries in 2009 are the dairy farmers and the hog producers,” he said, noting lowered demand and exports have been key economic factors for those sectors.
Strom predicted those industries, like the rest of agriculture, will emerge from the economic downturn with changes.
“We are concerned about margins in the livestock industry and how long that will last and go forward and what the industry will look like as we come out of this recession,” he said.