US ag lender CoBank starts program for drought-hit farms

Thu Sep 13, 2012 3:07pm EDT

* CoBank to expedite affected farmers' loan requests

* Bank to partner with FCS associations to help borrowers

CHICAGO, Sept 13 (Reuters) - CoBank, the largest bank in the U.S. Farm Credit System, said on Thursday it had launched a program to help farmers and agribusiness hurt by this summer's historic drought.

The bank plans to expedite the review and processing of customers' loan requests stemming from the drought and partner with its associations to support farmers, ranchers and other rural borrowers within their territories.

"We believe having this program in place will help us better fulfill our mission as the impacts of this historic drought are felt over the balance of the year," CoBank CEO Robert Engel said in a statement.

Worries about the U.S. farm economy escalated over the summer as farmers watched their crops wilt in the fields and prices rose to record or near-record levels. Ranchers, cattle feeders, and dairy, hog and poultry producers will be hit hardest as pastures have dried up and feed costs nearly doubled.

The U.S. Department of Agriculture forecast this week the U.S. corn crop will be the lowest in six years and soybeans the lowest in nine years due to drought losses. The USDA projected farm gate prices for corn would rise to $7.20-8.60 a bushel, compared to $6.25 a year ago.

Soybean prices for farmers should be in a range of $15-17 a bushel in coming months, versus $12.45 last season. Wheat and milk prices were also projected higher than a year ago, the USDA said.

CoBank's announcement came on the heels of Wednesday's statement by the Farm Credit System, the largest single lender to U.S. agriculture, that it would meet the borrowing needs of rural America and stand by its customers challenged by the worst drought in more than half a century.

The System, a U.S. government-sponsored entity (GSE), has more than $230 billion in assets and accounts for 40 percent of U.S. ag loans. Denver-based CoBank, a $90 billion co-op, is the biggest of the four regional FCS banks.

Fitch Ratings noted last week that roughly half of the four regional FCS banks' loan portfolio consisted of long-term real estate mortgage loans secured with farmland, putting them at risk if commodity prices trigger a correction in record-high farmland values.

The FCS was created by Congress in 1916, long before the better-known GSEs such as Fannie Mae or Freddie Mac, to provide a reliable source of credit to the U.S. agriculture industry.

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