From its start in 1916, Farm Credit financial institutions have been serving farmers, ranchers and rural communities for over 100 years as customer-owned cooperatives, governed by the customers it serves.
Monty Thornbrough, Vice-President and Certified General Appraiser with Farm Credit of Western Oklahoma, has served those rural customers for 20 years and witnessed the industry changes that include consolidations, mergers, interest rate hikes, greater equipment technology and higher operational costs.
“When I started in 2003, I believe there were seven or eight Farm Credit associations in Oklahoma,” Thornbrough said. “Now there are two because of mergers, and just like the farming industry, things are getting bigger and growing” through consolidations.
Since graduating from Oklahoma State University, Thornbrough has been working in the Altus office handling appraisals of land, machinery, equipment, crops, inventories, and cattle as well as chattel inspections. Lending and appraising functions are separate at Farm Credit Western Oklahoma with Thornbrough working on the appraising side providing lenders with accurate valuations through yearly inspections.
“…that’s kind of our job is to be the eyes for the association out on the farm.”
“Things change – equipment values change, cattle numbers change, crop acres change.
We’re trying to get our loan officers the most accurate information that we can get,” he said. “So, that’s kind of our job is to be the eyes for the association out on the farm.”To get an accurate valuation on agricultural equipment on the farm, Thornbrough relies on IronGuides. With the online guides, he obtains serial numbers, region-specific valuations and adjustments for hours and options, including historical values.
“The number one thing that that we like about IronGuides is the use of the serial numbers.”
When we’re out on the farm, we can easily take a picture of the serial number off of that piece of equipment, come back and plug it into Iron Solutions and then know the year model of that piece of equipment, on most late model equipment,” he said.
Options are “the one thing that can swing the value of a piece of equipment, sometimes thirty or forty thousand dollars depending on the options.”
When valuing farm equipment often worth millions of dollars, keeping up with the technology and getting the correct option value is critical. Options are “the one thing that can swing the value of a piece of equipment, sometimes thirty or forty thousand dollars depending on the options,” he said.
“As far as a lender, it would be an issue if we overvalued a piece of equipment,” Thornbrough said. “We would be in a position that we would possibly lend too much money on it and when you look at a million, two million dollar lines of equipment, that adds up in a hurry so we have to be as accurate as we can on those values.”
Thornbrough noted recent industry challenges including rate increases, market competition and increased cost of farming.
Lenders have seen a slowdown in the market with recent rate increases, but business remains steady. “Operators are taking a step back and really thinking through those large purchases..and maybe using that older equipment another year” while keeping an eye on rates.
Thornbrough said the biggest struggle operators face today are increased operating costs.
“It’s the cost to farm, the cost of land, the cost of equipment, the cost of inputs, fuel, fertilizer, seed-everything has increased and yet the commodity prices have not increased as much,” he said.
Also, a significant increase in farmland prices and low turnover rate of farmland is making it more difficult for young farmers to begin or expand their operations. It’s estimated that more than 40 percent of U.S. farmland is owned by people older than 65 years.
“If you’re trying to come in new, it’s almost impossible to do it by yourself. It just takes too much money.”
Unless inheriting the generational farm, it is cost-prohibitive for young operators to start farming. “If you’re trying to come in new, it’s almost impossible to do it by yourself. It just takes too much money,” Thornbrough said.
Although Congress created Farm Credit in 1916, Farm Credit does not receive any government funding or tax dollars. Instead, the structure reverses the traditional flow of funds by raising money on Wall Street and bringing it back to rural communities.
The net income that Farm Credit institutions generate can be used in only two ways: retained within Farm Credit as capital or passed on to customer-owners by way of patronage dividends. Those dividends effectively lower the cost of borrowing for farmers and in 2020, Farm Credit returned $1.7 billion in patronage dividends to its customer-owners.