A Farm Crisis Is Looming, Kansas Ag Banker Warns

Expected reductions in farm subsidies would be just one more problem for farmers - and bankers - in south-central Kansas.

"It's going to have a tremendous impact," said John S. Nye, executive vice president of $84 million-asset Citizens Bank of Kansas, Kingman.

Congress is considering changes in government subsidies to farmers as part of the 1995 Farm Bill. Most observers expect cuts.

"My fear is it's going to force another layer of people to quit the business," Mr. Nye said.

The agriculture portfolio at his bank already "is under a tremendous amount of stress," he said.

Low prices for cattle have pounded Citizens' business in that sector, Mr. Nye said. Wheat prices have been high, but disease and heavy rains cut the growing season, so farmers couldn't fully benefit.

Mr. Nye, who is president of the Kansas Ag Bankers, said agriculture lenders now are trying to determine how to deal with the uncertainty over subsidies.

"Right now we're not anticipating another payment," he said.

But not long ago, payments were about 25% of wheat farmers' income, he said.

Because wheat prices have been high this year, "we tend to forget how reliant we were just two years ago," he said.

If payments are cut, the hardest hit will be the medium-size farmers who make up the bulk of Citizens' agriculture customers.

That kind of customer is "more than likely the least trained," Mr. Nye said. "He doesn't have the benefit of volume, and any decision he makes might have a bigger impact.

Like many rural banks, Citizens has focused on farm marketing, offering sessions to train borrowers about options markets and other risk management alternatives to try to improve farm income.

Farm lenders say their customers don't do enough in this area, and Mr. Nye estimated that only about 15% of his farm customers have marketing plans.

The changes in the industry may well make bankers and farmers smarter, he said. But that doesn't mean his outlook for the farm business is rosy.

When Mr. Nye heads to Texhoma, Okla., next month to become executive vice president of $35 million-asset First National Bank, he takes his concerns about the agriculture business with him.

"I don't want to sound like an alarmist, and I don't want anyone to run around like the ag crisis is here," he said. "But there is an ag crisis looming, and I sure don't want everyone to think that it's not."