the last five years, as nonbank lenders have made dramatic strides. And though banks remain the main source of farm loans, the move to nonbanks appears to be accelerating, according to a Doane Agricultural Services Co. survey presented to a gathering of farm lenders here last week. The St. Louis company's survey showed that competition - particularly from dealer and manufacturer financiers - is increasing dramatically. Half of all farmers finance purchases through such sources, up from 33% just five years ago. "We went through a period in the late '80s, early '90s when banks really increased their market share among farm borrowers," said Lynn Henderson, Doane's president and chief executive, who presented the results to the North American Agricultural Lenders conference. "They are now slowly losing their grip." Nonbank lenders are "winning the convenience war, that's for sure," said John Blanchfield, associate director of ABA's Agricultural Bankers Division. "You've got a guy who can talk the tractor and the financing in one spot." But banks still can compete through their own advantages, he said. "Banks offer more than just credit, they offer relationship," he said. "That's one thing the dealers have not been able to develop is the cradle- to-grave relationship." Indeed, commercial bank agriculture lenders still have some things to smile about - like farmers' opinions about two of the factors they consider most important in a lender. They still consider banks the most dependable source of credit and the one with the most competitive interest rates. Doane's survey, this year based on responses from 380 U.S. farmers and ranchers with more than $100,000 in annual revenues, has been done in five- year intervals since 1985. The percentage of farmers using commercial banks for at least some financing has declined to 77% from 84% in 1990. "There's a new aggressive entrant into the lending game, one that certainly has been competitive and successful," Mr. Henderson said. "Suppliers will at times use credit as a way to encourage purchase of their products. We're in a period where that is happening." Farmers' use of the Farm Credit System also was on the rebound: 43% said they were using it, a jump from 38% in 1990. In particular, farmers with sales of more than $250,000 dramatically increased their use of farm credit banks to 54% from 24% in 1990, showing the federal system has successfully targeted large borrowers, Mr. Henderson said. Respondents' use of the Rural Economic and Community Development system - formerly the Farmers Home Administration - and insurance companies declined slightly. Some lender usage varied by geography. Midwestern farmers reported the biggest jump in the use of dealers or manufacturers for at least some financing - to 43%, from 28% in 1990. However, midwestern farmers reported increases with all types of farm lenders in 1995. Their commercial banks use jumped to 81% from 71% and Farm Credit System use was 43%, up from 29%. In contrast, southern farmers reported decreased financing needs across the board. Farmers, among the most loyal of bank customers, had spent an average of 14.3 years with their primary lender, down from 19 years in the 1990 survey. Mr. Henderson said the decrease is likely due to the increased competition for farm loans. Those who had changed primary lenders in the last five years said they most often did so because it was easier to obtain credit with their new lender. Producers said that their number one requirement in a farm lender is that it be a dependable source of credit. And banks were cited as dependable by the highest percentage - 81%. The Farm Credit System was mentioned by 52%, dealers or manufacturers by 50%. To farmers, the second most important element in a lender was competitive interest rates. Again banks topped the list, with 67% calling their rates competitive. However, that response was down from 75% in 1990. About 56% of farmers said that the Farm Credit System had competitive rates, up from 43%.

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