The following letter is being mailed to dairy farmer members today:
March 5, 2010
Dear Dairy Farmer Member,
In 2009 dairy farmers experienced their worst year since perhaps the Great Depression. While 2010 looks to be better, milk prices have not yet recovered to levels that are needed to make up for last year.
Yankee Farm Credit provided substantial financial assistance to dairy farmer customers last year, including both new funds and forbearance actions (e.g., interest-only payments). As we service loan requests this year, we will be mindful of borrowers’ financial condition. If you anticipate requesting credit, what can you do to improve the odds that we will say “yes” to your request? We provided guidance relative to that question in the Spring 2008 issue of Financial Partner magazine. That guidance is still valid, and that column is reprinted on the back of this letter. [Click here for the Spring 2008 issue of Financial Partner magazine (2 MB PDF file). See page 6.]
For borrowers who do not meet the balance sheet benchmarks in that column, our approach to credit requests this year may be more conservative than in the past. We may require additional collateral, co-signers or guarantors. We may require additional financial covenants or FSA guarantees. We may increase interest rates where risk has increased. Each situation is unique, and I encourage you to discuss your situation with your loan officer.
Our approach this year does not mean that we are questioning borrowers’ character or work ethic. It simply reflects changing business realities, in both the dairy and the lending industries. In your industry, there is a limit to the amount of operating losses that can be covered by additional borrowing. In our industry, the people who look over our shoulder expect us to limit the amount of risk in our loan portfolio. You should want us to limit risk, too, since you are an owner of the Association.
Yankee Farm Credit was here for the dairy industry in 2009. We intend to be here in the future. We want you to be here, too. We want you to succeed. As lenders, we know that debt can be a valuable tool for success. We also know that excessive debt can contribute to failure. Our goal is to work with you to determine the right amount of debt for you.
We wish you success in your operation. Please let us know how we can be of assistance.
Sincerely,
George S. Putnam
President and CEO
Balance sheet benchmarks in the above-mentioned column in the Spring 2008 issue of Financial Partner magazine:
· Net worth as a percent of total assets: 50 percent or more
· Debt per cow: $3,000 or less
· Current ratio (current assets divided by current liabilities): 1.5:1 or more
