3 P. J. van Blokland
An Introduction to
Agricultural Credit in Florida
iU 23 LIB7
AUG 23 197/
Food and Resource Economics Department
Agricultural Experiment Stations
Institute of Food and Agricultural Sciences
University of Florida, Gainesville 32611
This report attempts to present an outline of agricultural credit in
Florida. It starts with an introduction to the principal features of the
state's economy, and follows with a background to its: agriculture. Real
and non real estate statistics are presented and discussed from a historical
perspective. These figures and trends are subsequently classified by
financial institution, and comparisons made with other areas. The conclu-
sions of the report emphasize the unique features of Florida's agricultural
credit situation, and suggest that non real estate indebtedness could be
Key words: agriculture, credit, debt, economy, farm, financial
institutions, loans, marketing, real estate, receipts, sector.
TABLE OF CONTENTS
LIST OF TABLES . . . . ... . .... ii
LIST OF FIGURES . . . . ... . . iii
INTRODUCTION AND OBJECTIVES . . . .... 1
INTRODUCTION TO FLORIDA'S ECONOMY . . . . 1
AGRICULTURE IN FLORIDA . . . . ... . 4
Background . . . . ... . . 4
Cash Receipts from Farm Marketings . . . 4
Production Costs and Incomes . . . . 5
Farm Structure . . . . ... . 7
INTRODUCTION TO FLORIDA'S AGRICULTURAL CREDIT . . .. 10
Background . . . . ... . . 10
Real Estate Loans . . . . ... . 10
Non Real Estate Loans . ... . . .. 12
REGIONAL AGRICULTURAL CREDIT AND COMPARISONS . . ... 13
Real Estate Loans . . . . ... . 13
Non Real Estate Loans . . . .... 15
Commercial Banking in Florida . . ... .. 17
Regional Loan Distribution by Institution . . .. 19
CONCLUSIONS . . . . ... . . 23
BIBLIOGRAPHY . .... .. ......... .... . .. 27
LIST OF TABLES
1 Percentage distribution of personal income by industrial
source of income (1974) . . .... . .. 3
2 Farm classes, percent of total farms in 1969 and 1974 and
percent of total value sold in 1969 for Florida and the USA 8
3 Farm ownership classification in Florida for 1969 and 1974. 9
4 Farm real estate debt outstanding by lender in Florida for
selected years . .... . . . 11.
5 Farm non real estate debt outstanding by lender in Florida
for selected years . . .... . . 13
6 A comparison of Florida's real estate debt with the Southeast,
Corn Belt and the USA, by percentage institutional share
(1975) ..... . . . . . 14
7 Federal Land Bank Association loans in Florida, including
regional ranking for each district, for the year ending 31st
March 1976 . . .. . . . 15
8 A comparison of Florida's non real estate debt with the South-
east, the Corn Belt and the USA, by percentage institutional
share (1975) . . . . . . 15
9 PCA loans, net earnings, rank, and operating cost of the nine
regions in Florida for the year ending 31st March 1976 16
10 Number of commercial banks and holding companies, including
deposits and loans by selected years. . . ... 18
11 Farm loans of three major lenders in Florida, reported for
each county (loans outstanding, $000) . . .... 20
12 A ratio of total cash marketing to non real estate loans for
various states in selected years . ... ..... 25
LIST OF FIGURES
1 Percentage share of cash marketing by month (1975) . 6
2 Ranking in agricultural loans 1974 . . .. .. 22
AN INTRODUCTION TO AGRICULTURAL
CREDIT IN FLORIDA
P. J. van Blokland
INTRODUCTION AND OBJECTIVES
The main purpose of this report is to present some basic data on
agricultural loans in the state of Florida. This report is then intended
to provide a suitable basis for future work.
The reason for writing the report is essentially simple. Published
agricultural financial data is usually fragmented, macro-oriented, applied
to varying time periods and produced in a wide array of sources. Loan
data are rarely related to local agriculture and tend to be presented in
isolated lumps. Comparisons are therefore not usually available without
concurrent access to several publications.
This predominantly descriptive report therefore attempts to bring
things together by combining Florida's loan statistics with the local
economy, financial institutional trends, and the farm scene. The endeavor
relies fairly heavily on regional and national comparisons in order to
trace the total picture. The report is by no means complete, but it should
provide a more digestible representation of agricultural loan statistics in
Florida than the author has previously found.
INTRODUCTION TO FLORIDA'S ECONOMY
One of the most important features of an economy is its population.
Florida has a combination of several unique population characteristics that
affect its local economy, and therefore impinge on its financial institutions.
The population is largely composed of migrants from other states, is
P. J. VAN BLOKLAND is assistant professor of food and resource economics.
heterogenous, fast growing, concentrated and has a skewed age distribution.
All these characteristics have strong market implications, particularly with
reference to the recent history of the gtate.
In 1940, Florida was the smallest of the 12 Southeastern states in
population. Now with 8.5 million people it ranks eighth in the nation. The
annual population growth rate has only twice fallen below 3 percent since
1960, and the 1973 and 1974 annual rates were 5.4 percent and 5.2 percent re-
spectively . This growth rate has not been evenly distributed throughout
the state. The main concentrations have been in the Fort Myers, Fort
Lauderdale-Hollywood and West Palm Beach-Boca Raton areas, though Orlando
and Tampa-St. Petersburg have grown rapidly since 1970 . This rapid growth
is projected to continue, with a preliminary estimate of 14.5 million in the
state by the year 2000 .
Florida also has a large proportion of naturalized aliens, predominate-
ly Spanish speaking. Since 1970 it has ranked third nationally, after New
York and California, with around 11,500 naturalizations per year . The
age distribution in the state is also atypical. About 18 percent are 65 or
over, with Sarasota, Fort Myers and Daytona Beach having over 25 percent of
their population in that category. This concentration of growth and specific
clientele encourages private sector financial institutions to increasingly
specialize in meeting their demands. This specialization induces less in-
terest in primary sector investments, and eventually less lending expertise
in these traditional enterprises. Thus the main financial source for agri-
culture, particularly for short term loans, is the Farm Credit System.
Per capital personal income has also grown rapidly. The annual growth
rate has recently been higher than the average for the United States, at
least until 1974. Between 1965 and 1975 the lowest growth rate in the state
was 10.3 percent in 1966, and the highest was 17.8 percent in 1973 . In
1974 the total income of $44 billion was about 4.5 percent of the total US
figure, and is therefore roughly the same as the state's population pro-
portion to the national total. However this isolated statistic hides the
very rapid growth rate which has occurred in the state. For example, which
total personal income in the United States increased by 320% between 1959
and 1974, the total Florida personal income grew by nearly 500% [7,10].
The 1974-75 recession affected Florida far more than the United States
in general, because Florida relies heavily on the construction industry and
tourism. In fact commercial bank loan losses were among the highest in the
nation. The following table provides some comparative data, which illustrates
the respective strengths of the different production sources in the state.
Table l.--Percentage distribution of personal income by industrial source of
Industrial source Florida Mass. Texas Calif. All USA
Farm 3.7 0.3 3.2 3.9 3.7
Manufacturing 12.6 28.6 20.0 22.2 26.8
Mining 0.4 0.0 3.6 0.5 1.1
Contract construction 10.5 5.9 7.5 5.4 6.3
Wholesale and retail 19.5 16.8 18.9 16.9 16.5
Finance, insurance and
real estate 7.0 6.3 5.4 5.5 5.2
and public utilities 7.9 6.4 7.9 7.2 7.2
Services 19.2 19.7 14.9 17.7 15.3
Other industries 0.6 0.4 0.4 0.4 0.3
Government 18.5 15.5 18.2 20.3 17.6
Total 100 100 100 100 100
Source: Adapted from .
Massachusetts, Texas and California provide some comparison. Texas and
California are both very important agricultural areas with a wide variety of
enterprises and Massachusetts is predominately urban. All three states and
Florida are in the top eight in population in the country.
Florida generates the "average"proportion in personal income from agri-
culture, transportation, communication and public utilities and government.
It is much lower in manufacturing, higher in wholesale and retail trade,
finance and real estate, and in services, and much higher in construction
than the average for the USA. The heavy reliance on construction explains
the severe effects of the recession in Florida, when employment in this in-
dustry fell by 30 percent in 1975, compared with 12 percent nationally.
Tourism is the major contributing factor to the "services" category.
Tourists spent $8.8 billion in the state in 1975, some 70 percent of which
went on food, transportation and lodging. Over three times the population
of the state, around 25 million, come annually to Florida as tourists.
All these factors have implications for the state's economy. They
affect natural resources use, including labor, and therefore modify the
traditional agricultural picture. They also allow financial institutions
to have a wide variety of choices in their loan portfolios, and much of the
present total agricultural credit scenario results from these alternative
opportunities for loan funds.
AGRICULTURE IN FLORIDA
The following introduction to the state's agriculture follows the
previous sketch on the local economy where it has been suggested that sector
investments have generally catered to the wants of the expanding population.
This section emphasizes the importance of agriculture, by illustrating its
performance, its growth and its considerable contribution to the rest of the
country. Perhaps the major point is that Florida's agriculture is basically
unique. There is a large variety of enterprises, utilizing the climatic
and natural resource advantages of the state. Farm size varies from sub-
sistence to huge estates owned by large business corporations. Agriculture
is an extremely important sector, generating $2.7 billion on the farm, and
$8.9 billion at the retail level in 1974 .
Florida is the largest producer of oranges and sugarcane in the country,
and is second in greenhouse and nursery products. It is seventh in peanuts,
ninth in eggs and tobacco and eleventh in dairy products. Although it ranks
twenty fifth in cattle and calves, this aggregated classification masks the
fact that the state probably exports more calves for the fattening enterprise
than any other state. These ranking figures exclude any vegetable category,
which is a major enterprise in Florida .
The individual farm enterprises which provided the greatest contribution
to cash receipts in 1974 were oranges, vegetables, sugarcane, dairy, cattle
and calves and greenhouses and nursery in that order. These made up 75% of
the receipts, with all citrus and vegetables providing about 50 percent.
Cash Receipts from Farm Marketings
In 1975, Florida ranked 13th in the country in total cash receipts. The
state probably has the greatest monthly variation in cash receipts in the
nation, due mainly to the cropping enterprises (See Figure 1) . Five
months sales provide two thirds of the gross returns, and another 5 months
only 17 percent. Thus cash flow is a particularly important consideration
for many of Florida's crop farmers.
Cash receipts have expanded rapidly in the last twenty years, and at
a faster rate than the national average . Since 1960 they have risen
from $0.8 billion to $2.4 billion, with both crops and livestock showing
this threefold increase. Since 1967 both groups have approximately doubled.
However, a rather different picture emerges if these receipts are de-
flated, using 1967 as the base, and the "all crops" and "all livestock" de-
flators for the country . Florida crop receipts grew by 224 percent in
money terms between 1967 and 1975. But during this time crop prices rose by
201 percent, for an apparent real gain of only 23 percent. This figure is
probably underestimated, considering the relative importance of fruit and
vegetables in Florida crop sales. As fruit and vegetable prices rose by
around 165 percent over this period, the real gain is plausibly nearer 40
Between 1967'and 1975, Florida's livestock receipts grew by 195 per-
cent, and national livestock prices by 172 percent, suggesting a real gain
of 23 percent. As crops generally contribute 75 percent to total receipts,
the real growth in total cash receipts may therefore by around 35 percent.
These calculations are obvious approximations. But when the objective
is to understand the current financial situation; an attempt to include in-
flation is preferable to ignoring it. It seems fair to assume that financial
institutions are aware of the necessity of deflation in interpreting statis-
tics, and it may be that at least part of their loan allocations may be ex-
plained by this fact. In other words, the great increase in total cash re-
ceipts in the past few years in Florida should be examined realistically.
Production Costs and Income
Since 1967, total production costs have doubled, both in Florida and the
US. Florida's farmers spent nearly $1.7 billion on nonland inputs in 1975,
and only 13 other states paid more . Hired labor was the largest item,
and the $382 million bill ranked Florida second in the country for this item.
Feed and fertilizer were the next largest, both at around $260 million. These
three items accotnted~for half the total production expenses.
The last two years have shown Florida's total production expenses in-
creasing at almost double the rate of the total US figure. The state expen-
diture rose 27 percent between 1973 and 1975 while the comparative figure
for the nation was 15 percent. The main contributor was an 84 percent increase
(1) Crop marketing in Florida
(2) Total marketing in Florida
(3) Livestock marketing in Florida
(4) Total marketing in USA
1 -i &. I I e I x S t 1
Jan. Feb. March April Hay June July August Sept. Oct. Nov. Dec. Months
Figure 1.-Percentage share of cash marketing by month (1975)
in fertilizer costs. (Hired labor costs grew by only 13 percent over the
No monthly production expenses statistics were found. However it can
be surmised that these expenditures will be fairly periodic, particularly
for hired labor, and may indeed vary as much as the crop cash receipts.
Hence the producer will be faced with a cash flow problem from both the
input and the output side. The financial implications are obvious. There
will be problems in timing associated with purchasing inputs, selling out-
puts, and scheduling principal and interest repayments. These problems arise
on many thousands of small scale agricultural businesses and consequently
private sector financial institutions have tended to prefer other commitments.
Yet farm income in the state looks apparently healthy. For example,
Florida has consistently ranked in the top four states in the country in terms
of total net income per farm. In 1975, this figure was $26,400, for 4th
place. It ranked 10th in 1975, in total net farm income, with $875 million,
after Texas. (California was 1st with $2242 million)1 .
Florida's net farm income has increased steadily since 1967, and in 1975
showed an increase of 237 percent for the preceding 8 years. The comparative
evenness of this growth is worth emphasizing. For example, between 1972 and
1975, Missouri's net farm income went from $604 million to $1093 million and
then fell to $485 million, and in 1975 was $557 million. In the same years
Nebraska's figures were $717, $1,246, $643 and $1,198 million, and Texas
showed $1,002, $2,134, $905 and $954 million2 . These fluctuations only
exacerbate the production and price uncertainty prevalent in agriculture,
and uncertainty tends to be penalized in financial circles. So Florida looks
The previous agricultural trends have occurred during a period of chang-
ing farm structure. In this respect also, Florida is rather atypical. There
is a fairly large proportion of very large farms marketing the majority of
1Net farm income for farm operators only.
2Florida's comparative figures were $674, $882, $757 and $875 million.
the agricultural gross sales in the state. Only two states, Arizona and
California rival this percentage. Table 2 provides some census data com-
pared to the USA figures.
Table 2.--Farm classes, percent of total farms in 1969 and 1974 and percent
of total value sold in 1969 for Florida and the USAa
Farm Florida USA
fiction Percent Percent Percent of total
according Gross of total' of total of total value
to gross Sales farms value sold farms sold
sales Dollar 1969 1974 1969 1969 1974 1969
- - -Percent- - -- -
la >100,000 5.6 8.4 72.5 6.1
lb 40-99,000 5.8 6.6 11.5 12.5
2 20-39,999 7.3 8.3 6.4 12.8 13.3 21.4
3 10-19,999 9.4 10.9 4.2 17.5 12.6 15.6
4 5- 9,999 12.7 11.9 2.9 12.7 12.1 5.8
5 2,500- 4,999 12.1 13.9 1.4 8.9 12.0 2.1
6,7,8 <2,500 47 40.0 1.2 40.5 31.4 2.6
aSome 1974 figures not available.
Source: Adapted from [17,18].
About 85 percent of all farm sales in Florida came from less than 12 per-
cent of the farms, compared with the US average of a little over half the sales
from nearly 8 percent of the farms. The preliminary 1974 census report shows
an increase in farm percentage in the larger categories for both Florida and
the USA, the latter strongly reflecting the larger increases in grain prices.
It would be interesting to sub-divide Class la, for Florida has several farms
with sales of well over $1 million annually. It is also probable that some
of these farms comprise an estate, and yet are reported as individual farms
rather than as a collective unit. Table 3 presents some of the basic data
The figures show that farm corporations in Florida in 1969 comprised 8
percent of the total farms, but took up 32 percent of the total land. The
recent 1974 census data show, perhaps surprisingly, an increase in the number
of family farms and a fall in those farms managed by partnership. Corporation
farms have expanded during this five year period and it is probable that they
will also have increased their share of acreage. Of the total 1987 farms with
sales of $100,000 or more in 1969, 841 or 42 percent are family owned, 343
or 17 percent are partnerships and 39 percent corporations (the remaining
2 percent are "other").
Table 3.--Farm ownership classification in Florida for 1969 and 1974
farms percent acres percent farms percent
Individual or 15,868 79 6,946,161 54 17,047 81
Partnership 2,350 12 1,491,680 12 1,712 8
owned 1,669 8 4,057,406 32 2,002 10
Other 209 1 223,097 2 150 1
Total owned farms 20,096 100 12,718,344 100 20,911 100
In the partnership category, 8 percent were recorded as vegetable farms,
40 percent were fruit farms, 11 percent were dairy farms and 10 percent were
livestock ranches. In the corporation category, 8 percent were respectively
dairy farms, vegetable farms, and ranches and 45 percent of these corporations
were listed under fruit farms. The partnerships have 12 percent of fruit by
value and the corporation 41 percent, while "other", an additional large
category, shared 16 percent.
These large farms require special loan facilities in order to service
their needs. Nearly 9 percent of Florida's farms spend more than $50,000
annually on production expenses . There are not many rural banks with
sufficient funding for meeting loans of this magnitude . They therefore
have either to develop an expensive correspondent relationship with larger
urban oriented banks, or to invest elsewhere. A more recent alternative is
provided by the bank holding company, and from 1975, the opportunity to
branch. But these are new structures and so it will be seen that the Farm
Credit System has virtually monopolized the agricultural credit scene in the
state of Florida. This situation is also partly explained by the charac-
teristics of the local economy referred to previously, encouraging banks to
select non agricultural investment opportunities.
INTRODUCTION TO FLORIDA'S AGRICULTURAL CREDIT
Agricultural credit can be divided into several categories. The approach
here is predominantly institutional, for in the United States it has been
possible to link the institutions to the public and private sectors and to
long run, medium run and short run credit. It is in fact incorrect to con-
sider the Farm Credit System as "public sector", for it is now fully commer-
cial and completely owned by its members.3
Long term agricultural credit is usually associated with real estate.
The Federal Land Banks, (hereforth termed the FLB's), life insurance companies
and commercial banks are the main institutions, with individuals contrib-
uting over twenty five percent. Short and medium term credit largely comes
from the Production Credit Associations (PCA's), via the Federal Intermediate
Credit Banks, and from commercial banks. Significant amounts of short term
credit are issued through newer entrants to the agricultural markets such as
credit unions and life insurance companies. However these last sources are
exceeded by financing methods through merchants, via accounts receivable, and
The approach in the remainder of this section will be firstly to present
long term credit as real estate loans, short term credits as non real estate
loans, and discern some institutional and other trends. The subsequent section
will regionalize these types of credit.
Real Estate Loans
Table 4 provides some of the real estate loan figures over time by in-
stitution, as well as each institution's share of the total long term loans.
The trends are apparent. There has been a remarkable increase in
Federal Land Bank lending in Florida. Since 1967, total loans outstanding
have increased sixfold, and the Land Bank's share in total real estate loans
3It is assumed that the reader is aware of the structure and function of
the Farm Credit System in the USA. The uninitiated (and the rusty) will find
"Financial Management in Agriculture" by John A. Hopkin, Peter J. Barry and
C. B. Baker, the Interstate Printers and Publishers Inc., Danville, Illinois
1973, pp. 50-64, a good source.
Table 4.--Farm real estate debt outstanding by lender in Florida for selected
Federal Home Life
Land Admini- Insurance Commercial Indi-
Year Banks station Companies Banks viduals TOTAL
Million Million Million Million Million Million
Dollars % Dollars % Dollars % Dollars % Dollars % Dollars
1960 26.8 11 6.8 3 68.6 29 28.5 12 109.3 46 240.0
1964 45.9 12 11.7 3 132.1 36 40.1 11 137.6 37 367.3
1967 78.7 16 16.6 2 182.2 36 52.0 10 170.2 34 499.7
1970 137.6 22 22.8 4 202.8 33 66.6 11 184.5 30 614.3
1971 161.2 25 24.4 4 198.2 31 70.9 11 191.7 30 646.4
1972 194.6 28 26.2 4 203.2 29 79.3 11 200.9 29 704.2
1973 240.1 30 32.9 4 209.0 26 96.0 12 226.4 28 804.5
1974 352.4 35 35.1 3 242.5 24 111.5 11 268.1 27 1009.6
1975 476.1 38 36.0 3 269.2 21 141.8 11 344.7 27 1267.8
Source: Adapted from .
outstanding, has grown from 16 percent to 38 percent. The Farmers Home Ad-
ministration (run by the USDA) and the commercial banks' share have remained
about the same, while individual and life insurance companies' shares have
It seems unlikely that this picture will modify in the future, apart
perhaps from life insurance companies. These companies reduced their farm
mortgage portfolios in the early 1960's nationwide, and Florida simply shows
the national trend. Farm mortgage investment declined because of better in-
vestment opportunities in the rapidly expanding market for commercial mort-
gages, but the recent recession has changed this market. Therefore, life
insurance companies will probably return to agricultural mortgages in order
to participate in the post 1972 increased marginal value product of agri-
Indeed, mortgage writings have changed to encourage sales. Previously,
the typical mortgage was for 20 to 30 years. Now several companies offer a
15 year term with a balloon at maturity, or a 25 to 30 year term with the
company having the option to call the loan after 15 years, upon 6 months
notice . This amortization change allows interest rate adjustments after
this period. Thus the borrower has an assured rate for the first fifteen
years and the lender is not permanently locked in.
4The balloon loan involves paying interest only in each cash repayment
period until the final payment, when all the principal is repaid.
Other long term financial trends seem rather more fixed. Commercial
banks generally prefer short term lending, and it is unlikely that they will
vigorously campaign for farm real estate mortgages. On the other hand the
Federal Land Bank shows every sign of eagerness in increasing its acquisitions
of first mortgages. Their bonds sell well in New York in competition with
other bonds, and there is plenty of money, which is prepared to invest in
American agricultural land.
The Farmers Home Administration will probably show a decline in its
mortgage purchases of farm land. This move reflects a shift in priorities
rather than investment opportunity. It is going increasingly towards rural
development and rural poverty alleviation, and leaving the land market.
Individuals may also make up a declining share of this market. As
farms become fewer and larger, and land prices increase, it is more and
more difficult to borrow sufficient sums privately, more difficult to avoid
inheritance problems and more difficult to expand without external borrowings.
These facts can be coupled with the Scylla of rising production costs and
Charydis of yields levelling off, making self-financed reserve liquidity a
greater problem for farmers. This means less cash available to lend against
a mortgage, and even sufficient money for meeting the escalating down payments
for rising land values.
Non Real Estate Loans
The non real estate loan picture also shows some clear trends. The two
main sources for short and medium term credit are the PCA's and the commercial
banks. In 1975, non real estate debt was $454 million, or about 1.6 percent
of the total non real estate debt in the country. Given that real estate
debt was about $1.27 billion for Florida, or nearly 3 percent of the nation's
outstanding agricultural mortgages, this non real estate debt level may
appear comparatively low. Table 5 provides some basic statistics.
The in-state trend is apparent. PCA's have increased their share of
short and intermediate term loans of up to 7 years, at the expense of the
commercial banks. The FHA share has declined due to its change in objectives
personal observations at the Columbia, South Carolina headquarters
of the Federal Land Banks in the Southeast, (1977).
Table 5.--Farm non real estate debt outstanding by lender in Florida for
Production Credit Commercial Farmers Home
Association Banks Administration TOTAL
Million Million Million Million
Year Dollars Percent Dollars Percent Dollars Percent Dollars
1960 40.2 50 33.8 43 5.5 7 79.3
1964 79.4 54 60.5 41 7.2 5 147.0
1967 115.0 55 83.1 40 11.0 5 209.6
1970 151.2 52 100.1 34 9.7 3 291.8
1971 172.8 60 106.6 37 10.2 3 290.3
1972 172.0 59 111.5 38 8.9 3 293.4
1973 192.9 58 133.5 40 6.4 2 333.8
1974 236.6 61 145.7 37 7.7 2 390.7
Source: Adapted from .
Both PCA's and banks have increased their agricultural loans consider-
ably. PCA loans have increased two and a half times the 1967 level, and banks
by one and three quarters. Together, non real estate debt in Florida has
grown twice as fast as the US average since 1960. This growth signifies either
a low Florida base or a large amount of self financing for these loans in the
state, or of course, institutional awareness of good investments. But despite
this increase, non real estate debt is low compared with other states. These
then are some of the basic trends in the state wide agricultural credit picture.
It may now be useful to illustrate these trends with some recent figures pre-
sented on a regional basis. These are described in the next section.
REGIONAL AGRICULTURAL CREDIT AND COMPARISONS
Real Estate Loans
Florida ranked 13th in total farm real estate debt in 1975, and is the
third largest in the south, after Texas and Oklahoma. The share of this debt
by institutional category compared with other areas is shown in Table 6.
These figures illustrate several peculiarities, when comparing Florida
to the other areas. Life insurance companies appear in a greater proportion
than in the rest of the country, and particularly than in the rest of the
Southeast. This is particularly significant when it is recalled that com-
panies' investment in farm mortgages is declining. Commercial banks are less
important, and remarkably so compared with the other Southeastern states, with
at least comparable land values.6 Yet their role cannot be said to be mark-
edly different in the real estate market than in the rest of the USA.
Table 6.--A comparison of Florida's real estate debt with the Southeast, a
Corn Belt and the USA, by percentage institutional share (1975)
Federal Home Life
Land Admini- Inqurance Commercial
Bank station Companies Banks Individuals TOTAL
Florida 38 3 21 11 27 100
Florida) 47 8 6 23 16 100
Corn Belt 25 5 13 15 41 100
USA 29 7 14 13 37 100
aMy calculations, using statistics from "Agricultural Finance Statistics,
op.cit., and "Agricultural Finance Databook, Annual Series," by Emanuel
Melichar and Marian Sayre, Division of Research and Statistics, Federal Reserve
System, Washington, D.C., September 1976.
Individuals are more prominent financial lenders in Florida than in its
neighboring states. Yet Florida cannot match the Corn Belt, or the US as a
whole in this category. Finally it appears that the FLB is markedly aggress-
ive in the Southeast area. It has over 40 percent of the Southeastern real
estate market, including Florida, compared to 25 percent in the Corn Belt and
less than 30 percent for the country.
Obviously real estate lending will vary by regions. The Federal Land
Bank, of which Columbia is the headquarters for the Columbia Farm Credit
District serving North and South Carolina, Georgia and Florida, divides
Florida into seven regions. The following table provides some regional
statistics, as well as ranking each region in size of loan outstanding com-
pared to the 46 regions in the district .
Thus out of 46 districts in North and South Carolina, Georgia and
Florida, the lowest ranking Florida district is 14th. Florida has 11 percent
of the outstanding number of loans, but 26 percent of the outstanding dollars.
6Florida land values are in fact still determined from an amalgam of
Alabama and Georgia land values in USDA statistics.
During the year the state closed out 12 percent of the loans that were closed
out, returning 23 percent of the loans closed.
Table 7.--Federal Land Bank Association loans in Florida, including regional
ranking for each district, for the year ending 31st March 1976a
Loans outstanding Loans closed
Million Rank in Million
Region Number Dollars district Number Dollars
aMy calculations using previously listed
sources (see page 14).
Non Real Estate Loans
Non real estate debt in the state was a little over $450 million in 1975.
Table 8 provides some comparisons.
Table 8.--A comparison of Florida's non real estate debt with the Southeast,
the Corn Belt and the USA, by percentage institutional share
Production Credit Commercial Farmers Home
Association Banks Administration TOTAL
- - -percentages- -- -- - -
Florida 65 33 2 100
(excluding Florida) 58 38 4 100
Corn Belt 27 70 3 100
USA 33 63 4 100
,.y calculations, using sources listed in Table 6.
Florida and the Southeast obtain most of their short term loans from
PCA's, while the rest of the country tends to use commercial banks as their
primary source. The reason is partly an aggressive approach to lending by
the Farm Credit System in the Southeast and partly the Southeastern banks
have chosen other alternative investments for their funds.
A more regionlized approach will be presented firstly for the PCA's
and secondly the commercial banks in the state. Table 9 represents the
picture for PCA's, including ranking each region with respect to loans out-
standing for the 56 regions in the Columbia district.
Table 9.--PCA loans, net earnings, rank, and operating cost for the nine re-
gions in Florida for the year ending 31st March 1976
PCA Operating cost per
loans Net $100 based on Loans
outstanding earnings average balance closed
Million Million of loans out- Million
Region Number Dollars Dollars Rank standing number Dollars
Southwest Fla. 626 62.7 0.81 1 0.82 51.6
Gulf Atlantic 585 44.2 0.64 4 1.08 24.3
Panhandle 751 40.8 0.72 7 0.63 34.6
Mid Florida 621 33.8 0.43 11 0.62 20.6
Farmers 316 32.9 0.73 12 0.77 32.3
Big Bend 564 30.4 0.33 14 0.65 25.6
Central Fla. 387 29.4 0.45 15 0.71 17.9
Northeast 374 23.7 0.27 26 1.13 23.6
North Florida 498 16.7 0.20 45 1.33 12.6
Total 4722 314.7 4.6 Av. 0.82
Source: Adapted from .
Florida has 9 percent of the number of loans outstanding in the Columbia
district, and 22 percent of the money. Hence loans tend to be larger in
Florida. They also account for 20 percent of the district's earnings. The
rankings are again high, with over half of Florida's regions in the top fifth
of the district. The operating costs per $100 of average balance of out-
standing loans show a fairly wide range. For example North Florida's cost is
over twice that of Mid Florida's, presumably because of smaller loans in
North Florida. This is probably also the reason that Florida as a whole can
receive loans at an operating cost which is 25 percent cheaper than the rest
of the district.
Commercial Banking in Florida
Commercial banks in Florida, with few exceptions, do not invest a large
proportion of their funds in the agricultural sector of the state. So it may
prove useful to provide a background of commercial banking, to see why the
Farm Credit System has acquired the major share of agricultural lending.
Firstly, it is important to realize that Florida's commercial banking
industry is a sizeable business. At the end of 1975 there were 742 banks in
Florida with total deposits of approximately $25 billion. In terms of de-
posits, Florida ranks 8th in the nation, and is by far the largest state in
terms of deposits in the Southeastern region, being about equal to the com-
bined total of Georgia, Alabama and Mississippi. The regional distribution
of these banks is not particularly uniform. Some 15 of Florida's 67 counties
carry 85 percent of the state's deposits in 75 percent of the banks. Dade,
Broward and Pinellas counties alone have 30 percent of the banks and 40 per-
cent of the deposits.
The structure of Florida's banks has historically been fragmented.
This has been a unit banking state since 1913 and state laws do not yet per-
mit full branch banking. There were some problems with this unit banking
system, which became more noticeable by the mid 1960's, when Florida's rapid-
ly expanding economy required better banking services than the system could
provide. Hence the growth in registered bank holding companies, and there
are now some 32 such companies with 461 of the state's banks, and 75 percent
of the total deposits. The following table provides some background
Bank numbers have grown 70 percent in the decade, while the holding
company control of these banks has expanded from 5 percent to 62 percent.
The 1972-75 period indicates a lull in Florida's economy. While bank numbers
have continued to expand, money variables have remained fairly static. Bank
demand deposits and total loans in fact fell between 1974 and 1975. Prelim-
inary 1976 data suggest some growth renewal in these figures. Federal
A bank holding company is a corporation that holds a controlling in-
terest in the stock of one or more banks. The degree of control over indi-
vidual bank units varies. Some units operate virtually as independent banks,
others almost as branches of the same bank. Multibank holding companies have
grown rapidly since the 1970 amendments to the national Bank Holding Company
Act that placed onebank holding companies under the same regulatory standards
as the multibank companies. So one bank holding companies have expanded by
establishing new banks or taking over existing ones.
Reserve Bank member deposits are now around $26 billion and loans about $14.3
billion . These estimated statistics likewise reflect the changes in the
Table 10.--Number of commercial banks and holding companies, including deposits
and loans by selected years
Number Number of
Number of of total
of Demand Total total Loan holding banks bank
Year banks deposits deposits loans ratio companies controlled deposits
1965 439 4660 7716 3826 50 7 24 10
1967 447 5489 9742 4737 49 13 84 34
1969 472 6906 12343 6407 52 16 107 38
1971 537 8338 16265 7977 49 23 225 58
1972 578 9994 19782 10276 52 30 304 67
1973 643 10820 22902 12890 56 32 390 75
1974 711 10687 24071 13719 57 31 444 76
1975 742 10475 24865 13080 53 32 461 75
Source: Adapted from .
The holding companies have a varied structure. The largest, Southeast
Banking Corporation, has approximately 10 percent of total deposits in the
state, followed by Barnett Banksof Florida with 8 percent, Sun Banks of Florida
and Flagship Banks Inc. with around 6 percent apiece. So the big four con-
trols 30 percent of all deposits and 24 percent of the banks.
Throughout their history, commercial banks in Florida have not made
agriculture a major recipient of their loans. The ratio of agricultural to
total loans has never been more than 3.6 percent between 1961 and 1975, and
has not exceeded 3 percent since 1968. The highest ratio in the 1970's was
2.2 percent in 1975. For comparison, the Sixth Federal Reserve District,
(including all of Alabama, Georgia, Florida, and portions of Louisiana,
Mississippi and Tennessee, headquartered in the Federal Reserve Bank of
Atlanta), was around 7 percent from 1961 to 1975, (this figure excludes
Florida's contribution). Thus Florida's loan ratio is comparatively low.
Typically about 40 percent of the agricultural loans in the state made by
commercial banks are for real estate, though this rose to 50 percent in 1975.
Thus some sort of regional grouping has been attempted and concluded
with an outline of the role of commercial banks. It is now appropriate to
bring together all the agricultural credit loans outstanding, and show these
on a regional basis.
Regional Loan Distribution by Institution
The regional observation unit is the county. It will be seen that a
few counties have the lion's share of agricultural loans, not only from one,
but predominantly from at least two of the three main lending institutions
shown in Table 11. The reason of course lies with the agricultural enter-
prises and farm structures involved. For example the large scale citrus and
vegetable producers of Hillsborough County represent a better credit risk
than the much smaller farm structures found elsewhere in the state.
The top ten counties in Florida took up nearly 40 percent of the total
agricultural loan in 1974. These are ranked in Figure 2. In about one third
of the counties, at least half the loans come from the Federal Land Bank.
And in fifteen of these counties, loans outstanding exceed $10 million. The
counties are Alachua, Marion, Orange, Pasco, Hillsborough, Polk, Manatee,
Hardee, DeSoto, Highlands, Okeechobee, St. Lucie, Lee, Hendry and Palm Beach.
There are eight counties where PCA's have a similar $10 million outstanding.
These are Jackson, Alachua, Marion, Orange, Polk, DeSoto, Highlands and Palm
Beach. Only six counties show an excess of $10 million in loans from commer-
cial banks, and these loans also include real estate loans. They are Jackson,
Marion, Orange, Pinellas, Hillsborough and Polk. Thus Marion, Polk and Orange
counties are the only ones occurring in all three categories.
Table ll.--Farm Loans of three major lenders in Florida, reported for each
county (loans outstanding, $000)
Total Commer- Federal Prod.
Farm cial Land Credit
Florida Loans Banks Banks Assns.
Alachua 32,486 19.3 39.0 41.7
Baker 2,439 15.3 61.2 23.5
Bay 1,783 22.6 5.6 71.8
Bradford 3,748 22.0 35.0 43.0
Brevard 4,729 17.6 42.7 39.7
Broward 12,984 66.1 14.0 19.9
Calhoun 5,515 32.2 26.8 41.0
Charlotte 4,612 8.4 70.5 21.1
Citrus 1,924 2.0 69.4 28.6
Clay 5,590 27.0 42.4 30.6
Collier 6,901 10.2 27.2 62.6
Columbia 15,658 58.3 32.1 9.6
Dade 14,285 60.2 13.5 26.3
DeSoto 33,590 7.8 65.5 26.7
Dixie 1,241 36.8 4.2 59.0
Duval 15,328 53.0 12.8 34.2
Escambia 5,644 3.8 47.6 48.6
Flagler 4,194 14.5 62.5 23.0
Franklin 292 12.7 87.3
Gadsden 14,919 31.9 20.7 47.4
Gilchrist 7,421 11.6 66.5 21.9
Glades 10,972 84.0 16.0
Gulf 3,083 7.0 91.9 1.1
Hamilton 7,251 25.6 44.9 29.5
Hardee 46,059 14.3 68.2 17.5
Hendry 21,197 3.7 70.4 25.9
Hernando 7,194 21.1 56.2 22.6
Highlands 54,202 17.4 54.9 27.7
Hillsborough 68,320 35.4 55.7 8.9
Holmes 8,170 41.1 28.2 30.7
Indian River 18,262 39.3 44.8 15.9
Jackson 38,125 38.2 24.3 37.5
Jefferson 11,553 14.7 15.3 70.0
Lafayette 5,478 3.2 49.5 47.3
Lake 34,322 23.9 60.2 15.9
Lee 21,854 20.6 51.2 28.2
Leon 12,474 20.9 45.8 33.3
Levy 11,337 31.2 33.9 34.9
Liberty 778 87.0 13.0
Madison 13,222 23.8 47.9 28.3
Manatee 24,728 20.0 45.1 34.9
Marion 50,738 34.2 35.0 30.8
Martin 4,462 16.7 42.6 40.7
Monroe 252 100.0
Nassau 11,710 0.3 44.2 55.5
Table ll.--Farm loans of three major lenders in Florida,
county (loans outstanding, $000) --Continued.
reported for each
Total Commer- Federal Prod.
Farm cial Land Credit
Florida Loans Banks Banks Assns.
Okaloosa 5,785 14.5 41.5 44.0
Okeechobee 38,553 7.4 68.7 23.9
Orange 39,209 45.5 28.5 26.0
Osceola 9,809 20.8 57.2 22.0
Palm Beach 43,315 15.5 60.6 23.9
Pasco 22,589 26.1 53.0 20.9
Pinellas 17,885 91.7 7.0 1.3
Polk 47,370 35.9 38.2 25.9
Putnam 10,612 30.7 27.0 42.3
St. Johns 5,647 14.0 53.5 32.5
St. Lucie 19,966 15.9 56.2 27.9
Santa Rosa 10,517 26.6 31.2 42.2
Sarasota 11,514 15.0 46.4 38.6
Seminole 13,293 12.1 10.9 77.0
Sumter 18,240 7.6 51.7 40.7
Suwannee 24,571 37.9 39.4 22.7
Taylor 2,655 27.7 25.8 46.5
Union 4,078 26.4 32.6 41.0
Volusia 11,627 61.8 16.1 22.1
Wakulla 2,475 85.3 14.7
Walton 6,840 5.5 36.6 57.9
Washington 4,583 41.1 21.8 37.1
Source: Adapted from .
Counties and County Seats in Florida
^ kloost j"lm /Jackson
t s e I W i l t oA H a f i t*
ALACUA GAINESVILLE LAKE TAVARES
1.0 chua I'. tr10- 1
ALACHUA GAINESVILLE LAKE TAVARES 0 SI-Inole
BAYER ACCLENNY LEE FORT MYERS Hernando 0
BAY PANAMA CITY LCON TALLAHASSEE .
BRADFORD STARKE LEVY BRONSON Pasco
BREVARD TITUSVILLE LIBERTY BRISTOL fl
IHllhborogh Ocola rd
BROWARD FORT LAUDERDALE MADISON MADISON ,
CALHOUN BLOUNTSTOWN MANATEE BRADENTON PietIs ) Pt ind.n SivtZ
CHARLOTTE PUNTA GORDA MARION OCALA '
CITRUS INVERNESS HanatCe r
CLAY GREEN COVE SPRINGa MARTIN STUART k- 0, y oc itcfi
MONROE KEY CHEST f s
COLLIER NAPLES NASSAU FERNANDINA'B ACH o Atn
COLUMBIA LAkE CITY OkALOOSA CRESTVIEN Sarot T *.
DAoE MIAMI OKELCHOBEE ONEECHOIEE
DE SorT ARCAcIA Chrlot t
DIXIE CROSS CITY ORANGE ORLANDO .
OSCEOLA kJSSIMMl EL y
DUVAL JACKSONVILLE PALM BLACH HWST PALM BEACH
FLAGLER BUNNELL PASCO DADE CITY r rd
FRANKLIN APALACHICOLA PINELLAS CLEARWATER
GILCHRIST TRENTON PUTNAM PALATKA I
GLADES MOORE HAVEN ST. JOHNS ST. AUGUSTINE Rnc adt
GULF PORT ST, JOE ST. LUCIE- FURT PIERCE
HAMILTON JASPER SANTA ROSA MILTON
HARDEE AUCHULA SARASOTA SARASOTA
HENDRY LA BELLE SEMIlOLE ;ANFORn
HERNANDO BROOKSVILLE.E SUITER BUSHNELL
HIGHLANDS SEBRING SUWANNEE LIVE OAK / .'5
HILLSBOROUAH TAMPA TAYLOR PERRY
HO.MIES BONIFAY UNION LAKE BUTLER
INDIAN RIVER VERO BEACH VOLUSIA DELAND
JACkSON MARIANNA WAKULLA CRAWFORDVILLE
JEFFERSON MONTICE.LO WALTON PDFUNIAk SPRINGS
LAFAYETTE MAYO WASHING1;IN f:III'LEY
Source: Adapted from .
Figure 2.--Ranking in agricultural loans 1974
It is becoming increasingly difficult to confirm that US agriculture
is fundamentally short of capital. This statement does not contradict the
fact that US farmers will require more capital in the future. Rising input
costs, increasing farm size, and mechanization will all increase the need
However, it is not necessarily true that the capital is used any more
efficiently. The national outputrcapital ratio has changed from 0.154 in
1960 to 0.181 in 1975, or 17 percent, while over this same period the na-
tional output labor ratio increased by nearly 240 percent . Nevertheless,
it has been worthwhile to substitute capital for labor, and the trend will
continue as long as the marginal value product of capital is measurably
higher than that of labor.
A recent paper has shown that farm debt approximately doubles about
every eight years in the US, and suggests that this trend will continue into
the future . However a large proportion of these increased capital re-
quirements are caused by inflation, rather than increased purchases. These
increased capital requirements are occurring while output prices for the major
agricultural commodities are falling.
This situation creates debt repayment problems. Between 1965 to 1970,
total agricultural debts could have been met from net farm income in about
5 years. In the prosperous days of 1973 and 1974 the figure was approxi-
mately 3 years. By 1975 it was back to 5 years and in 1976 it would have
taken almost 7 years to repay total debt from net cash income from farming
. Thus input investments such as land or equipment, coupled with pre-
sent commodity prices, may not be earning reasonable returns, without in-
cluding inflationary expectations.
Consider the following example using some 1977 Florida crop budgets,
and an average price for land in Florida of $783 per acre .
Cash expenses for one acre of dryland corn in North Florida are about
$125, (excluding land rent of $25), and fixed costs, $27. Assuming the
above land price at 8.5 percent interest, this gives a land cost of $66.50,
for a total cost of $218.5 per acre. The average yield in Florida in 1975
was 45 bushels per acre . Hence the corn price would have to be $4.85 to
9Unpublished 1977 crop budgets, Food and Resource Economics Department,
University of Florida, Gainesville.
break even. Even with an 80 bu/acre yield, the break even price is still
$2.73. The seasonal average price, including government payments in Florida
in 1975 was $2.72 . However recent outlook work prognosticates an aver-
age ex-farm gate price of $2.00 or less at harvest . So a land price of
$783 cannot justify corn production in Florida. Similar examples can be cited
for several other crops. Land purchases may therefore be considered with
future increasing land values in mind, and not solely with the value of the
production from that land.
Farmers will need increased-cash in the future and will require sources
outside agriculture to finance them. Presumably the Farm Credit System will
still maintain its role. But what about the commercial banks? Recall that
less than 2 percent of their total loans are allocated to agriculture, and
nearly half of these agricultural loans are in real estate. The basic reason
for their lack of interest has been that they have had better opportunities
available elsewhere in the economy. But the recent recession and the present
liquidity situation may encourage some increase in agricultural investment.
Loan losses in the sixth district member banks in 1975 were more severe
than for banks in general in recent years . Within this district, loan
losses were more severe in Florida. These losses are attributed to the
active involvement in real estate, particularly condominiums, apartments and
commercial properties. They also experienced losses in the more traditional
areas of consumer and business loans. Thus it is to be expected that future
loans will be more carefully administered.
Banks in the nation generally have considerable cash and paper liquid-
ity, and are aggressively seeking investments for their loan funds. This
is occurring while the Florida bank business grows larger through holding
companies and consequently is more capable of meeting the large single re-
quests of successful agricultural producers.
A comparison of the ratio of total cash marketing to non real estate
loans in Florida, with other states, suggests that these non real estate loans
could be profitably expanded. Table 12 provides some illuminating statistics
reinforcing this viewpoint.
The ratio is obviously a simple way to analyse data. It indicates at
worst the cash marketing per dollar of non real estate debt, and at best,
the potential for future investment in short term loans.0 The ratio has
10The ratio of total cash marketing to real estate debt outstanding
showed little difference between the states.
generally narrowed since 1960. But Florida has consistently shown a higher
ratio than other states.11 Furthermore, this ratio apparently levels off at
about 2.5, as for example in
as a rule of thumb indicates
Kansas, Texas and Kentucky. Using this statistic
that farmers in the state could profitably double
their present non real estate indebtedness.
Table 12.--A ratio
of total cash marketing to non real estate loans for
states in selected years
State 1960 1965 1967 1970 1972 1974 1975
Florida 9.8 6.0 5.4 4.3 5.7 5.5 5.4
California 5.8 4.7 4.2 4.2 4.3 4.3 3.9
Colorado 3.0 2.3 2.3 2.4 2.9 3.1 2.7
Georgia 8.8 6.2 5.7 4.3 3.8 4.1 3.8
Kentucky 4.3 3.5 3.3 2.9 2.6 2.6 2.2
Mississippi 6.8 4.8 4.8 3.9 4.2 4.5 2.8
Illinois 4.3 4.0 3.4 3.2 3.1 4.2 3.3
Iowa 4.5 3.9 3.6 3.3 3.0 3.5 3.0
Minnesota 4.3 3.4 3.3 3.0 2.6 3.9 3.0
Kansas 3.7 2.4 2.4 2.5 3.0 3.0 2.5
Texas 4.2 2.8 2.7 2.6 2.7 2.7 2.6
As a final remark, it is perhaps worth emphasizing that the main pur-
pose of this report was to provide some groundwork for future efforts in the
field of agricultural finance in Florida. If it can also stimulate queries,
then this would be a welcome addition.
11These states were selected to show representativeness rather than
 Brake, John R. "Meeting the Growing Capital Needs of Agriculture,"
paper given at the National Agricultural Marketing Association
1977 Conference, St. Louis, Mo., May 2, 1977.
 Allen C. Ewing and Company. "Florida Bank Holding Companies," Jackson-
ville, Florida, 1976.
 Federal Land Bank and Federal Intermediate Credit Bank, Columbia Dis-
trict, Annual Report, 1976.
 Federal Reserve Bank of Atlanta. Monthly Review, November 1976.
 Federal Reserve Bank of Atlanta. Monthly Review, November 1975.
 Federal Reserve Bank of Atlanta. Monthly Review and Economic Survey,
 "Florida Statistical Abstract 1976," University Presses of Florida,
Gainesville, Florida, 1976.
 Simunek, Richard. "The Relationship of the Farm Bureau Balance Sheet
to Sector and National Income and Product," paper presented to
workshop on Farm Sector Financial Accounts, Washington, D.C.,
 State of Florida. Division of Banking, Annual Report, 1974.
 U.S. Department of Agriculture. "Agricultural Statistics 1976," Gov.
Print. Office, Washington, D.C., 1976, p. 417.
 U.S. Economic Research Service. "State Farm Income Statistics,"
Supplement to Statistical Bulletin 557, Gov. Print. Office,
Washington, D.C., August 1976.
 U.S. Economic Research Service. "Farm Income Statistics," Statistical
Bulletin 557, Gov. Print. Office, Washington, D.C., July 1976,
 U.S. Economic Research Service. "Agricultural Lending by Life In-
surance Companies," by James 0. Melton, Ag. Fin. Review, Gov.
Print. Office, Washington, D.C., Vol. 37, February 1977.
 U.S. Economic Research Service. "Agricultural Finance Statistics,"
Gov. Print. Office, Washington, D.C., appropriate years.
 U.S. Economic Research Service. "Agricultural Outlook," Gov. Print.
Office, Washington, D.C., April 1977.
 U.S. Economic Research Service. "Agricultural Outlook," Gov. Print.
Office, Washington, D.C., January-February, 1977.
 U.S. Bureau of Census. "1969 Census of Agriculture, Florida, Part 29,
Section 1, Summary Data."
 U.S. Bureau of Census. "1974 Census of Agriculture, ,Preliminary Report,
Florida," November 1976.