Front Cover
 Title Page
 Table of Contents
 List of Tables
 Objectives, justification...
 Importance of Florida's agricultural...
 Agricultural debt in Florida and...
 Florida commercial bank survey
 Summary and conclusions

Title: investigation on the role of commercial banks in financing Florida agriculture
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00049897/00001
 Material Information
Title: investigation on the role of commercial banks in financing Florida agriculture
Alternate Title: Economic information report - University of Florida Food and Resource Economics Dept. ; 95
Physical Description: Book
Language: English
Creator: Van Blokland, P. J.
Publisher: Food and Resource Economics Dept., College of Agriculture, Institute of Food and Agricultural Sciences, University of Florida
Publication Date: 1979
Spatial Coverage: North America -- United States -- Florida
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Bibliographic ID: UF00049897
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.

Table of Contents
    Front Cover
        Front Cover
    Title Page
        Title Page
    Table of Contents
        Page i
    List of Tables
        Page ii
    Objectives, justification and procedure
        Page 1
    Importance of Florida's agricultural sector
        Page 2
        Page 3
    Agricultural debt in Florida and comparisons
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
    Florida commercial bank survey
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
    Summary and conclusions
        Page 16
        Page 17
        Page 18
        Page 19
Full Text
- 1979

Economic Report 95

tip ,


(9 I3

An Investigation

on the Role of Commercial Banks

in Financing Florida Agriculture

>urce Economics Department
-ud and Aaricultural Sciences
Gainesville, 32611

P. J. van Blokland




P. J. van Blokland


LIST OF TABLES . ... .... . . .... ii


SECTION 1 . . . . . . . .

The Importance of Florida's Agricultural Sector . . 2

SECTION 2 . . . . . . . .

Agricultural Debt in Florida and Comparisons . . 4

SECTION 3 . . . . . . . .

The Florida Commercial Bank Survey . . . 10

Part I The Individual Bank and Local Agriculture . .. 11
Part II Farmer Client Analysis . . . 13
Part III The Future Role of Commercial Banks in Agriculture .14

SECTION 4 . . . . . . . .

Summary and Conclusions . . . . . 16

BIBLIOGRAPHY . . . . . ... 19


Table Page

1 Farm real estate debt outstanding by lender in Florida 5

2 Farm non-real estate debt outstanding by lender in Florida 6

3 The number and percentage of Florida banks supplying agricul-
tural loans in various categories in 1977. . ... 17



P. J. van Blokland


The essential purpose of this paper is to discover the past, present
and future role of Florida's commercial banks in the state's agriculture.
There is no attempt to assess the adequacy of total agricultural lending
in the state, but rather an investigation to see whether there are agri-
cultural lending opportunities presently available to commercial banks.
Until 1977, no economist had published material in the public domain
concerning agricultural lending in Florida since 1942.1,2 The 1977 study
provided an overall summary of agricultural credit trends in the state,
and indicated that commercial banks contribute a smaller proportion of
agricultural long and short term loans to farming than banks in other
states. This paper pursues this suggestion through a 1978 postal survey
of commercial banks, concentrating on non-real estate lending to agricul-
The paper first attempts to establish the importance of agriculture in
the state. It then examines the sources and trends of agricultural debt,
both within the state and compared with other states. The third part of
the paper details the survey, and analyzes the findings. Finally, all
three parts of the paper are brought together and conclusions are drawn.

1Reitz, J.W., "Production Credit in Florida Citrus and Vegetable
Areas," Bull. 376, Ag. Expt. Stn., Univ. of FL., Gainesville, 1942.

van Blokland, P.J., "An Introduction to Agricultural Credit in
Florida," Econ. Info. Rpt.77, Food and Resource Economics Dept., Ag.
Expt. Stns., I.F.A.S., Univ. of FL., Gainesville, August 1977.

P. J. van Blokland is an assistant professor in Food and Resource Economics.


The Importance of Florida's Agricultural Sector

Agriculture is an exceedingly important industry in Florida. The
retail value of agricultural output is probably around $12.5 billion, or
nearly $4 billion ex. farm gate, and the contribution to Gross State Pro-
duct is approximately 17%.3 Agriculture generates 2.8% of the labor and
proprietors' income in the state, which while seemingly small, is higher
than either Texas or Illinois, both major agricultural states and only
slightly less than California, (3.1%) the leading agricultural state in
the nation. This 2.8% is equivalent to $950 million, which is a greater
sum than that generated by general building construction ($700 million),
foodstore sales ($770 million) and more than hotels, motels, and amusement
centers and recreation parks put together.3 As Florida is generally known
for tourism and construction, these statistics underline the relative im-
portance of agriculture to the state.
According to 1977 USDA statistics Florida ranked 12th in the nation
in total farm cash receipts, 23rd in livestock receipts and 7th in crop
receipts. However, the livestock ranking is somewhat misleading, for
aggregating cattle and calves, masks the fact that the state probably ex-
ports more calves for the fattening enterprise than any other state.5
Florida stands first in the nation in citrus and sugarcane, second in green-
house and nursery products, tomatoes and egg hatcheries, third in lettuce,
seventh in peanuts, eighth in tobacco and ninth in eggs and potatoes. Yet

Florida Statistical Abstract 1978, Bureau of Economic and Business
Research, Coll. of Business Admin., Univ. of FL, The Univ. Presses of FL,
Gainesville, 1978 pp. 218-220, pp. 584, pp, 108-9, pp. 110-111.

4U.S.D.A., E.S.C.S., "State Farm Income Statistics", Supplement to
Statistical Bull. No. 609, Washington, D.C., Sept. 1978 p. 9.

5W. Kary Mathis, Director, Marketing Center, Food and Resource Econ.
Dept., Univ. of FL, personal communication.

these rankings exclude any winter vegetables category and as Florida supplies
about 80% of U.S. output of winter vegetables during December to February,
this is an important enterprise. Crops typically supply 75% of the value
of agricultural output in the state, and livestock the remainder. For
example, in 1977, citrus contributed 26%, vegetables 21%, and greenhouse
and nursery products 10% of the crops' 72% contribution, while cattle and
calves made up 12%, dairy products 9% and poultry 7% of livestocks' 28%
These products are produced on farm units which are considerably
larger than the national average, ranking 3rd in net income per farm in
the USA.6 Some 9% of the farms produce 81% of the farm output, and 72%
of total output comes from farms selling at least $200,000 worth of pro-
duce annually.7
-Florida has far fewer farms than other Southeastern states, but much
the same land area under farming.8 For example, Florida's 38,500 units
farm about 14 million acres, while Tennessee has 112,000 farms, covering
14.5 million acres. Florida is also similar in the percentage of land in
farms and under forest according to USDA definitions and statistics. The
average for the six states comprising.the southeast are 47% and 57% re-
spectively (some land includes forest) while the corresponding figures for
Florida are 41% and 51%9 The only contrasting statistic is the propor-

U.S.D.A.,E.S.C.S., "State Farm Income Statistics," Supplement to
Statistical Bull. No. 609, Washington, D.C., Sept. 1978 pp. 57-58, p.15

Florida Statistical Abstract 1978, Bureau of Economic and Business
Research, Coll. of Business Admin., Univ. of FL., The Univ Presses of FL.,
Gainesville, 1978 p. 198

8The Southeastern states in this paper are Alabama, Florida, Georgia,
Louisiana, Mississippi and Tennessee to conform with the Federal Reserve's
Sixth District headquartered in Atlanta.

9U.S.D.A., "Agricultural Statistics," Gov't. Printing Office, Washing-
ton, D.C., 1978, pp. 418-420

tion of land under special use, such as urban areas, roads, military land
and Federal and State recreation areas, where Florida with 16%, has twice
as much as Tennessee, the next closest state.
So Florida has an important agricultural sector, with larger farms
and incomes than the average in the nation and in neighboring states.
Yet, the same proportion of land is farmed in Florida as in other South-
eastern states. So, even though there is a different farm structure, it
is not unreasonable to expect some similarity in institutional debt, part-
icularly as these six states comprise the Federal Reserve's sixth district,
and three of them make up the entire fifth district of the Farm Credit Ad-
ministration (Alabama, Mississippi and Louisiana). There should also be
some additional common factors between Georgia and Florida, which make up
half of the Farm Credit Administration's third district.

Agricultural Debt in Florida and Comparisons

It is useful to show the sources of agricultural credit in Florida,
before making any comparisons. Accordingly Tables (1) and (2) present
the sources supplying real and non-real estate capital to Florida farmers
and indicate the trends.
There has been a remarkable increase in Federal Land Bank lending in
Florida. Between 1967 and 1979 total loans outstanding have increased
six-fold, and the Federal Land Bank's share has grown from 16% to 40%, while
other sources have generally declined. Commercial banks now supply only
9% of the real estate debt, or less than half that of the life insurance
companies, who in turn have a greater share in agricultural real estate
in Florida than in any other state.
Table (2) provides figures illustrating the non-real estate trends.

Table l.--Farm real estate debt outstanding January 1 by lender in Florida (selected years) ($M).

Federal Farmers' Life
Land Horie Insurance Commercial Individual
Banks Administration Companies Banks & Other Total
Years $ % $ % $ % $ % $ % $


















































Table 2.--Farm non-real estate debt outstanding by lender in Florida,selected years ($M).

Production Farmers'
Credit Commercial Home
Association10 Banks Administration Total
Year $ % % $ % $

1960 40.2 50 33.8 43 5.5 7 79.3

1967 115.0 55 83.1 40 11.0 5 209.6

1970 151.2 52 100.0 34 9.7 3 291.8

1973 192.0 58 133.5 40 6.4 2 333.8

1974 236.6 61 165.7 37 7.7 2 390.7

1977 328.3 65 160.8 32 17.0 3 506.2

1979 376.2 55 173.1 25 134.9 20 684.2

10The Production Credit Association (PCA) figure includes all Federal Intermediate Credit Bank (FICB)

Though perhaps somewhat distorted by the recent and perhaps unique,
enormous influence of Farmers Home Administration funds stemming from
weather related crop disasters, again the trends are obvious. In essence,
the Production Credit Associations have increased their share of non-real
estate loans at the expense of commercial banks. While the banks' flow
of short term funds to agriculture has doubled since 1969, their total share
has fallen from 40% to 25%, and in real terms, their dollar volume has
actually declined.
In summary, the commercial banks' share of total farm loans outstanding
in Florida was 20% in 1960, similar to the Farm Credit Administration. How-
ever, by 1979 their share had slipped to 13% while the Farm Credit Adminis-
tration provided 44% of the total. In fact, the Farm Credit Administration
outstanding loans in 1979 is 16 times the 1960 total, while the commercial
banks' increase is a little over 4 times their 1960 level. Apparently, the
Farm Credit Administration found it worthwhile to expand their inputs into
Florida's agriculture, while the commercial banks were less enthusiastic.
In order to see whether this situation is unusual, a comparison between
Florida and the other Federal Reserve Sixth District states showed that
Florida receives proportionally far less capital from commercial banks
than these states. This statement is consistent with historical and trend
statistics, with real estate or non-real estate figures.
For example, these states have received a fairly constant 24% of their
real estate debt from commercial banks, since about 1960. These figures
range from Georgia and Tennessee highs of around 28% to the Louisiana low
of 17%. Yet Florida's typical percentage over this same time period is
11%, which although nearer the nation's average real estate lending from
commercial banks of about 14%, is much lower than its neighbors. A similar
situation is seen with non-real estate lending. Typically, between 42% to
45% of short term loans in the sixth district (excluding Florida) have come
from commercial banks since 1970, and this proportion has increased slightly
since 1960. However, the Florida proportion has declined since this date
from 43% to about 34% in 1977 and 25% in 1979. To put these figures in some
perspective, the U.S. average is 63%, showing that loans from commercial
banks in the sixth district including or excluding Florida, provide a smaller
proportion of non-real estate debt than in the rest of the nation.

Apparently the Farm Credit Association has been more aggressive in
marketing its loans than have commercial banks. This is particularly true
in Florida, where other investment opportunities for banks are apparently
more attractive. However, despite this explanation, this declining activity
by commercial banks is a little surprising.
It is difficult to find evidence suggesting that farm production and
marketing risks are greater in Florida, or in the Southeast than elsewhere.
Output prices for Florida's major agricultural enterprises have not fluc-
tuated any more than have nationwide agricultural enterprises in recent
years. In fact, a weighted price index of the state's major 34 enterprises
suggests less fluctuations than for grain and soybeans in the Midwest.11,12
Other evidence shows much higher cash receipts from primary marketing and
other cash income per farm in Florida than the national average.13
It is particularly noticable that both these sources of income have
shown a steady and continuous upward trend at least since 1967, unlike the
situation in many other states. Cash receipts from farm marketing have
risen two and a half times between 1967 and 1975 and farm income from other
sources has more than tripled.14 Both figures should provide reassurance
for lenders.

lBrooke, D.L., "Florida Farm Prices," Econ. Info. Rpt. 89, Food and
Resource Econ. Dept., Ag. Expt. Stns., I.F.A.S., University of FL., Gaines-
ville, June 1978, pp.6-7,p.15.

U.S.D.A., "Agricultural Statistics," Gov't. Printing Office, Washing-
ton, D.C., 1978. This index obviously pools the individual crop risk into
an aggregate and therefore cannot show that some enterprises involve greater
risks than others. While this micro viewpoint would be important for an area
where this crop was grown, the focus here is at the state level and looks at
state wide lending.

13Eastwood, F.A., "Florida Aggregate Primary Producer Incomes and Mar-
keting Margins," 1967-75, Econ. Info. Rpt. 74, Food and Resource Econ. Dept.,
Coll. of Ag., Coop. Extn. Service, I.F.A.S., Univ. of FL., Gainesville, June
1977, p.3.

1The quoted 1975 figures are $3.33 billion and $460 million respectively.

Florida farms are larger than average and thus tend to have larger
loans. Using a simple average of real estate debt divided by farm numbers
in the state, Florida's figure of $36,000 per farm is nearly twice as high
as the next largest figure in the sixth district, Louisianna, with $19,000,
and considerably greater than the U.S. average of $21,000.
Similarly on a per farm acre basis, Florida's real estate debt is $98,
followed by Georgia with $80, while the comparable U.S. average figure is
$53. Even though these figures are approximations, when coupled with the
previously mentioned net farm income per farm, they do suggest some invest-
ment opportunities that banks may not be examining.
The non-real estate figures show a broadly similar pattern. For ex-
ample, average non-real estate debt per farm in Florida is the highest in
the Southeast. Florida's figure is a little under $18,000, while the next
highest is Georgia at $16,000. However the commercial banks short term con-
tributions per farm is greater in Louisiana, with Florida and Georgia
jointly second at about $4,500.
All these figures illustrate that Florida agriculture is being fi-
nanced in accordance with its larger units and greater income. Farms in
the state have greater average real and-ncn-real estate debt loans than
other farms in the southeast and in the nation. Yet it is not obvious that
Florida's agriculture is financed at a sufficiently greater extent, partic-
ularly in non-real estate loans. A simple ratio of total cash marketing
to non-real estate debt gives some credence to this suggestion. A historical
comparison (since 1960) with the other southeastern states, and other
agriculturally prominent states such as California, Illinois, Iowa, Kansas
and Texas shows that Florida's ratio is consistently the highest.15
Most current figures support this contention. For instance, 1977
statistics show the ratio for the following.states to be: Alabama 3.1,
California 2.9, Georgia 2.2, Illinois 2.4, Louisiana 2.6, Mississippi 2.2,
Tennessee 1.5 and Texas 2.4 compared with Florida at 4.3. This ratio is
obviously simplistic, but not unuseful. It indicates at worst the cash

15van Blokland, P.J., "An Introduction to Agricultural Credit in
Florida," Econ. Info. Rpt. 1977, Food and Resource Economics Dept.,
Ag. Expt. Stns., I.F.A.S., Univ. of FL. Gainesville, August 1977.,p.25.

marketing per dollar of short term debt, and at best, the potential for
future investment through short term lending. Yet even though this ratio
has narrowed since 1969 for all states, Florida's ratio is always higher
than the others, suggesting that non-real estate indebtness in the state
could be profitably increased. As this form of debt comes mainly from
Production Credit Associations or commercial banks, and because banks were
apparently playing an atypically small part in lending to agriculture a
survey of Florida commercial banks was conducted during the summer of 1978.


The Florida Commercial Bank Survey

The survey had two main purposes. The first was to obtain some basic
data on bank short term lending practices to agriculture. The second was
to see whether bankers were becoming more interested in short term agri-
cultural lending than they had been in the past. There were reasons to
suggest that they were becoming more interested. These reasons included
the legal change which allowed branch banking in Florida after January 1,
1977; the very high loan loss ratios largely resulting from construction
loans during the 1974-75 recession and the author's contacts with bankers.
Some 640 postal questionnaires were sent to commercial banks in Florida,
using a mailing list supplied by the Florida Banker's Association, producing
270 responses. The responses rate was better than these figures suggest be-
cause at least 37 banks were new branches and forwarded the questionnaire
to their parent bank, which replied on their behalf.
The survey itself dealt with short term lending, and was divided into
three main parts. Part I used seven questions to discover how each bank
rated and serviced its local agriculture. Part II asked six questions in
attempting to clarify how individual bankers assessed their farmer clients.
Part III employed eight questions in discerning the future role of banks
in agriculture. The methodology was simple.
No statisical sampling techniques were performed. This was because
the original questionnaire was sent to all the banks on the mailing list
of the Florida Banker's Association rather than drawing a sample from
this list. Furthermore it was felt that the geographic distribution of

the respondents, their size and their loan to deposit ratios were sufficiently
representative to provide useful and accurate information.
Each bank was sent a questionnaire that had been examined, criticized
and pretested by the author's colleagues and by four local bankers. It
had received limited publicity through the Florida Banker's Association.
A cover letter mentioning Florida Banker's Association support and a letter
stating the importance of the survey accompanied each questionnaire. The
author's name and telephone number were included for any possible queries
(there were 11). Anonymity was guaranteed. A stamped addressed return
envelope was enclosed. Finally it was thought that the four page question-
naire required about ten minutes to complete.
Research funds were insufficient for follow-up reminders so 26 telephone
contacts were made to non respondents. In 25 of these cases the bank was
less than six months old, and the survey had been sent to the parent bank,
for responses. Thus, the survey covered a larger proportion of banks than
the number of responses indicates.
The results were analyzed at the end of the summer of 1978 and a
summary sent to the 74 respondents requesting it.
The following results highlight the main features from each part of
the survey, and use the actual questions and layout of the survey.

The Individual Bank and Local Agriculture

Question 1. How important is farming in your bank's area compared with
other businesses, in terms of gross sales?

Number of banks responding Percent of banks responding
in each category (#) in each category (%)

The major
activity 15 6
Very important 53 23
Fairly important 52 22
Not important 113 49
No answer* 47

*Questionnaire was returned, but this question was not answered.

Question 2. What percentage (in money terms) of your short term loans
goes to farmers?

Number of banks responding Percent of banks responding
in each category(#) in each category (%)

Over 75% 0 0
50-74% 15 7
30-49% 22 10
15-29% 27 12
5-14% 22 10
Less than 5% 139 61
No answer* 55

Question 3. What are your present short term loans to farmers (in money
terms), compared with five years ago:

Number of banks responding Percent of banks responding
in each category (#) in each category (%)

Much higher now 12 6
Higher now 47 24
About the same 108 54
Less than 5
years ago 33 16
No answer* 80

Perhaps the most striking feature from these three questions is
that 50% of the banks rated agriculture at least fairly important in
their areas. Even so, nearly two thirds of them have less than 5% of
their short term loans allocated to farmers. While 30% of the banks have
increased their farm loans as a percentage of total short term lending,
over half have not changed during the last five years and 16% have de-
creased their proportion. These decisions have occurred during a time
of growing popular national interest in, and awareness of agriculture,
and while Florida's citrus, tomato, sugar cane, ornamental and vegetable
enterprises have received considerable attention.
Responses to other questions in Part I found that short term bank
lending in Florida went mainly to beef, citrus, nursery ornamentals, and
vegetables in decreasing order of importance. There were 91 banks lending
to beef enterprises, averaging 31% of these banks' total short term farm

*Questionnaire was returned, but this question was not answered.

loans. The other three enterprises received around 40% of the farm loans
from 72 to 76 banks, depending on the enterprise. While more banks lend
to beef, it does not receive as large a percentage of the banks' agri-
cultural dollars as does the citrus enterprise which has 76 banks pro-
viding about 47% of their short term funds.
As Florida is typified by large farms, it is not surprising that the
majority of banks' short term agricultural loans went to farmers with gross
sales greater than $100,000. For example, 87 banks allocated 60% of these
loans to farmers with gross sales over $250,000, while in contrast, 78 banks
provided funds to farms with gross sales lower than $50,000.

Farmer Client Analysis
This part of the questionnaire concentrated on bankers' evaluation of
their farmer clients. They have apparently exercised this prerogative, for
133 banks, or 75% of those responding to this question refused some farmer's
requests for funds in 1977-78, due mainly to insufficient collateral, too
risky a venture and poor managerial ability, in that order.
In their assessment, "knowledge of the applicant" was rated as the sin-
gle most important factor, followed closely by the applicants "financial re-
cords."16 While 163 respondents gave some ranking to "personal knowledge,"
112 of these stated this category as their first or second choice. Sim-
ilarly, 103 banks ranked financial records either first or second. Re-
payment schedule and real estate collateral were the respective third and
fourth choices. "Other collateral" and "physical records" were considered
the least important categories.
In a list of personal items, the vast majority of banks selected
"reputation" as their first choice (149 out of 172 respondents). This
category was followed by "years in locality," with 97 banks ranking it
second. The category "educational level" was, perhaps surprisingly, only
their fourth choice. Less than a third of the banks responding to this
category ranked it any higher, though it may be that the "reputation"
category was interpreted as somewhat reflecting education. It is possibly

The quotation marks refer to the phrases used in the survey.

reassuring that only 17 banks thought the "age" was very significant (a
primary or secondary choice) in assessing loan application.
The question asking bankers to rank individual records in order of
importance produced the widest variety of responses of any in the survey.
(As with any ranking question, it was possible to give equal choices to any
item.) The majority (93 banks) selected the balance sheet as their first
choice, though 44 rated it third or lower. Then came the income statement
which was the first or second selection of 131 banks. Cash flow records
followed, though it was almost equally selected as either the first, second,
third, or fourth choice of 140 banks. Finally, the.respondents agreed in
making living expense records their last selection, with 63 banks placing it
In assessing loan requests, 97 out of 152 banks thought that three
years historical records were sufficient, though the answers ranged from
two to ten years. Consequently, it was surprising that only 60% thought
that budgeting the farm business was essential, though it was somewhat re-
assuring that only eight bankers did not find budgeting particularly useful.

The Future Role of Commercial Banks in Agriculture
This part of the survey tried to assess the future role of Florida's
commercial banks in short term agricultural lending. The two main questions
Question 1. Which category best represents your estimate of future short
term lending (in money terms) by your bank to farmers, say,
five years from now?

Rank Number Percent

Much more lending than now 3 28 15
More lending than now 2 63 34
About the same 1 73 40
Somewhat less than now 4 12 6
Much less than now 5 9 5
No Answer 95

The answers to this question suggest that banks are not unanimous in
their future short term loan commitments to agriculture. The majority of
banks decided that they would be lending no more to agriculture than they
are now. As their present proportion of total short term loans going to

agriculture is lower than nearly any other states, this is perhaps unexpected.
However, some banks are undoubtably planning to be more aggressive in this
area and nearly half of the respondents expect to provide more loans to farm-
ers than they do now, as shown in the following responses.

Question 2. Which category best represents farmer credit requirements in

At the present time Five years from now
No. of No. of
Rank Banks % .Rank Banks %
need much more money 3 8 6 2 46 29
than they have 3 8 6 2 46 29
need more than
they have 1 88 57 1 89 57
they probably have
enough now 2 52 24 3 19 12
they probably have
more than enough now 4 5 3 4 3 2
No answer 126
100 100

These responses reflect an almost universal belief that Florida's farmers
will require more credit in the future. Nearly two-thirds of the banks feel
that the farmers need more funds than they have now and 87% are certain that
farmers requirements will be greater in the future. Banks additionally feel
the Production Credit Association is their one main competition.
Only 6% of the banks employed loan officers who concentrate on farm
lending. In fact, agricultural specialists working for banks are very rare
in Florida. So short term farm loans are mostly shared among most or all
of the loan officers in tthe bank (80% fell into this category.) Yet 35
banks out of 175 thought that they would need to employ an agricultural loan
officer during the next five years. This figure, while a considerable change
from the present, is probably not sufficient to enable investor owned banks
to play a major role in agricultural lending in the state.

17It is the author's opinion that there are more agricultural specialists
employed in banking in Champaign,Urbana, Illinois (perhaps 30) than in the
whole of Florida.

Summary and Conclusions

It has been shown that agriculture is an extremely important part of
Florida's economy, and that farmers produce a wide variety of enterprises
at no greater risk than farmers in other parts of the country. The majority
of the state's agricultural output comes from farms with large net farm
incomes marketing over $250,000 of annual sales, and that farm income and
off farm income has been increasing steadily over the past 19 years.
Most of their debt capital comes from the Farm Credit Administration.
Commercial banks play a proportionally much smaller role in financing
agriculture in Florida than banks in neighboring states or in the United
States as a whole. That does not necessarily mean that the aggregate6df
Florida farmers are short of capital. There is an intimation that are
agricultural lending opportunities for commercial banks that they are pre-
sently not utilizing.
The survey results suggest that they probably will not take thes
opportunities in the near future. "Even though more than half the res on-
dents realized agriculture was at least fairly important in their are ,
only 6% of them employed agricultural specialists, and only 20% though t
that they would-need this specialization in the next five years.
Agricultural lending requires unique skills, particularly in und r-
standing and interpreting the record keeping practices of farmers. T e
survey responses do not suggest that significant numbers of loan offi ers
with these skills will be added by commercial banks in the near future.
This conclusion is somewhat re-enforced by the percentage of total lo ns
allocated to agriculture by 265 individual banking units in Florida i
1977.18 A summary of the information is shown in Table 3.
The 265 commercial banks were geographically scattered throughout the
state, and the proportion of agricultural loans was quite small for a ma-
jority. Seventy percent had either no loans or less than 1% of their loans
allocated to agriculture. Forty of the 77 banks in the latter catego y lent
more in farm mortgages than in operating loans. Only as the proportional

18Melichar, Emanuel, Board of Governors of the Federal Reserve S stem,
Washington, D.C. 20551, personal communication July 1978.

Table 3.--The number and percentage of Florida banks supplying agricultural
loans in various categories in 1977.

Percent of total bank Banks Number of banks where real
loans allocated to estate loans to agriculture
agriculture were greater than non-real
estate loans.

Percent Number Percent Number

0 112 42 ---

Greater than 0 and
less than 1% 77 29 40

1% and less than 5% 62 20 21

5% and less than 10% 15 5 6

10% and less than 15% 5 2 2

Greater than 15% 4 2 1

Totals 265 100 70

amount of lending in agriculture increased, was the percentage of short term
lending greater than for long term. So it is probably in these banks that
some farming expertise may be found.
Thus, the general conclusion is that many commercial banks in Florida
show little interest in competing with the Production Credit Association
in short term lending to agriculture. It needs a further investigation
to discover what better investment opportunities they have found and what
impediments exist to servicing agricultural lending opportunities.


[11]. Brooke, D.L., "Florida Farm Prices," Econ. Info. Rpt. 89, Food and
Resource Econ. Dept., Ag. Expt. Stns., I.F.A.S., University of
FL., Gainesville, June 1978, pp.6-7, p. 15.

[13]. Eastwood, F.A., "Florida Aggregate Primary Producer Incomes and Mar-
keting Margins," 1967-75, Econ. Info. Rpt. 74, Food and Resource
Econ. Dept., Coll. of Ag., Coop. Extn. Service, I.F.A.S., Univ.
of FL., Gainesville, June 1977, p.3.

[ 3]. Florida Statistical Abstract 1978, Bureau of Economic and Business
Research, Coll. of Business Admin., Univ. of FL., The Univ.
Presses of FL., Gainesville, 1978, pp.218-220, pp. 108-109.
pp.110-111, p.198,p.584.

[ 5]. Mathis, W. Kary, Director, Marketing Center, Food and Resource Econ.
Dept., Univ. of FL., personal communication.

[18]. Melichar, Emanuel, Board of Governors of the Federal Reserve System,
Washington, D.C. 20551, personal communication July 1978.

[ 1]. Reitz, J.W., "Production Credit in Florida Citrus and Vegetable Areas,"
Bull. 376, Ag. Expt. Stn., Univ. of FL., Gainesville, 1942.

[ 9]. U.S.D.A., "Agricultural Statistics,:"Gov't. Printing Office, Washing-
ton, D.C., 1978, pp. 418-420.

[ 4]. U.S.D.A., E.S.C.S., "State Farm Income Statistics," Supplement to
Statistical Bull. No. 609, Washington, D.C., Sept. 1978, p.9,
p. 15, pp. 57-58.

[ 2]. van Blokland, P. J. "An Introduction to Agricultural Credit in
Florida," Econ. Info. Rpt. 77, Food and Resource Economics
Dept., Ag. Expt. Stns., I.F.A.S., Univ. of FL., Gainesville,
August 1977.

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