Farm credit system in for changes

When you look at the many millions of dollars being offered by Rabobank for Farm Credit Services of America, you can't help wondering what the real deal is.

Why would an international organization -- started as a cooperative in the Netherlands -- be willing to pay upwards of $1.4 billion to acquire the four-state farm credit institution; and why would the stockholder-members of Farm Credit Services of America be willing to sell what is apparently a very valuable, federally-connected lending system?

Despite a barrage of questions and a counter-offer from Minnesota-based AgStar Financial Services, the executives at Farm Credit Services of America in Omaha are standing firm in their support of accepting the offer from Rabobank.

In a telephone conversation with the Gazette this morning, the general counsel for Farm Credit Services of America, Michelle Mapes, said the board and administration of the four-state association believe the Rabo offer is in the best interest of stockholders and the officers are obligated to pursue fulfillment of the contract.

However, final approval does not rest with the executives. The final decision will be made by 51,000 Farm Credit Services of America stockholders and the Farm Credit Administration, which oversees the Farm Credit System's banks.

John Hanson of McCook, who served in the farm credit system for 25 years before joining McCook National Bank, has mixed emotions about the sale to Rabobank. On one hand, he fears there will be problems with outside ownership, but on the other he says the sale would create a level playing field for the ag lending business. Now, Farm Credit Services of America has an advantage because of its federal connection.

As to why Rabobank would pay $600 million to FCS-A stockholders and $800 million to the Farm Credit Administration to acquire Farm Credit Services of America, Hanson has a ready explanation. It gives them "access to the distribution system," he says, meaning that it puts them inside the ag lending business in the United States. That advantage is indicated by news releases from Farm Credit Services, which says the farm credit company will be able to offer larger loans and more services if it is acquired by Rabostar.

A lot to think about. That's especially so after AgStar Financial Services came in with a proposal to merge with Farm Credit Services of America. As part of that plan, there would be a cash distribution of $650 million.

Both offers work out to an average of more than $11,000 per stockholder, but Mapes, who serves as senior vice president as well as general counsel, said it won't work out that way when the distribution is made. Payouts will come in the form of patronage and other benefits, she said.

Stockholders will have until late fall to decide, with the change of ownership, if approved, taking place in March of 2005. It's too early to predict what will happen, but -- whatever takes place -- it appears the once stable and predictable farm credit system is in for major changes.